Non-traditional or “alternative investments,” when properly added to traditional investments, can help further diversify a portfolio. See a chart of traditional and alternative strategy index returns (PDF).
Many alternative investments have a low correlation to stocks and bonds, meaning they perform well in different economic environments. In simple terms, alternative investments can provide positive returns when the economy or stock market is contracting.
Just as there are many types of stocks and bonds, there are many categories of alternative investments. Investing in alternative investments may not be suitable for all investors and involves special risks such as risk associated with leveraging the investment, potential adverse market forces, regulatory changes, and potential liquidity. There is no assurance that the investment objective will be attained.