Risk of alternative investments

RETURNS: THOUGH APPEAL OF HIGH RETURNS IS STRONG, IT'S CRUCIAL TO LOOK BEYOND NUMBERS

- Maria Smit

Investment options offering (and promising) double-digit returns regularly appear in advertisements and news headlines. In an overcrowded investment universe, these attract attention, and investors are, of course, enticed by what seems like superior returns to other investment products.

However, while the appeal of high returns is strong, it is crucial to look beyond the numbers and fully understand the risks involved. Investors need to consider different factors that align with their financial goals, risk appetite, and liquidity needs.

Alternative options

Unlike traditional investments such as stocks, bonds, or cash, alternative investments span a broad range of assets that do not trade on public markets. These investments often offer diversification and the potential for higher returns, but they also come with increased risk and complexity.

In South Africa, common alternative investments include real estate, private equity, commodities, collectables, cryptocurrencies, and infrastructure projects.

Each of these asset classes presents unique opportunities, but they also carry inherent risks that investors must carefully evaluate before committing capital.

The myth of guaranteed growth in alternative investments