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Alternative Investment Options

Whenever we hear the word INVESTMENT, a normal investor finds only few options traditionally the three primary asset classes--stocks, bonds, and cash. However there is wide range of alternative Asset Class available to the potential investors. These options help in diversifying the portfolio. The term Alternative Asset is very flexible. It may include specific physical assets, such as natural resources or real estates or private equity etc. in some cases it may be art, wine, etc. Why invest in Alternative Asset Class? Part of sound investment portfolio is to diversify the portfolio. There exists lack of correlation between this asset classes with other investment options. Hence poor performance of one asset class nullifies lose of others. Many alternative investments attempt to achieve their returns not from the activity of the market but by using unique investing strategies to exploit market inefficiencies that the markets haven't perceived. As a result, alternative assets can provide an additional layer of diversification and complement more traditional asset classes. In addition to their investment value, some alternative investments, such as art, antiques or gems, may simply be a pleasure to own.

1. Arts It refers to the application of human creative skill and imagination. Investment in artistic will boom your investment and will let your fate drive yourself. An Art can be a best Alternative option to diversify an investor portfolio. The reason behind this are:  Indian art is growing tremendously and breaking new trends of unprecedented appreciation due to excess liquidity in the economy.  The Indian art industry is estimated at about Rs 250 crore and is expected to grow at 35per cent a year.  Investing in Indian art now; price increases of between two times and eight times in just the last three years for the works of artists like ( Late) M.F. Husain, V.S. Gaitonde, Satish Gujral and Tyeb Mehta is further proof that art is a good investment option.

2. Coins Beside the Propensity of collecting coins, now a days Coins are becoming the engine for the purpose of investment. There are more and more people who started to view a Coin Collecting as an investment. Some of the experts even suggest that it is the best tool to optimize your investment, and allocate at least 10% for the same in ones portfolio. Coin Collecting can be a best alternative Option to diversify an investor portfolio The reason behind this are:  There is a constant growth in the value of coin. The older it is the more it is valuable  It is better compare to the highly liquid and risky market.  According to a survey done in U.S. A commemorative coin issued today has more value tomorrow. Here is an example of coin investments which have some collectors smiling: the 1995 Tenth Anniversary of the American Eagle coin set (issue price $995.00, current value $3,600.00 3. Antiques Investment in Antiques ensures that whether or not brought on by recession, financial instability or inflation, quality scarce. Antiques have not only retained their worth but have continued to be in high demand. The art and antique market, in the course of financial slumps, have tended to continue to be secure and even continued to increase in value. The investment in Antiques can be a best alternative Option to diversify an investor portfolio The reason behind this are:  In the medium to long-term, most good quality antiques and art do appreciate in value and experts, as a conservative estimate, put the minimum appreciation at about 10% to 15% a year.  There is growing support worldwide for antiques as an alternate investment option. Many believe it is not as risky as investing in the stock market and antiques usually maintain their value and appreciate with time.  There is no question that investing in art and antiques cannot only afford you an excellent investment option, but it also gives you the double pleasure of enjoying them at the same time. That means beside investment you can use it for decorating your home.

4. Wine The numbers of people are investing in a wine with an eye of selling rather than drinking, because the Investment in a Wine is Fine. Some of the investors do not even know the brand of wine they owe; rather they are just concern with its value because it solves the purpose of their investment. The investment in Wine can be a best alternative option to diversify an investor portfolio The reason behind this are:  The more the older the wine is the more is the value it gains  The only fee that investors will pay is for the storage of their wines. Storage, insurance and logistics are met by a small annual per case fee.  Wine is a tangible asset with, unlike a share or a bond, an intrinsic value.  Whilst investors are encouraged to adopt a long-term horizon, wine investments can be expanded or liquidated quickly according to your individual needs.  Investing in wine can have a significant tax advantage 5. Commodities Commodities are natural resources that have a global market, most of which fall into the category of agriculture, energy, or metals. The main characteristic of commodities is that they are needed by modern societies and they greatly fluctuate in price. Commodities, whether they are related to food, energy or metals, are an important part of everyday life. Similarly, commodities can be an important way for investors to diversify beyond traditional stocks and bonds, or to profit from a conviction about price movements. Commodity markets deal in the trade of commodities like gold, cotton, crude oil, orange juice etc The investment in Commodities can be a best alternative option to diversify an investor portfolio The reason behind this are:  Leverage allows for big profits if you are on the right side of the trade.  It has been witnessed that the trading volume in commodities as compare to capital market is tremendously higher, because the volume of trading in commodities in 3 year is as equivalent to that of capital market volume in 10 years.  Its a pure play on the underlying commodity.  You can go long or short easily.

6. Real estate Real estate has huge potential demand in almost every sector especially commercial, residential, retail, and industrial, hospitality, healthcare etc. Real estate investing involves the purchase, ownership, management, rental and/or sale of real estate for profit. An investor may make a direct investment by purchasing a house, plot or apartment etc. or he may make an indirect investment through investing in fund which invests in real estate companies. Some of the prominent companies promoting real estate funds in India are HDFC Property Fund, DHFL Venture Capital Fund, Kotak Mahindra Realty Fund, Kshitij Venture Capital Fund (A group venture of Pantaloon Retail India Ltd) and ICICI's real estate fund, India Advantage Fund. Reasons to invest in Real Estate: Real estate makes a great investment one that provides excellent returns on income and can provide continuous income year after year.  Historically, real estate has shown to be an excellent source profit through the increase in investment property value over a time.  It may also provide the rental income till the investor liquidates his investment. Thus it nullifies the maintenance costs & in addition becomes a fixed source of income.  In other investments, inflation proves to be a curse whereas in real estate, inflation serves as a friend of the investor by appraising the rental value with the overall appreciation.  Proactive measures taken by the government has encouraged liquidity flow into the real estate sector from the organized sectors in India as well as foreign lands.

7. Gold Gold is a precious metal which is brighter than its color. The demand of gold never satisfies by its supply. So the price of gold go upwards day after day. Most religions and races value its preciousness and some particular season the demand of gold become high and there is a steep hike in the price. Besides this situation we can see a steady increase in the price of gold. So it is a good investment option which has not much risk when compared to stocks and mutual funds. Investors consider gold is a better investment option than that of a metal which increases the beauty of the person it wears. Various options for investment in Gold: Gold Ornaments. Gold ornaments also can be considered as an investment. But for mere investment purpose it is not good.  Gold coins. Gold coins are used as legal tender money in some places and it has its own value other than its gold content. It is convenient to keep gold as coins and easy to sell it off when necessary.

 Gold Bars. Gold bars are in variety of weight and can handle easily for investment purpose. An investor can avail gold bars from the market and can keep it in safe custody or bank lockers till he wish to sell it off.  Gold Exchange Traded Fund. This is an acceptable method of investing in gold. This is just like mutual funds and has the same value as gold and made in small units.  Gold Futures. This is a contract that in a future date that agreed quantity of gold in agreed price and agreed purity can be deliver at an agreed time. The customer should pay only a fraction of the cost at the time of the contract and the rest of the payment at the agreed time.  Gold Certificates. In this case the bank keeps the physical gold and they issue a certificate to the depositor. The depositor can avoid the risk of storing real gold and can sell a part or as a whole whenever he wishes to do so.  Gold orientated funds. It includes shares of gold mining companies, mutual funds and other instruments etc. Reasons to invest in Gold: During last two years, when all the asset classes have failed to perform, gold is the only investible asset that has remained upbeat.  It has a very low correlation with other asset classes like equity and debt thereby a good asset to diversify the overall portfolio.  Worldwide gold production is not matching consumption. The price will go up with demand.  Several gold funds reached all-time highs in 2007 and are still trending upward.  Gold is more than just another commodity, its a currency. It is the currency that evolved in the marketplace over the last 5,000 years.

8. Private Equity Private equity is defined as equity invested in a private or listed company through a negotiated process. It can also be defined as providing medium to long-term finance to potentially high growth companies (quoted or unquoted) in exchange for an equity stake in the company. Private Equity usually consists of institutional investors or accredited investors who can commit large sums of money for a long period of time. The funds so raised are utilized for developing new products and technologies, expand working capital,, make acquisitions or strengthen a companys balance-sheet. Private Equity investing may be divided into different categories:-

Seed

Start-up

Expansion Replacement capital

Buyout

Seed stage Financing provided to research, assess and develop an initial concept before a business has reached the start-up phase. Start-up stage Financing for product development and initial marketing. Companies may be in the process of being set up or may have been in business for a short time, but have not sold their products commercially and are not yet generating a profit. Expansion stage Financing for growth and expansion of a company which is breaking even or trading profitably. Capital may be used to finance increased production capacity, market or product development, and/or to provide additional working capital. This stage includes bridge financing and rescue or turnaround investments. Replacement Capital Purchase of shares from another investor or to reduce gearing via the refinancing of debt. Buyout A buyout fund typically targets the acquisition of a significant portion or majority control of businesses which normally entails a change of ownership. Buyout funds usually invest in more mature companies with established business plans to finance expansions, consolidations, turnarounds and sales, or spinouts of divisions or subsidiaries. Financing expansion through multiple acquisitions is often referred to as a "buy and build" strategy. Investment styles can vary widely, ranging from growth to value and early to late stage. Furthermore, buyout funds may take either an active or a passive management role. Why Invest in Private Equity:-

 The fundamental reason for investing in private equity is to improve the risk and reward characteristics of an investment portfolio.  Historically Private Equity investments have usually out performed various other investment classes.  A much greater depth of information on proposed company investments is available to private equity investors. This helps investors more accurately assess the viability of a company's proposed business plan and to project the post-investment strategy to be pursued and expected future performance.  The private equity asset class offers the ability to gain investment exposure to the most entrepreneurial sectors of the economy. These are such sectors which usually underperform due to insufficient funds but due to Private equity investments, they acquire capital and generally outperform the market.  Low correlation with certain asset classes including public equity because the performance of private equity will not affect fluctuations in secondary market.

9. Managed futures Managed futures are futures positions entered into by professional money managers, known as commodity trading advisors, on behalf of investors. Managers invest in energy, agriculture and currency markets using futures contracts and determine their positions based on expected profit potential. The investment in Managed Futures can be a best alternative option to diversify an investor portfolio The reason behind this are:  The potential benefits of managed futures are that the investments may help diversify one's portfolio and, under some conditions, minimize risk. For example, investing in currencies abroad may mitigate domestic risk.  Managed futures may also help the individual to profit or minimize risk during periods of slow economic growth.  Trading and Account handling management is under the hand of registered CTA (Commodity Trading Advisor) who is an experienced commodity future trading professional who will handle all aspects of the account; from market strategies to risk management.

10. Hedge Funds A hedge fund is a private investment fund that participates in a range of assets and a variety of investment strategies intended to protect the fund's investors from downturns in the market while maximizing returns on market upswings. In short A hedge fund is a fund that can take both long and short positions, use arbitrage, buy and sell undervalued securities, trade options or bonds, and invest in almost any opportunity in any market where it foresees impressive gains at reduced risk. Hedge funds are distinct from mutual funds and other types of traditional investment portfolios. As a class, hedge funds undertake a wider range of investment and trading activities than traditional investment funds, and invest in a broader range of assets, including equities, bonds and commodities. However, hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. Investment in Hedge Funds is not liquid since it requires its investor to keep money for at least one year. Why Invest in Hedge Funds: Many hedge fund strategies have the ability to generate positive returns in both rising and falling equity and bond markets.  Inclusion of hedge funds in a balanced portfolio reduces overall portfolio risk and volatility and increases returns.  Huge variety of hedge fund investment styles many uncorrelated with each other provides investors with a wide choice of hedge fund strategies to meet their investment objectives.  Academic research proves hedge funds have higher returns and lower overall risk than traditional investment funds.  Hedge funds provide an ideal long-term investment solution, eliminating the need to correctly time entry and exit from markets.