How have your investments done over the last few years? Unless you are part of the small few that saw the financial crisis coming then your investments are likely to have done poorly. Many others are in a similar situation and they are seeking alternative investments for wealth preservation.

The main reason why many individuals are looking at alternative investments is because the returns have a low correlation against other traditional assets. This means that when we have financial events like we have had recently, your entire wealth doesn’t take a hit. There is a level of further diversification in there which helps to protect you.

You need to diversify in alternative investments because of traditional assets have performed so badly. Shares haven’t performed well and if you look at it from a decade long view the performance is dire. Property prices are still in decline and the value of cash is falling in real terms. Now is the point when you need alternatives.

Alternative investments are not the be all and end all (not by a long shot). Investments in stamps, antique furniture and works of art can go wrong. It is something that you need to keep in mind.

What are some the negatives? There isn’t an active marketplace which means that it isn’t so easy to offload your investment when you want. It is different to the stock market as sometimes there might not be a buyer waiting. If you have to search for one then this adds to your costs.

A small market place with a lack of participants means that it is difficult to establish proper prices. You will also struggle to get reliable data about old prices so that means you have to try and determine a fair price yourself. This can be hugely subjective and prone to errors. If you do it well though there can be huge potential in alternative investments..