Alternative investments are financial assets that do not fall into the conventional investment categories of stocks, bonds, and cash. They are often used as a way of reducing overall investment risk through diversification. Alternative investments can include private equity or venture capital, hedge funds, managed futures, art and antiques, commodities, and derivatives contracts. Real estate is also often classified as an alternative investment.

Some of the characteristics of alternative investments may include narrow specialization of the investment managers, relatively low correlation of returns with those of traditional investments, less regulation and transparency than traditional investments, limited historical risk and return data, unique legal and tax considerations, higher fees, often including performance or incentive fees, concentrated portfolios, and restrictions on redemptions.

Alternative investments are supplemental strategies to traditional long-only positions in stocks, bonds, and cash. Alternative investment strategies are typically active, return-seeking strategies that also often have risk characteristics different from those of traditional long-only investments.

The benefits of alternative investments include greater portfolio diversification and lower overall risk with the potential for higher returns. As of 2019, the global breakdown of financial assets included a 13% allocation to alternative investments.

Access to alternative investments has traditionally been limited to institutional or accredited investors, but in recent years, the growth of alternative finance has opened up new avenues to investing in alternatives.