What are considered alternative investments?

Alternative investments are financial assets that do not fall into traditional categories such as stocks, bonds, or cash. They typically include a variety of asset classes that can provide diversification and are generally understood to be less correlated with market movements compared to traditional investments.

Real estate, commodities, and hedge funds fit squarely within this definition. Real estate provides income through rents and can appreciate in value over time. Commodities like gold or oil can serve as a hedge against inflation or currency fluctuations and often react differently to economic conditions than stocks or bonds. Hedge funds use various strategies to achieve high returns and may invest in a wide range of assets, including both traditional and alternative investments, often employing leverage and sophisticated investment techniques.

In contrast, the other choices provided consist solely of traditional investment options. Stocks and bonds are the primary instruments of the equity and debt markets, while government bonds and savings accounts are focused on fixed-income investments and cash reserves, respectively. Cash equivalents and money market funds also belong to the realm of traditional finance, designed for short-term liquidity rather than the alternative investment space. Thus, the inclusion of real estate, commodities, and hedge funds as alternative investments makes the correct choice distinctly clear.