Alternative Investment

Alternative Investment

As soon as we have free capital, we ask ourselves a question – how can we save and expand our monetary resources in the conditions of constantly growing inflation?

The classical answer to this question is depositing money in a bank. The effectiveness of this method of capital placement is quite illusory in the existing financial situation. Oftentimes percent rate for bank deposits is low, often not corresponding to the inflation level.

We are also interested in not only saving, but multiplying the existing capital.

Through step by step learning financial basics process every person starts to discover new investing perspectives for himself that allow him not only correctly allocate funds, providing reliability of their saving, but also receive quite a large profit from it. It’s important to note here that the development that financial markets received in the latest years, has significantly increased the list of tools and ways to invest money. Most of the time this list includes investing into business, funds, security papers, investing into research developments, precious metals (gold, silver, etc), real estate, antiques and other property.

Yes, certainly, the deposit in the bank, as a way of investment, is probably the safest; risks are usually reduced to a minimum level in a stable economic situation. Preferring a serious, well-established bank, the depositor cannot be completely guaranteed to protect himself from bankruptcy, but in the case of its occurrence is entitled to a fulfillment of bank guarantee. However, as has been pointed out above, the interest rate is not high.

One of attractive ways of investment is to invest in the business, which in its turn could mean investing in a ready-made business, or creating your own new business.

Do not confuse the concept of investing in business and doing business. Investing in business does not oblige one to do the business himself, although if you want you can head it. However, in this case, you should objectively evaluate your ability and competence in the area in which the activities will be conducted. When creating a new business, the best option would be to hire a highly professional staff. The same, in general, is suitable to the case of ready made business. Although, at times, using the services of professional staff does not fill the importance of a skilled leader.

Investing in business is not at all simple, for investing with results one will have to fully research the market of the offered goods and services, and to study the active but not always regimented rules. It’s necessary to have all-encompassing understanding about the degree of the market need for the offered goods and services. In the case with a completely new product it is worth to perform vast market research in order to get a completely correct opinion about how much the potential customer needs it.

However, even completely researched offers in accordance with some economic rules cannot give a guarantee to the investor in terms of what is actually going to happen with his business. If the lucky train of events, for the most part, investing in business has long-term prospects. Investing into real estate is quite a classical way of investing, since the prices for real estate are going to be growing in the future.

Investing into scientific research relates to the area of corporate investing, however, we cannot ignore it. Alternative Investing into science, obviously, stays as a governmental area, but it is not closed from private investments. It requires not only economic literacy, but also some sort of technical understanding from the investor. It’s important not to forget about the level of risk that is higher here than in any other way of investing.

Another way of alternative investing that is mentioned above, is investing into antiques and period pieces. By the way, for some people investing into art is a certain way of life, some sort of life style, while for others it’s nothing but a source of profit. Investing into antiques is a way of investing that, probably, a lot of people are familiar with.

Investing into antiques has a certain peculiarity that lies in the fact that in any proper collection there has to be a plan according to which the works of art are chosen. This way its value gets higher. To do that it’s necessary to have special knowledge that often becomes the reason for finding a highly professional expert, who in his turn will help to authenticate the authorship, evaluate the balance of price vs quality of the work of art and its historical value. It can be paintings, interior design objects, icons, graphics, sculpture.

It is common to believe that non-traditional assets include hedge funds, currency exchange difference, controlled market funds, direct investments, immovable property, and sometimes such assets as works of art or highly priced collectible wine.

Hedge funds represent wide opportunities.

Usually hedge funds are formed as partnerships with limited liability, on average the size of investments varies between 10-20 million US dollars to 5-10 billion US dollars. According to estimations of various specialists overall in the USA hedge funds control from 1 to 2 trillion US dollars, and the main mass of investments is spread between the largest hedge funds, that correspond to 25% of the total. To compare: the sum of world securities markets is evaluated ta the level of 35 trillion US dollars, and the total capitalization of world stock markets is close to 45 trillion US dollars.

The spectrum of Alternative investment styles, that are used by various hedge funds, is very wide. Some of them prefer security positions on futures contracts based on the position going up (“long” position), to the securities the price of which is expected to go down. Others try to predict and use the anomalies of price forming among different asset classes, such as convertible bonds, and other related to them assets such as stocks and bonds, issued by the same company.

Smart use of various schemes helps many hedge funds receive the profits that in fact are only somewhat correlated to normal stock markets and bond markets. The style of investing that this or that hedge fund uses, mainly influences the balance between the profits and risks that the fund promises.

Written by GiovannaP