In recent years, individual investors have gained more and more access to so-called “alternative” investments. Stocks, bonds, and cash (or mutual funds containing those investments) have worked well for years. However, further diversification can help you manage risk, and help you reach your goals.

Alternative investments include assets beyond traditional stocks, bonds, and cash. For example, real estate, commodities, and hedge fund strategies might be considered alternative investments. For the most part, you can get exposure to these investments within mutual funds. However, you may need to hunt for specialized funds.

Alternative investments can help your portfolio because they behave differently than traditional investments. They're less likely to go up and down at the same time (or in the same direction) as the other investments in your portfolio. As a result, your account balance should not react as wildly to market gyrations as a more traditional account would.

Investing experts disagree on exactly how much “alternative” you should have in your portfolio. A prudent approach is to benefit from alternatives, but not overdo it. Five to ten percent of your investment portfolio is probably a good place to start — with that amount diversified among a variety of alternative strategies.