Alternative assets can provide diversification beyond traditional stocks and bonds from "summary" of All About Asset Allocation, Second Edition by Richard Ferri
Alternative assets offer investors the potential to diversify their portfolios beyond the usual mix of stocks and bonds. This diversification can reduce overall portfolio risk by spreading investments across different asset classes that may not move in tandem with each other. While traditional assets like stocks and bonds can be correlated, alternative assets often have low or even negative correlations with these more conventional investments. This lack of correlation can help smooth out overall portfolio returns over the long term, providing a more stable investment experience. Including alternative assets in a portfolio can also help investors access different sources of return. While stocks and bonds rely on market performance for their returns, alternative assets may generate profits from a variety of other factors, such as real estate rental income, commodity price movements, or private equity investments. By tapping into these alternative sources of return, investors can potentially enhance their overall portfolio performance and reduce reliance on the ups and downs of the stock and bond markets. Moreover, alternative...
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