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W Alternative Investments: Education is Key ith the wide range of "alternative" investment options available today, blanket statements about the alternative category can lead to investor misconceptions. Broadly GHÀQHG DOWHUQDWLYH LQYHVWPHQWV are investment strategies that use trading techniques historically unavailable through traditional, public markets. According to Hilliard Lyons' Christopher D. Wright, vice president, product manager, mutual funds & alternative investments, the number one misconception is that alternative investments add risk to increase portfolio returns. "On the contrary, alternative strategies on average have lower risk levels (volatility) versus traditional investments and should be considered a tool for managing portfolio risk, not for adding additional risk to increase returns," Wright explains. He summarizes the second biggest misconception in two words — unrealistic expectations. "Unfortunately, a lot of investors believe that when traditional investments go down, alternative investments go up," he adds. While [68] LOUISVILLE MAGAZINE 2.12 this may be true in some cases, it is certainly not always the case. When the market is down, alternative investments are typically up, or at least outperform on a relative basis. "A lot of alternative strategies target absolute returns, can go long or short and/or hedge their downside risk. Overall, you don't want your alternative investments to move in lockstep with the rest of your portfolio," Wright explains. It is also important to note that alternative investments typically lag in performance during bull markets. Because they don't usually correlate to stocks and bonds, alternative investments have the advantage of generating independent returns for portfolios. Are alternative investments good for every investor? Basically, yes, answers Wright. Young people, retirees and everyone in between can EHQHÀW IURP VWUDWHJLHV WR SUHVHUYH capital and provide downside risk protection. Says Wright: "The key to remember is alternative strategies are long-term investments and must be held through entire market cycles for investors to maximize their SRUWIROLR GLYHUVLÀFDWLRQ EHQHÀWV µ Taking the Leap: Buying Alternative Investments Current stock market conditions have left many investors apprehensive about the possible impact of principal declines and heightened volatility on their portfolio. At the same time, WUDGLWLRQDOO\ ´VDIHµ À[HG income instruments such as CDs and U.S. Treasuries either offer low interest rates or are exhibiting high levels of volatility when compared to their historical pasts. Lamkin Wealth Management's investment strategist Jonathan Upton and president & CEO Mark Lamkin believe there are attractive solutions to this challenging environment in the realm of alternative investments. "Some of our highest conviction ideas in this economic environment are real estate investment trusts, ÁRDWLQJ UDWH SULYDWH GHEW DQG structure products," they point out. These alternative investments may be new to the retail investor since they have been dominated by the high-net-worth and institutional investors in the past. The investment vehicles discussed below now allow broader availability to the investing public and may be appropriate for your portfolio in 2012, according to Lamkin Wealth Management. Real Estate Investment Trusts (REITs) It's no secret that the past 10 years KDYH EHHQ GLIÀFXOW IRU WKH UHDO HVWDWH environment. While residential and retail real estate are still struggling in the U.S., the aging of the baby boom generation will continue to increase demand for health care. "This is a trend that will unfold regardless of the economic backdrop