As the saying goes, don't put all your eggs in one basket. The same is true of investment. Don't invest all your money in the same asset or market. Through diversification of investment, investment risk can be minimized and income can be maximized, and the best way to diversify portfolio is alternative investment.

Alternative investment refers to asset classes (such as bonds, stocks and cash equivalents) that do not belong to mainstream financial instruments. This type of investment opportunity is expanding with other relatively new assets in the market. Common alternative investments include commodities, real estate, art, wine, automobiles, diamonds and personal-to-personal loans.

Why do you need to allocate alternative assets?

Alternative investments usually include investments other than publicly traded real estate, stocks and bonds. Its investment scope includes private commercial real estate, hedge funds and managed futures, private equity funds, real estate and natural resources. In addition, the alternative investment industry has developed rapidly, expanding and improving its long-term investment strategy.

Therefore, it attracts the interest of more and more individual investors. Sameer Jain pointed out in a research paper published in Social Science Research Network. One of the main reasons for investors to diversify their portfolios is to reduce risks. Alternative investment has nothing to do with important traditional asset classes such as stocks and bonds, which makes it an ideal supplement to investors' portfolio.