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The Little Book of Alternative Investments: Reaping Rewards by Daring to be Different by Phil DeMuth, Ben Stein

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Chapter Thirteen

Adding Alternative Investments to Your Portfolio

Finding Your Portfolio’s G-Spot

The time has come to put the 1,000-piece puzzle together. Having been to the big city and seen the bright lights of Wall Street, it’s time to go back to the farm, sit by the stream, and soberly reflect.

As you read this Little Book, you may have noticed that some of the alternative investments discussed are complicated. Some of the alternative investing strategies can be difficult to understand. Even if you pore over the mutual fund’s prospectuses, you will often find a lot more legal boilerplate and bland generalities than detailed explanations of investment policy.

When it comes to night driving, we are admonished not to drive beyond our headlights. This is a good rule when it comes to alternatives as well. Do not invest deeper than your understanding. Do not invest in them a lot if you only understand them a little.

Don’t invest beyond your headlights.

In that respect, these alternatives might be likened to a collectible. There is the ever-present possibility for a serious hobbyist in many fields to make some money by leveraging his time and intellectual effort. If investing for you is a serious hobby, these alternatives can be worthwhile. Even if it turns out that you didn’t do much better than you would have with a vanilla indexed portfolio from Vanguard or Fidelity, you will at least have enjoyed the study and learned something along the way. If you end up making some good calls ...

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