Alternative investments are financial assets that fall outside traditional categories such as stocks, bonds, or cash. They include holdings like real estate, private equity, hedge funds, venture capital, commodities, collectibles, and even cryptocurrencies.

People turn to alternative assets mainly for diversification. Because these investments often behave differently from public markets, they can help balance a portfolio during times of volatility or inflation. For instance, real estate can provide both rental income and protection against rising prices, while commodities such as gold or oil often move in the opposite direction to equities.

Private equity and venture capital appeal to investors seeking higher long-term returns, though they carry greater risk and require patience, since funds are usually locked in for years. Hedge funds, on the other hand, use complex strategies to generate returns regardless of whether markets rise or fall.

More recently, digital assets and collectibles like art, wine, and vintage cars have also entered the mix, attracting investors drawn to unique opportunities beyond the stock market. While alternative investments can strengthen a portfolio, experts caution that they require careful research, a clear understanding of risk, and a willingness to accept lower liquidity.