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Lack of knowledge is the top reason for not using alternative investments followed by lack of track record. As popular of an investing tool as they have become, there are different theories about what role alternatives play in a portfolio as well as what actually constitutes an “alternative,” so it’s easy to understand why there could by some misunderstandings.
To help set the record straight, a number of experts weighed in on some common misconceptions. Alternative managers noted some of the unfair biases they hear, and Kate Warne, the chief investment officer of Edward Jones provides a third party perspective from a firm known for its traditional approach to investing.
“We’re not 100% negative on alternatives, we’re just a lot more cautious about value and the role they play in a portfolio,” Warne said.
Since he is working on developing alternative products, we’ll use a definition provided by Ed Egilinsky, the head of alternative investments at Direxion, which is, “anything outside of long only stocks bonds and cash.”
Click through for a rundown on the top myths and misconceptions: