Purpose

• People invest money in alternative investments for many reasons. Many alternative investments are physical holdings that provide investors with a sense of security that a paper investment such as a stock or bond does not provide. Investors sometimes invest in alternative investments that they understand. For example, a collector of antique glass might feel more comfortable choosing what vase to buy as an investment than choosing which stock to purchase. People also invest in alternative investments out of fear of the collapse of the stock market or the economy as a whole.
  
  

Examples

• There are a number of alternative investments for investors to consider. Precious metals such as gold, silver and platinum are a commonly encountered form of alternative investment. One advantage of investing in precious metals is that they are easy to buy and sell. Real estate is another alternative investment that many investors are familiar with from their daily lives. Investments in real estate vary from rental houses to undeveloped land. Other possible alternative investments include art, collectibles, antiques, base metals (such as copper and aluminum), small businesses and vending machines.
  
  

Risks

• As with traditional forms of investment, alternative investments are also prone to risk. Just as a stock's value can fluctuate, so can the value of alternative investments. Alternative investments do not trade in large volume on a stock exchange. This means that finding buyers and determining a fair value can be difficult, both of which complicate the sale of an alternative investment. Investors in stocks and other financial securities also have numerous media sources that provide information and data on stock and bond investments. Most alternative investments have no such resource.
  
  

Disadvantages

• Alternative investments can be difficult and expensive to buy. For example, most workers have access to a 401k or other stock market-based investment program at their place of employment. People can contribute a small amount from each paycheck to these plans and invest in the stock market. Buying real estate and other alternative investments often requires an investor to make a large purchase all at once. Furthermore, government regulation of the buying and selling of securities offers some protection to investors. Buyers of alternative investments rarely have this protection.