Outside of familiar investment tools such as stocks, bonds, and physical assets, there are many alternative investment products that everyone should know about and at least exist.
Below we will refer to the 6 most famous types of alternative investments:
1. Investment funds
Let’s say you have distributed your money among ten investments. Assuming that one of these investments completely collapsed. Then you will lose what you had in this investment, but you will not lose everything. You still have nine more investments. And I still benefit from any returns from these remaining investments.
Better yet? But the task of choosing the optimal investment will require you a lot of time and experience to research and determine the companies that will invest in it. And even more time to ensure that there are no major threats to these companies on the horizon. This is why you may want to invest in an investment fund. Mutual funds take capital from investors and use it to buy stocks in a variety of companies.
2. Venture capital
Venture capital is the financing that investors provide to startups and small companies that are believed to have significant long-term growth potential.
This type of investment is usually associated with high risk for investors, but the downside for startups is that capital owners usually have a say in the company’s decisions. Many venture capital investors have made significant investments in well-known startups such as Google, Facebook and Twitter.
4. Fund Fund (FOF)
A fund – sometimes called a multi-manager investment – is an investment strategy whereby the fund invests in other types of funds.
This strategy aims to achieve greater diversification to reduce risk, therefore this type of fund attracts small investors who want to be exposed to lower risks compared to direct investment in securities.
The fund allows individual investors with limited capital to invest in a variety of portfolios of different assets, difficult to access through individual investment
Risks are defined as the possibility of an unwanted occurrence, such as the possibility of a company issuing shares a loss or a decline in profits or a decline in the market value of these shares, as the investor always wants to increase the market value of his shares.
And the absence of this increase or decline in prices is an undesirable event for this investor, and it represents one of the investment risks, so the rational investor in the money market must realize that there are risks associated with the investment.
These risks are the uncertainty of achieving the expected return on investment. It is the responsibility of the investor to reduce the risk factors that are under his control.
Regulators in the money market are working to reduce the risk factors that are under their control so that only those factors that no one has control over, and they are risks that the investor must bear.
The risks are divided into two main types, which are market risks (systemic risks) and company risks (irregular risks). As for the first, they affect the market in general, and their impact includes all shares traded in a specific market. These risks are generally represented in general political and economic conditions, including growth factors The economic, interest rates, inflationary pressures, the risks of changing exchange rates, and other factors that have a comprehensive impact on the stock market.
As for the risks of the company (irregular risks), they are the risks associated with a particular company, that is, they result in losses in investment in shares as a result of the decline in the company’s business that was invested in, and the risks associated with a company can be classified within the following types:
Business Risks: These are the risks of the company’s issuance of shares not succeeding in its business due to intense competition, the inability of management, or changing consumer tastes towards the company’s products, and other reasons that lead to the company returning in its performance, and its inability to achieve its basic goals in a commercially profitable way.
Financial risks: These are risks that are also related to the company, but not through the financial means that the company pursues in achieving these goals, such as the risks of the company bearing debts. It is known that the company’s debt increases its risks due to its dependence on external financing sources (debts) in exchange for fewer risks For a company that relies on self-financing sources (shareholders ’equity).
Related to the investment is a set of measures that the investor takes to direct his savings to invest and make the right investment decision, and one of the most important measures is that the investor has savings for that. (Abu Dhabi – Al Ittihad)