U.S. equities experienced their worst start to a new year, and the poor performance may have pushed some investors to consider alternative investments and related exchange traded funds that could provide more stable returns in volatile conditions.

Potential investors should be aware that alternative investments are not meant as growth strategies to generate outsized returns in investment portfolios. In reality, these strategies are doing exactly what they were made for, diminishing volatility. Consequently, in bullish market conditions, the strategies may underperform, but if the markets turn, alts can shine.

Alternatives would be used in an investment portfolio to provide diversification from equities or better protect an investor from downside risks in stocks while bringing some upside participation. Nevertheless, these alternative strategies may include equity exposure, so in a widespread sell-off, investors should not expect complete immunity.

For instance, the AdvisorShares Ranger Equity Bear ETF (NYSEArca: HDGE), which tries to generate capital appreciation through short sales of domestic equities, rose 13.8% year-to-date and recently hit a 52-week high while the S&P 500 Index declined 9.0%.

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