Alternative investments are becoming increasingly popular among mass affluent investors, with adoption expected to increase to 32% by 2024. However, these investments are not suitable for everyone and require careful consideration before including them in a portfolio. There are several factors to keep in mind when evaluating the appropriateness of alternative investments, including the learning curve associated with them.
Investors need to take the time to understand the alternative investment market and carefully consider their own situation, goals, and objectives before diving into these opportunities. Additionally, alternative investments lack transparency compared to traditional investments, making it challenging for investors to track the performance of their investments in real-time. This opacity can make it difficult for investors to manage their expectations around reporting timelines.
Another consideration for investors new to alternative investments is the complexity of tax filing, as reporting for these investments typically lags behind traditional investments by a couple of months. This often requires investors to file for a tax extension, which may be a dealbreaker for some individuals. However, the barrier to entry for alternative investments is lower than for traditional options, with investment opportunities available for as little as $10,000, $20,000, or $50,000.
Alternative investments also offer better liquidity compared to traditional options, allowing investors the flexibility to withdraw their investment sooner without incurring heavy penalties. While alternative investments can provide unique opportunities for mass affluent investors, it is important for individuals to understand the differences between alternative investments and traditional options before making any investment decisions. Consulting with a licensed professional is recommended for personalized advice concerning specific investment situations.
