Mutual Funds: What Is an Alternative Mutual Fund?

By
TradersDNA

Mutual Funds: What Is an Alternative Mutual Fund?

Are you trying to understand what an alternative mutual fund is? Trying to decide if you should invest in one?

If you want to diversify your investments and make some great returns, alternative mutual funds may be worth considering. Unlike conventional mutual funds, these funds often use alternative trading and investment strategies. They may also hold non-traditional investments.

Here’s what you need to know about alternative mutual funds.

What Are Alternative Mutual Funds?

Alternative mutual funds are unique funds that are offered publicly. They are SEC-registered funds that are a bit more diverse than conventional mutual funds. A range of strategies will be used when managing them.

Like traditional mutual funds, a fund manager manages the alternative mutual fund on behalf of a number of investors. The mutual fund will be managed by the fund manager with the aim to meet certain investment objectives.

Understanding the Benefits of Alternative Mutual Funds

There are many reasons why investors choose to invest in alternative mutual funds. Here are a few of the top reasons you may want to consider them for your investment portfolio:

  • Portfolio Diversification: Alternative mutual funds can be a great option for diversifying an investment portfolio that is full of conventional assets.
  • Open to Anyone: Unlike hedge funds, alternative mutual fund shares can be bought by anyone.
  • Regulatory Safeguards: Alternative mutual funds are registered and regulated by the SEC under the Investment Company Act of 1940
  • High Rewards: Many alternative mutual funds have the goal of generating above-average returns compared to conventional mutual funds.
  • Lower Fees: Although typically higher than traditional mutual funds, many alternative mutual funds have lower fees than hedge funds.

Considering the Risks

While alternative mutual funds have their benefits, it’s important to recognize that most of them have fairly short histories. Alternative mutual funds also tend to use investment strategies that are less simple than conventional mutual funds. They are unproven when compared to many conventional mutual funds and they can be risky.

Additionally, alternative mutual funds tend to have lower fees than hedge funds. However, their fees tend to be higher than conventional mutual funds. This can make them a bit more costly to invest in.

Like with conventional investment options, remember that there is risk involved when investing in alternative mutual funds. There are significant risks and there are no guarantees, so you can lose money with alternative mutual fund investments.

It’s important to be wise when choosing which alternative funds to invest in if you want to have the best chance of getting good returns. If you’re looking for a great way to invest your money, you may want to learn about The Four Arm Fund by Occasio Partners now.

Making the Decision to Invest in an Alternative Mutual Fund

If you want to diversify your investments and are willing to take the risk to get higher rewards, you may want to try investing in an alternative mutual fund. While they have their pros and cons, investing in alternative mutual funds can play a great role in your investing strategy.

Need more mutual fund tips and general investment advice? Start reading through our blog now to discover more great articles and guides.

 

RELATED ARTICLESMORE FROM AUTHOR