There is a growing universe of opportunities for individual investors to consider among alternative investments and several ways to consider adding them to your investment mix. Let’s explore some of those ways.
Alternative investing
The potential benefits of alternatives include a wider array of investing choices, diversification, the potential for improved risk-adjusted returns, income generation, and/or inflation protection.
Before deciding to invest in alternatives, you should determine if they make sense for your specific investing goals, which are a function of your investing objectives, risk tolerance, liquidity needs, time horizon, and any other factors that are relevant to your situation.
You may also want to understand how alternatives might affect the rest of your investment mix, as they differ from traditional investments in multiple ways and have unique characteristics and risks. These differentiating factors can include eligibility (e.g., private market alternatives typically require investors to meet the eligibility criteria for a Qualified Purchaser), greater complexity, lack of liquidity (e.g., many alternatives can be subject to “lock-up” periods or offer intermittent liquidity), risks, varying regulations among alternative assets, fees, funding, tax reporting, and minimum investment requirements.
Alternative investment opportunities have expanded in recent years. At Fidelity, for example, private market alternatives (i.e., private equity, private credit, and core real estate), liquid alternatives, and digital assets are among the investment choices available for clients.
Private market alternatives
A key differentiating aspect of private market alternatives, compared with traditional investments that you may be more familiar with (such as stocks and bonds), is where they are bought and sold. Whereas public market investments are those that are accessible to the general public to be bought and sold on regulated exchanges (where you can easily transact via your brokerage account or financial advisor), private market investments do not trade on public exchanges. Private market alternatives include investments in private equity, private credit, and private real assets, for example.
Investing in private market alternatives can be a cumbersome process. If you are interested in private market alternatives, consider using a broker who makes it simpler for eligible investors to research and subscribe. See if you qualify or talk to your advisor to access these opportunities.
Liquid alternatives
Liquid alternatives offer access to sophisticated investment strategies through familiar vehicles such as mutual funds and exchange-traded funds (ETFs). These strategies may include taking long and short positions, using derivatives (a financial instrument whose price is directly dependent on the price of an underlying asset), and utilizing leverage.
Firms that offer liquid alternatives may enable you to buy these funds via your brokerage account.
You can search for liquid alternative funds at Fidelity, for example, from the Mutual Fund Screener. Use the Asset Class and Category drop-down menu on the left, and select either Alternative and/or Non-traditional equity asset classes. You can also filter by category within each asset class by selecting Expand All and choosing specific categories within the Alternative and Nontraditional equity asset classes such as Equity Hedged, Macro Trading, and Multi-strategy. If you're specifically looking for funds managed by Fidelity, check the box next to Fidelity Funds under Key Criteria.
You can also find liquid alternatives structured as exchange-traded funds (ETFs) using the ETF Screener (log in required). On the menu to the left, select Basic ETF/ETP Facts, then Asset Class, followed by Alternative and/or Nontraditional equity. If you're specifically looking for funds managed by Fidelity, select the Fidelity icon at the top of the results table.
Digital assets
Digital assets, such as cryptocurrencies and crypto tokens, are designed to work as mediums of exchange stored on a decentralized (i.e., no centralized authority, like a bank) ledger known as the blockchain.
Cryptocurrencies can be bought on many traditional investment platforms, crypto exchanges, select mobile payment services, and alternative platforms.
At Fidelity, for example, you can buy and sell crypto like bitcoin and ethereum 7 days a week, 23 hours a day.1 You can also purchase funds that invest in cryptocurrencies, such as the Fidelity® Wise Origin® Bitcoin Fund (
Investing in alternatives
Of course, investing in alternatives may not be right for everyone. They can be much more complex than traditional investments. Some have high minimum investments and long time horizons. For example, investing in less-liquid alternatives can mean locking your money up for multiple years (a “lock-up” period is a predetermined time that the investor is not able to redeem their investment). Moreover, some alternatives can be volatile and may not align with your investing objectives.
With that said, investors may increasingly find that alternatives—and private market alternatives in particular—represent an opportunity to consider. Research has shown that public markets have shrunk: The number of publicly traded companies has declined more than 40% over the last 25 years.2 This has resulted in investors potentially having access to a shrinking number of investment opportunities across traditional asset classes.
Meanwhile, private companies are playing an increasingly important role in today’s economy, representing significant growth in the number of options available. Add in the exponential growth in investable options among digital assets and you can see why these asset classes may increasingly represent a greater portion of the investment choices at your disposal.
As with all your investments through Fidelity, you must make your own determination whether an investment in any particular security/securities or digital asset/cryptocurrency is consistent with your investment objectives, risk tolerance, financial situation, and evaluation of the security and/or digital asset. Neither Fidelity nor any of its affiliates are recommending or endorsing these investments by making them available to its customers.