Protection when the market gyrates

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Q. As the stock market hops around, I’m being told I should be invested in alternatives. What does that mean?
— Still learning

A. No one should be invested in only one type of security, but so-called alternatives can be a way to diversify your portfolio.

Alternative investments have become popular with investors since the financial crisis of 2007/2008 as a way to diversify investment portfolios away from traditional stocks and bonds, said Anthony Vignier, a certified financial planner and attorney with Vignier Investment Group in Kearny.

He said the idea of investing in alternatives is to reduce fluctuations in a portfolio by protecting it from downside risk and hopefully getting some growth.

Alternative investments cover a wide array of investments such as managed futures funds, hedge funds, long-short funds and commodities such as precious metals, oil futures and more. Alternatives can also be investments in real estate, art and antiques, coins, stamps or even wine, Vignier said.

Because of the increasing popularity, alternative investment strategies are no longer just for the wealthy, pension funds or endowments, Vignier said.

“Alternatives are now available through exchange-traded funds (ETFs) and mutual funds, but there are also alternatives that are complex, have limited track records, carry high investment minimums, are illiquid and have high fees and costs,” Vignier said. “As with any investment tax consequences should always be considered.”

Vignier said alternatives are typically not suitable for people who have less than $100,000 in an investment portfolio.

Before you consider investing in any alternatives, be sure you thoroughly understand what you’re getting into and know how you can get out of it, Vignier said. He recommends you talk to a financial professional who’s knowledgeable about alternatives, and make sure the professional is working for you and not just selling a product.

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This story was first posted in December 2015. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.