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What retail investors should know about alternative investments

Alternatives aren’t new, but they are becoming more accessible to retail investors.
Examples of alternatives include real assets, hedge funds, commodities, and digital assets.
Potential investors should consider factors like fees, liquidity lock-ups, and complexity.

July 8, 2026 6 min read

Building a portfolio isn’t that different from building a sports team. Your starting lineup—the players you rely on every game—do most of the heavy lifting. But depth matters too. Stacking your bench with a few role players can go a long way and help the team perform more consistently, especially against tougher matchups and in less predictable conditions.

Alternative investments fit into that second category, acting as role players in your investment lineup. They’re not new—pension funds, university endowments, and sovereign wealth funds have been using them for decades. What is new is that retail investors are now able to gain access to many of these strategies too.

And lately, everyone’s talking about them. Your LinkedIn feed is full of them. Your brokerage platform just added a new tab for them. It might seem like alternative investments, or alts, are the missing piece for your portfolio.

But alternatives aren’t about predicting the next market trend. They’re about shaping how a portfolio behaves across different environments—much like adding the right role players to your roster to handle different in-game situations.

So, before you add alternatives to your roster, it's worth asking: what role should an alternative actually play in your portfolio?

What are alternatives and how do they work?

If stocks and bonds are your starting lineup, alternatives are the role players/specialists on your bench. They don’t replace your core players—but they bring different skill sets, strengths, and ways to contribute depending on the environment.

Alternatives are anything that isn't a traditional stock, bond, or cash equivalent. They're called "alternatives" because they offer a different kind of exposure—different return drivers, different risk profiles, and even different rules around when you can get your money back. In other words, they play a different (and very specific) role on the team.

Alternatives include:

Real assets: Infrastructure (roads, pipelines, real estate, timberland, farmland). These tend to have inflation-sensitive cash flows, which is part of the appeal.
Hedge funds: Pooled investment vehicles that use alternative strategies like short selling, leverage, derivatives, and arbitrage. These are highly variable in approach and risk.
Commodities: Physical assets like gold, oil, and agricultural products. They’re often used as inflation hedges or portfolio diversifiers and can be accessed directly or through futures-based funds.
Digital assets: Cryptocurrencies and tokenized assets. These have made their way into more institutional portfolios as a diversifier, though volatility and regulatory uncertainty make them more speculative options in this category.

Unlike stocks and bonds, most true alternatives are illiquid. Your money is typically committed for a set period, and you generally can't sell when you want to. That illiquidity isn't always a drawback. Investors are normally compensated for it through what's called the illiquidity premium: the idea that locking up your capital for longer should, in theory, earn you a higher return than you'd get from something you can sell tomorrow.

But did you know? Not all access points to alternative strategies come with the same constraints. A growing number of alternative exposures are now available through exchange traded funds (ETFs), which trade on exchanges throughout the day just like stocks. The ETF structure provides daily liquidity and price transparency, allowing investors to access certain alternative strategies while maintaining the flexibility to buy or sell shares on demand.

Why have alternative investments been popular with institutions?

Institutions have allocated to alternatives for decades. The Yale Endowment, one of the most studied portfolios in investing, famously put more than half its assets into alternatives.¹

But the takeaway isn’t about copying institutional allocations, it’s about understanding how they build portfolios. Like well-coached teams, they focus less on individual star power and more on how different players work together across a full season.

The answer has less to do with chasing returns and more about:

Diversification beyond the 60/40. No team should rely on a few star players to do everything. Adding assets with different return drivers can help reduce dependence on any one part of the portfolio.
Inflation protection. Some players perform better in tougher conditions. Real assets and commodities have historically helped portfolios adjust when inflation rises.
Portfolio behavior under stress. It’s not just about performance in ideal conditions, it’s about who shows up when the game gets difficult.

What the hype often gets wrong:

A deeper bench doesn’t automatically mean a better team.

"Beating the market." Outperformance isn't necessarily why institutions use alternatives—diversification, income, and inflation resilience are stronger arguments. Not every player is there to score the most points—some are there to stabilize the game.
Exclusivity and sophistication. The velvet-rope appeal is real, but it's not an investment thesis. Something previously inaccessible doesn't make it inherently better. Adding a “star” doesn’t guarantee a better outcome if they don’t fit into your lineup.
FOMO. Institutions have advantages retail investors don't: no life-based liquidity needs, dedicated due diligence teams, and lower fees. Institutions build with intention, not hype.

Institutions don’t use alternatives because they’re exciting. They use them because—when filling the right role—they can help the overall team perform more consistently.

What should you look for when considering alternative investments?

Building a resilient portfolio isn’t just about adding more players—it’s about understanding the role each one plays and what it costs to keep them on your roster. Consider your liquidity needs, your portfolio’s structure, and your time horizon.

If you're evaluating an alternative investment, review the following factors closely.

Fees

Traditional index funds typically have expense ratios that are a fraction of a percent. Alternative strategies often involve higher costs due to complexity or specialized expertise.

That's all fine if the returns justify it, but fees can compound just like returns do. Specifically, ask yourself: What's the total cost including management fees, performance fees, fund-of-fund layers, and platform charges? Net-of-fee returns are the only numbers that tell the actual story.

Liquidity

Liquidity—how easily you can buy or sell an investment—varies widely across alternative strategies, largely based on how they’re structured.

Some alternatives are available through ETFs that trade throughout the day, offering transparency and flexibility similar to stocks. Other alternative vehicles may allow redemptions only at set intervals (e.g., quarterly) and often cap how much can be redeemed at one time.

Neither approach is inherently better. The key is whether the structure of the investment aligns with your time horizon and potential liquidity needs.

Many alternatives aren’t as easy to “sub in and out” as stocks or ETFs. Instead, they’re longer-term commitments to a specific role—less about quick rotation and more about how they contribute over time.

Correlation

Many alternative asset classes have historically shown low or even negative correlation to stocks and bonds. But that's historical—there’s no way to guarantee that’ll stay consistent going forward.

Before investing, look at how the strategy performed during previous market downturns. If it moved in lockstep with equities during periods like 2008 or 2020, its diversification benefits may be more limited than advertised.

Complexity

If you can't explain in a sentence what the fund invests in and how it makes money, that's a red flag. Complexity can obscure risk—and sometimes, it’s used to justify higher fees.

How to determine if alternatives are a good fit

Not every portfolio needs a deeper bench, just like not every investor needs alternatives. So, how can you determine if they’re right for you?

Alternatives might make sense if:

You've already built a solid core portfolio of diversified stocks and bonds
You have a longer-term time horizon
You understand what you're buying and have read the fine print on fees and redemption terms
You're looking to reduce correlation to public markets
You're comfortable with the illiquidity trade-off

Alternatives might be overcomplicating things if:

You're still building your core portfolio—alternatives are traditionally better served as a complementary allocation
You're buying because of FOMO or because a salesperson made it sound exclusive
You'd need to liquidate within the next few years—life happens
The product is so complex that you can't explain it to someone else

Alternative investments can strengthen a portfolio, but they shouldn’t be your foundation. Like role players on a team, their value comes from complementing your starting lineup’s skillset, not replacing it.

The goal isn’t to build the most complex roster or chase the latest star. It’s to build a portfolio that performs consistently across different market conditions, not just when everything is going right.

Accessing alternatives through liquid ETFs

Alternative ETFs are now more accessible than ever, thanks to surging investor interest and their rapid rise over the past few years. In fact, global assets under management hit $391 billion by December 2025 (Figure 1).²

Where alternative ETF demand is headed

Considering an allocation to alternatives for your portfolio? Here are a few categories available in the ETF wrapper capturing investor attention:

Gold

Gold’s unique characteristics set it apart from other commodities, supporting its role as a distinct asset class and potential portfolio diversifier. Investors can access this exposure in a single trade with the SPDR^® Gold ETFs (GLD^® and GLDM^®).

Find out how

Digital assets

Invest in the growth potential of new disruptive technologies like blockchain and AI—and in companies poised to benefit from the digital asset revolution—with State Street^® Galaxy Digital Asset ETFs (HECO, DECO, TEKX).

Find out how

Multi-asset allocation strategies

Go beyond traditional asset allocation to help balance risk across growth and inflation environments with the State Street^®Bridgewater^® All Weather^® ETF (ALLW).

Find out how

Real assets

Go beyond commodities to access a broader mix of inflation-sensitive assets—including bonds, real assets, and natural resources—with the State Street® Multi-Asset Real Return ETF (RLY).

Find out how

Broad commodities

Seek diversification from commodities while helping reduce the costs of rolling futures contracts—with the State Street^® SPDR^® Bloomberg Enhanced Roll Yield Commodity Strategy No K‑1 ETF (CERY).

Find out how

Glossary

Footnotes

Disclosure

Investing involves risk, and you could lose money on an investment in each of SPDR® Gold Shares Trust (“GLD®” or “GLD”) and SPDR® Gold MiniShares® Trust (“GLDM®” or “GLDM”), a series of the World Gold Trust (together, the “Funds”).

Commodities and commodity-index linked securities may be affected by changes in overall market movements, changes in interest rates, and other factors such as weather, disease, embargoes, or political and regulatory developments, as well as trading activity of speculators and arbitrageurs in the underlying commodities.

Investing in commodities entails significant risk and is not appropriate for all investors.

Important Information Relating to GLD® and GLDM®:

GLD and the World Gold Trust have each filed a registration statement (including a prospectus) with the Securities and Exchange Commission (“SEC”) for GLD and GLDM, respectively. Before you invest, you should read the prospectus in the registration statement and other documents each Fund has filed with the SEC for more complete information about each Fund and these offerings. Please see each Fund’s prospectus for a detailed discussion of the risks of investing in each Fund’s shares. The GLD prospectus is available by clicking here, and the GLDM prospectus is available by clicking here. You may get these documents for free by visiting EDGAR on the SEC website at sec.gov or by visiting spdrgoldshares.com. Alternatively, the Funds or any authorized participant will arrange to send you the prospectus if you request it by calling 866.320.4053.

Neither GLD nor GLDM is an investment company registered under the Investment Company Act of 1940 (the “1940 Act”). As a result, shareholders of each Fund do not have the protections associated with ownership of shares in an investment company registered under the 1940 Act. GLD and GLDM are not subject to regulation under the Commodity Exchange Act of 1936 (the “CEA”). As a result, shareholders of each of GLD and GLDM do not have the protections afforded by the CEA.

Shares of each Fund trade like stocks, are subject to investment risk and will fluctuate in market value. The values of GLD shares and GLDM shares relate directly to the value of the gold held by each Fund (less its expenses), respectively. Fluctuations in the price of gold could materially and adversely affect an investment in the shares. The price received upon the sale of the shares, which trade at market price, may be more or less than the value of the gold represented by them.

Neither GLD nor GLDM generate any income, and as each Fund regularly sells gold to pay for its ongoing expenses, the amount of gold represented by each Fund share will decline over time to that extent. The World Gold Council name and logo are a registered trademark and used with the permission of the World Gold Council pursuant to a license agreement. The World Gold Council is not responsible for the content of, and is not liable for the use of or reliance on, this material. World Gold Council is an affiliate of the Sponsor of each of GLD and GLDM.

MiniShares® is a registered trademark of WGC USA Asset Management Company, LLC used with the permission of WGC USA Asset Management Company, LLC. GLD® and GLDM® are registered trademarks of World Gold Trust Services, LLC used with the permission of World Gold Trust Services, LLC.

For more information, please contact the Marketing Agent for GLD and GLDM: State Street Global Advisors Funds Distributors, LLC, One Congress Street, Boston, MA, 02114; T: +1 866 320 4053 spdrgoldshares.com

The Fund may invest in companies within the cryptocurrency, digital asset and blockchain industries that use digital asset technologies or provide products or services involved in the operation of the technology. The technology relating to digital assets, including blockchains and cryptocurrency, is new and developing and the risks associated with digital assets may not fully emerge until the technology is widely used. The effectiveness of the Fund’s strategy may be limited given that the operations of companies in the cryptocurrency, digital asset and blockchain industries are expected to be significantly affected by the overall sentiment related to the technology and digital assets, and that the companies’ stock prices and the prices of digital assets could be highly correlated. Certain features of digital asset technologies, such as decentralization, open source protocol, and reliance on peer-to-peer connectivity, may increase the risk of fraud or cyber-attack. Restrictions imposed by governments on digital asset related activities may adversely impact blockchain companies and, in turn, the Fund. Companies within the cryptocurrency, digital asset and blockchain industries may also be impacted by the risks associated with digital asset markets generally.

The Fund may invest in companies that rely on technologies such as the Internet and depend on computer systems to perform business and operational functions, and therefore may be prone to operational and information security risks resulting from cyber-attacks and/or technological malfunctions. Successful cyber-attacks against, or security breakdowns of, a company included in the Fund’s portfolio may result in material adverse consequences for such company, as well as other companies included in the portfolio, and may cause the Fund’s investments to lose value.

The value of certain of the Fund’s investments in cryptocurrency ETFs and ETPs that invest in crypto assets and in publicly traded securities of companies engaged in digital asset-related businesses and activities are subject to fluctuations in the value of the crypto asset, which may be highly volatile. The market for crypto asset futures contracts may be less developed, and potentially less liquid and more volatile, than more established futures markets.

Bridgewater provides a daily model portfolio to SSGA Funds Management Inc. (SSGA FM) based on their proprietary All Weather® asset allocation approach. The model portfolio is specific to the Fund. Based on Bridgewater's investment recommendations, SSGA FM purchases and sells securities and/or instruments for the Fund. SSGA FM seeks to implement Bridgewater's investment recommendations, but may change the Fund's investment allocation at any time.

Investing involves risk including the risk loss of principal.

ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETFs net asset value. Brokerage commissions and ETF expenses will reduce returns.

While the shares of ETFs are tradable on secondary markets, they may not readily trade in all market conditions and may trade at significant discounts in periods of market stress.

The Fund is actively managed The Adviser’s judgments about the attractiveness, relative value, or potential appreciation of a particular sector, security, commodity or investment strategy may prove to be incorrect, and may cause the Fund to incur losses. There can be no assurance that the Adviser’s investment techniques and decisions will produce the desired results.

Equity securities may fluctuate in value and can decline significantly in response to the activities of individual companies and general market and economic conditions.

The value of the debt securities may increase or decrease as a result of the following: market fluctuations, increases in interest rates, inability of issuers to repay principal and interest or illiquidity in the debt securities markets; the risk of low rates of return due to reinvestment of securities during periods of falling interest rates or repayment by issuers with higher coupon or interest rates; and/or the risk of low income due to falling interest rates. To the extent that interest rates rise, certain underlying obligations may be paid off substantially slower than originally anticipated and the value of those securities may fall sharply. This may result in a reduction in income from debt securities income.

Commodities and Commodity-Linked Derivatives: Commodity prices can have significant volatility, and exposure to commodities can cause the net asset value of Fund Shares to decline or fluctuate in a rapid and unpredictable manner. A liquid secondary market may not exist for certain commodity investments, which may make it difficult for the Fund to sell them at a desirable price or at the price at which it is carrying them.

The Fund may seek exposure to commodities by, among other things, investing in a wholly-owned subsidiary, an exempted limited company organized under the laws of the Cayman Islands (“Subsidiary”) and managed by the Adviser. The Subsidiary is not registered under the Investment Company Act of 1940, as amended (“1940 Act”) and is not subject to all of the investor protections of the 1940 Act. Thus, the Fund, as an investor in the Subsidiary, will not have all of the protections offered to investors in registered investment companies.

Derivatives Risk: A derivative is a financial contract the value of which depends on, or is derived from, the value of an underlying asset, interest rate, or index. Derivative transactions typically involve leverage and may have significant volatility. It is possible that a derivative transaction will result in a loss greater than the principal amount invested, and the Fund may not be able to close out a derivative transaction at a favorable time or price.

Market Risk: The Fund's investments are subject to changes in general economic conditions, general market fluctuations and the risks inherent in investing in markets. Investment markets can be volatile and prices of investments can change substantially due to various factors including, but not limited to, economic growth or
recession, changes in interest rates, inflation, changes in the actual or perceived creditworthiness of issuers, and general market liquidity.

Bridgewater® and All Weather® are registered trademarks of Bridgewater® Associates, LP.

Distributor: State Street Global Advisors Funds Distributors, LLC is the distributor for certain registered products on behalf of the advisor. SSGA Funds Management, Inc. has retained Bridgewater Associates, LP as the respective sub-adviser. State Street Global Advisors Funds Distributors, LLC and SSGA Funds Management, Inc. are not affiliated with Bridgewater Associates, LP.

In general, ETFs can be expected to move up or down in value with the value of the applicable index. Although ETF shares may be bought and sold on the exchange through any brokerage account, ETF shares are not individually redeemable from the Fund. Investors may acquire ETFs and tender them for redemption through the Fund in Creation Unit Aggregations only. Please see the prospectus for more details.

Holdings and sectors shown are as of the date indicated and are subject to change. This information should not be considered a recommendation to invest in a particular sector or to buy or sell any security shown. It is not known whether the sectors or securities shown will be profitable in the future.

Unless otherwise noted all information contained herein is that of the State Street® Multi-Asset Real Return ETF.

As with all stocks, you may be required to deposit more money or securities into your margin account if the equity, including the amount attributable to your ETF shares, declines.

"Bloomberg®" and Bloomberg U.S. Government Inflation-Linked Bond Index are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited ("BISL"), the administrator of the index (collectively, "Bloomberg") and have been licensed for use for certain purposes by State Street Global Advisors. Bloomberg is not affiliated with State Street Global Advisors, and Bloomberg does not approve, endorse, review, or recommend State Street® Multi-Asset Real Return ETF. Bloomberg does not guarantee the timeliness, accurateness, or completeness of any data or information relating to State Street® Multi-Asset Real Return ETF.

Unless otherwise noted all information contained herein is that of the State Street® SPDR® Bloomberg Enhanced Roll Yield Commodity Strategy No K-1 ETF.

As with all stocks, you may be required to deposit more money or securities into your margin account if the equity, including the amount attributable to your ETF shares, declines.

“Bloomberg®” and Bloomberg Enhanced Roll Yield Total Return Index are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the index (collectively, “Bloomberg”) and have been licensed for use for certain purposes by State Street Global Advisors. Bloomberg is not affiliated with State Street Global Advisors, and Bloomberg does not approve, endorse, review, or recommend State Street® SPDR® Bloomberg Enhanced Roll Yield Commodity Strategy No K-1 ETF. Bloomberg does not guarantee the timeliness, accurateness, or completeness of any data or information relating to State Street® SPDR® Bloomberg Enhanced Roll Yield Commodity Strategy No K-1 ETF.

This communication is not intended to be an investment recommendation or investment advice and should not be relied upon as such.

Frequent trading of ETFs could significantly increase commissions and other costs such that they may offset any savings from low fees or costs.

Diversification does not ensure a profit or guarantee against loss.

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