Alternative investments, such as real estate, private equity, hedge funds, and commodities, offer an attractive opportunity for diversification beyond the traditional stock market. Unlike stocks, which are often correlated to broader economic trends, alternative investments can provide unique returns that are less impacted by market volatility. They often exhibit lower correlations with conventional asset classes, helping to reduce overall portfolio risk. By incorporating these investments, individuals can mitigate the potential for large losses in market downturns while potentially enhancing long-term returns, as they may outperform traditional assets in certain economic environments.
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