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Time to invest in alternatives?

By Sheyna Steiner ·
Monday, March 31, 2014
Posted: 2 pm ET

Investors today have more investment products to choose from than ever. Many of the newer investment choices fall into the category of alternative investments, which includes private debt and equity, hedge funds, equity options, currencies and commodities, according to investment research firm Morningstar.

There can be some very good reasons for including alternative assets in your portfolio, according to a survey of high-net-worth investors released in early March by New York Life MainStay Investments. The survey questioned 806 high-net-worth investors with at least $1 million in investable assets.

Of those who use alternative assets, half do so for diversification; 48 percent cite investment growth and return potential as a reason for investing in alternatives and 60 percent say protecting principal is a key reason to invest in them.

Alternatives for everyone

It wasn't long ago that alternative investments were out of reach for the average investor. Since 2008, the investment universe has exploded with ETFs and mutual funds offering regular investors a taste of the asset class previously accessible only by very wealthy or institutional investors.

"There are a lot of well-known hedge fund managers who are offering their strategies through mutual funds, so whoever has enough money to invest in a mutual fund can already invest in certain hedge fund strategies. That is going to become more and more prevalent," says Deirdre Bolton, anchor on "Risk and Reward," a new show covering alternative investments at Fox Business Network.

"It's one of the easiest ways for an investor with a smaller amount of money to invest to get involved with alternative assets," she says.

Do you have any alternative investments in your portfolio? These five alternative asset classes may fit your personality as well as your checkbook.

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Senior investing reporter Sheyna Steiner is a co-author of "Future Millionaires' Guidebook," an e-book written by Bankrate editors and reporters. It's available at all the major e-book retailers.

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