Do you qualify?

When an investor develops their portfolio they choose investments based on efficiency, aiming to earn maximum return for minimum risk. Alternative assets are often attractive because of the high returns they can generate, and the opportunity they provide to diversify an investment portfolio away from traditional investments, which consequently reduces overall portfolio risk.

To self-certify as a HNWI you have to earn at least £100,000 per year or have net assets (excluding your property, pension rights and so on) of at least £250,000.

To self-certify as a sophisticated investor you must:

• have been a member of a business angels network for at least six months; or
• have made at least one investment in an unlisted security in the previous two years; or
• have worked in a professional capacity in the provision of finance to small- or medium-sized businesses in the last two years or in the provision of private equity; or
• be or have been within the last two years a director of a company with a turnover of at least £1m.

The best investment for an individual depends on their personal finances and circumstances. Choosing the right product is a crucial part of creating a robust investment plan so it’s important that the investor seeks quality financial advice. 

There is no recommended figure, but it is a common misconception that you should always invest large sums of money. If you are new to investments, as a general rule, you should start by only investing what you can afford to lose. 

Investors who consistently invest small sums can be just as successful than those who invest lump sums. These smaller investments can be gradually increased to larger sums over time.

An alternative investment is a financial asset that doesn't fall into conventional asset categories, like stocks, bonds and cash. Alternative investments include private equity, venture capital, hedge funds, managed futures and collectables like art and antiques.

Alternatives rely less on broad market trends and more on the strength of each specific investment; hence, adding alternatives can potentially reduce the overall risk of a portfolio. With low correlation to traditional asset classes, alternatives can be a beneficial way to diversify your portfolio.

Risks of Alternative Investments

Alternative investments are more complex than traditional investment vehicles. They often have higher fees associated with them. As with any investment, the potential for a higher return means higher risk.