Collectibles

• The collectibles category of alternative investments includes such diverse holdings as works of art, antique cars, stamps and other items that have traditionally increased in cost not because of intrinsic value but because of scarcity and demand. While collectible investing can create impressive returns, the public might suddenly change its mind about what it likes, causing the value of your investment to plummet precipitously. Perhaps more than any other type of alternative investment, collectibles operate independently of the influence of daily stock market cycles.
  
  

Currency

• As the currency market -- also called the foreign exchange (Forex) market -- has opened itself to individual investors, individual day traders have entered the scene, drawn by the increased profit potential relative to traditional investments. It also has an increased chance for loss also, as Forex is a world-wide market less regulated than most stock markets and certainly less than American stock markets. Traders are allowed to assume highly leveraged positions that can yield huge profits when the investments work out and can empty trading accounts when they don't. A trader doesn't have to use high leverage, however.
  
  

Hedge Funds

• Think of a hedge fund as a type of mutual fund. Hedge fund managers solicit funds from investors and sometimes are able to create a higher than normal rate of return by focusing their efforts on small-cap or micro-cap stocks across a variety of sectors, commodities and currency. Though unscrupulous people, such as Bernie Madoff, may give the impression that hedge funds are all aggressive risk-takers, an alternative investor can find all types of managerial temperaments in this asset. An effective hedge fund stays diversified across many industries and sectors, though it specializes in assets outside of the traditional realm.
  
  

Private Equity

• Most people are familiar with the process of buying and selling shares of stock in publicly traded companies listed on Wall Street stock exchanges. However, they may not realize there is an entire universe of smaller private companies that can function as an investment strategy just as easily. Many of these companies are in the process of developing new products and services but are in need of funding to fulfill their business plan. This funding is provided by private citizens and is referred to as private equity. There are companies throughout world that specialize in connecting those with money to invest with those who need it.