4 Common Alternative Investment Misconceptions

Alternative investments often face misconceptions that can deter potential investors from exploring their benefits. A lot of this is due to the newer nature of some alternative investment vehicles. In this blog, we will unpack four of the most common myths about alternative investments.

Myth 1: All Alternative Investments Are the Same

One of the biggest misconceptions about alternative investments is that they’re all the same. In reality, the alternative investment landscape is incredibly diverse, encompassing assets like real estate, private equity, hedge funds, commodities, and mortgage investments. Each category has its own risk profile, return potential, and role within a portfolio. For instance, real estate and mortgage investments offer tangible asset backing and can provide steady income streams, whereas hedge funds may focus on market opportunities and private equity on long-term capital growth.

Myth 2: Alternative Investments Are Just for the Wealthy

Another widespread belief is that alternative investments are only accessible to wealthy individuals. While it is true that some alternative investments require significant capital, many options are available to a broader range of investors. Mortgage Investment Corporations (MICs), for example, allow smaller investors to pool their resources to invest in real estate-backed loans. This structure democratizes access to lucrative real estate markets without the need for substantial individual capital.

Myth 3: Alternative Investments Add More Risk to Your Portfolio

A common concern is that alternative investments inherently add more risk to a portfolio. While some alternative investments can be riskier, others can help diversify and mitigate risk. For example, mortgage investments typically offer lower volatility compared to the stock market and provide a steady income stream backed by the tangible value of real estate. Diversification through alternatives can reduce overall portfolio risk by spreading exposure across different asset classes. This diversification into new markets is one of the main reasons alternative investments have gained so much popularity in the past few years. 

Myth 4: Alternative Investments Lack Transparency

Many investors believe that alternative investments lack transparency compared to traditional assets. While it is true that some alternative investments are less regulated, many are governed by strict guidelines and offer detailed reporting. MICs, for instance, are regulated and provide investors with regular updates on their performance and holdings. Choosing reputable and well-managed alternatives can ensure transparency and accountability. 

The Benefits of Mortgage Investments

Mortgage investments offer a compelling alternative investment opportunity. They provide diversification, steady income, and lower volatility compared to many other asset classes. By investing in mortgage pools, you can gain exposure to the real estate market without the headaches of direct property ownership.

To learn more about how mortgage investments can enhance your portfolio, contact Jordan on our team. Discover how to make informed investment decisions based on data and historical performance rather than misconceptions and emotions.