From a theoretical perspective alternative investments should be used within every portfolio
to increase diversification. The theory goes for institutional and for private investors. For
small investors however some alternative assets are not accessible. The goal of this study is
to evaluate how alternative investments have performed compared to common assets. Some of the
available alternative investment possibilities are already in use for many private investors.
It is positive that investors buy assets that are not listed on their brokerage account.
However to have efficient portfolios the asset allocation can be further optimized with
respect to Markowitz's modern portfolio theory. The market for alternative investments is small
and lacks liquidity. Therefore the author evaluates their usefulness in terms of accessibility
and availability. The findings of this study propose that alternative investments can help to
increase portfolio diversification. A portfolio comprised only of alternative investments
cannot outperform a traditional one. A combination of alternative assets and traditional assets
however can outperform the broadly used combinations of equity and debt.
