“A lot of advisors are looking to use alternative investments, but … what’s missing from the picture is the clients’ level of understanding of what they own and what that investment is trying to achieve,” Barry Glassman, CFP and president of Glassman Wealth Services, said in the article.

Most investors may hold on to the misconception that these types of hedge-fund-esque investments are some sort of robust money makers. In reality, these strategies are doing exactly what they were made for, diminishing volatility.

“By looking at these funds just as a piece of the entire portfolio, it may help the portfolios generate lower volatility during turbulent times and, in turn, allow the investor to fight off the behavioral urge to sell at market bottoms,” Adam J. Reinert, CFP with the Marshall Financial Group, said in the article.

These types of alternative ETF strategies diversify a portfolio since their returns are not closely correlated to stocks or bonds. During a bullish market condition, though, alternative strategies can underperform. However, when markets are volatile, alternative investments could shine.[Investors May Be Overlooking Alternative Investments, ETFs]

For more information on the ETF industry, visit our current affairs category.

Max Chen contributed to this article.