ALTERNATIVE INVESTMENT Meaning and
Definition
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Alternative investment is a financial term that refers to a type of investment that does not fall into the traditional categories like stocks, bonds, or cash equivalents. It encompasses a wide range of non-traditional investment options aimed at diversifying an investor's portfolio and potentially generating higher returns. These investments often involve different asset classes, strategies, or markets than those typically utilized in traditional investments.
Unlike conventional investments, alternative investments may include real estate, hedge funds, private equity, venture capital, commodities, precious metals, rare collectibles, fine art, intellectual property, cryptocurrencies, and other less common options. They are generally available to accredited or sophisticated investors due to their complexity, risks, and regulations, which can vary depending on the country or region.
The primary goal of alternative investments is to provide investors with opportunities to diversify their portfolios and potentially enhance returns by capitalizing on unique investment strategies or market inefficiencies. They often exhibit low correlation to traditional investments, where their performance might not be strictly tied to the movements of stock or bond markets. Although these investments can offer significant potential returns, they typically carry higher risks, longer investment horizons, and lower liquidity compared to conventional investments.
Overall, alternative investments are considered as supplementary investment options that complement traditional investments to create a more balanced and diversified portfolio. However, due diligence, careful research, and understanding of the investment's features and risks are crucial before considering any alternative investment option.
Etymology of ALTERNATIVE INVESTMENT
The word "alternative" derives from the Latin word "alternativus", which means "of or pertaining to choices or options". It is formed from the root word "alter", meaning "other", combined with the suffix "-tivus", indicating "pertaining to".
The term "investment" comes from the Latin word "investire", which means "to clothe, to dress, to cover" suggesting the act of putting money or resources into something with the expectation of future returns or benefits.
Therefore, the etymology of the phrase "alternative investment" combines the idea of having other options or choices with the act of putting resources into something for future gains.
