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How to Approach Liquid Alternatives in Your Portfolio in 2025

The article from Morningstar discusses the integration of liquid alternative investments into a portfolio as of 2025, highlighting their role in enhancing diversification, reducing volatility, and providing non-correlated returns to traditional assets like stocks and bonds. It explains that liquid alternatives, which include assets like hedge funds, managed futures, and commodities, can be accessed through mutual funds or ETFs, making them more accessible to retail investors. The piece outlines several strategies for incorporating these alternatives, such as using them for risk management, income generation, or as a hedge against inflation. It also addresses the importance of understanding the unique risks and costs associated with these investments, including higher fees, potential for lower liquidity, and complex strategies that might not always perform as expected. The article advises investors to consider their investment horizon, risk tolerance, and overall portfolio goals when deciding how much to allocate to liquid alternatives, suggesting a cautious approach with a recommended allocation typically between 5% to 15% of the portfolio.

Read the Full Morningstar Article at:
[ https://www.morningstar.com/alternative-investments/how-approach-liquid-alternatives-your-portfolio-2025 ]