Alternative Investment

Traditional investors usually invest in equities, derivatives, or fixed income instruments.

Equities are stocks representing ownerships interest of companies. A stock can easily trade for multiple times of its book value. Investors risk their asset in hope the companies will perform better in the near future. However, if a company goes down, your stock portfolio usually is not worth anything.

Bond is of low risk and low return instrument. When the bond matures, the investor will get back the full principle amount. The bond holders represent loans made by investors to a particular company or government. Should the company goes bankrupt, investors have the right to claim its assets.

Foreign exchange (Forex or FX) is an alternative investment instrument. Private investors, institutions, governments are constantly exchanging currencies to minimize their risk in the foreign exchange market. The retail transaction cost is typically less than 0.1%. The backbone of the Forex market consists of a global network of dealers. They are mainly major commercial banks that communicate and trade with one another and with their clients through electronic networks and telephones. There are no organized exchanges.