Scott Tominaga Briefly Discusses the Importance of Alternative Investments

While talking about alternative investment, most people think of investment options that only large institutional investors can access or the ones that is too complicated for an average investor to understand. But this is a common misconception.  But this is a major misconception. Over the years, access to alternative investments has opened up to a much broader audience and its advantages are far more useful than one might expect. Alternative investments can include venture capital, hedge funds, real estate and even precious metals. Scott Tominaga is a great candidate to talk about alternative investments as he has 25 years of experience in the financial services and alternative investment industry.

Once considered to be the domain of institutional and high-net-worth investors, alternative investments continue to increase in popularity and are gradually making their way into the portfolios of discerning individual investors. Alternative investments are a catchall for almost any asset that is purchased and sold outside of commodity, bond and stock markets. These investments have their distinctive allure, especially when it comes to high-net-worth individuals who have a special interest in an esoteric subject and think that they can turn that interest into a valuable investment.

The many advantages of choosing to invest in alternative investments include:

  • Reducing volatility by diversification: One of the key goals of investing in alternative classes is to reduce risks with the assistance of portfolio diversification. The correlation of alternative investments with important asset classes like bonds and equity is pretty low, and this is one of its distinctive features. In many situations, alternative investments are even used as an inflation hedge. A portfolio that has allocated a particular percentage of its funds to alternative investments shall be able to avail reduced risk without majorly affecting the returns.
  • Reducing volatility and increasing returns:  One of the key goals of alternative investments is to increase returns by adding discerning other assets that have distinctive risk and return characteristics as opposed to that of the traditional portfolio. The overall scope of alternative investments is quite expansive, and it has a dynamic range of investment options. Another factor to take into account is that there is no type of constraint in the case of alternative investments like the traditional assets, and they subsequently are also allowed to short.
  • Strong Income: Not all private alternative investments are cash-flowing investments, but there are many that have this feature, especially in the case of a cash-flowing real estate strategy.  While some investment options can produce strong income, many funds are structured to have a preferred return where the investors get paid first. Any person who has tried to generate income from public investments can understand that this will not be easy as public markets can be very volatile.

More details about alternative investments and their advantages can be found through industry experts like Scott Tominaga. As alternative investments typically do not correlate to the stock market, they can be quite helpful in mitigating volatility. Some can also offer tax benefits that are not available in traditional investments.

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