Beyond Stocks and Bonds: The Role of Alternative Investments in Modern Portfolios

DOI: https://doie.org/10.0223/Aper.2025315659

Authors:

Prof. Amit Bathia, Ms. Anavi Panjwani, Ms. Jiya Nuna, Mr. Neel Vazirani, Ms. Rashi Bengani, Mr. Vyan Kakkad, Mr. Siddharth Nair

Keywords:

Alternative investments, portfolio diversification, risk mitigation, risk-adjusted returns, alternative investment classes

Abstract:

This research paper investigates the influence of incorporating alternative investments, including commodities such as gold ETFs and Real Estate Investment Trusts (REITs), into traditional investment portfolios comprising stocks and bonds. The primary objective is to evaluate how the inclusion of these alternative asset classes impacts portfolio diversification, risk mitigation, and enhancement of risk-adjusted returns. By conducting a comparative analysis between a conventional portfolio and one augmented with these alternative investments, the study delves into several key areas, including portfolio construction, performance evaluation, and an in-depth analysis of return measures, risk assessments, and risk-adjusted performance metrics, such as the Sharpe ratio, Covariance, and other relevant indicators.
The research seeks to explore the broader implications of diversification through alternative assets, shedding light on how these investments can complement traditional portfolios by reducing volatility and potentially increasing returns. It also examines how investors might optimize their portfolios to achieve better risk-return trade-offs. The findings of this study aim to provide valuable insights for both institutional and individual investors who are looking to diversify their investments and improve the overall performance of their portfolios by leveraging the benefits of alternative asset classes.
 

PDF