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4 exotic investments for diversification

Diversifying the exotic way
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The moves of financial markets late last year and in early 2009, when so many asset classes fell, point strongly to the need for investors to diversify their portfolios.

"It's an enduring lesson of investing that diversification holds the key to success," says Chris Geczy, director of wealth management at the University of Pennsylvania's Wharton School. "In the last crisis, it's not that diversification didn't work, as some claimed. It did work, but many investors weren't appropriately diversified."

Various holdings can provide diversification -- some more exotic than others. Four holdings you may want to consider are emerging markets, mutual funds that employ strategies similar to hedge funds, currencies and art.

These assets can diversify your exposure beyond U.S. stocks and bonds. So when stocks and bonds fall, sometimes the other assets will rise. "Thinking about these kinds of issues may aid you in diversifying," Geczy says.

Here are important issues to keep in mind when investing in the four alternative areas. Remember that most of these investments are risky, so you only want to put small amounts in them.


 

 

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