People tend to invest in the stock market when they start their investing journey. Alternative investments could be a good way to increase your portfolio’s diversity. It is important to remember that alternative investments can involve a high degree of risk and offer potential for good returns.
When done right, investing in alternatives can be a smart move. Before investing in alternatives, you should do your research and understand the risks.
What are alternative investments? Let’s find out.
What Are Alternative Investments?
Any type of investment that can’t be put in a 401(K) is called an alternative asset. Cash and stocks are traditional assets, but are not considered alternative investments.
Private equity funds, hedge funds, real assets, and venture capital are some of the different types of alternative investments. 15 of the best alternative investment ideas have been listed.
Extra security can be provided by having alternative investments in addition to traditional assets in your portfolio. By investing in different asset classes, you can potentially improve the balance of risk and return in your portfolio, which can help reduce overall volatility and improve financial security. And, as diversification is the number one rule of investing, being smart in your asset allocation can help you meet your investment objectives.
15 Best Alternative Investments
Here are the top alternative investments you can add to your portfolio:
- Real Estate Investments
- Fine Art
- P2P Lending
- Angel Investing
- Precious Metals
- Mineral Rights
- Hedge Funds
- Start Your Own Business
1. Real Estate Investments
If you want to get involved in the property market but don’t have the funds or time to purchase real estate, real estate investments might be the thing for you. Real estate investments allow you to get involved in the property market without having to put in a lot of money or time.
With a real estate investment, you can own a small or a big part of a property with some platforms offering investments that start from as little as $10.
This type of investment is also known as real estate crowdfunding. Some real estate investments are only open to accredited investors. Whether you’re a beginner investor or have experience in the field, it’s important to do your research and find the best investment opportunity for your needs.
Real Estate Investing Details:
- A cost-effective way to get involved in real estate investment
- Investments start from as little as $10
- Online platforms and apps make it easy to invest
- Available for different types of investors
Most real estate investing platforms are only open to accredited investors, but Fundrise makes it accessible to all investors.
2. Fine Art
Fine art investing can be something of a closed club. It is important to remember that with the growth of online art marketplaces and resources, more people are now able to access fine art investing opportunities than ever before. You could either invest a lot of money on well-known pieces or take a chance on an up-and-coming artist hoping they make it to the big leagues. Make sure the art you buy is of good quality by doing your research.
You can buy shares through online platforms if you don’t have a lot of money. With fine art generally being a well-performing asset class, this type of alternative investment is well worth our consideration. It can provide stability and long-term appreciation in an investment portfolio.
If you’ve decided to invest in fine art and don’t know where to start, Masterworks is a great platform to check out. Just like buying shares in public companies, it allows you to buy shares in a painting. If you invest in a painting, you can earn an attractive return if it increases in value over time.
Fine Art Investing Details:
- Traditionally difficult to get into requiring large sums of money
- Performs generally well
- Investment platforms allow you to buy shares
- Can be quite fun especially if you appreciate fine art
3. P2P Lending
P2P lending allows investors to lend money to other people. It has become more popular in recent years. There are many platforms you can use for P2P lending (check out my review of Lending Club), so doing your homework is a must.
People looking to borrow are pre-qualified by the websites. The process is convenient for both parties. Some focus on returns and others on safety. It’s important to find the best sites that prioritize growth over safety for those looking to maximize their returns. Before investing in P2P lending, it is important to understand your risk appetite. You can make an informed decision about how much to invest if you understand your risk appetite.
P2P Lending Details:
- Loan people money through P2P lending platforms
- Research the platform you are lending money on
- Different platforms have different requirements such as credit score
- Can be an excellent diversification method
If you’re looking to invest beyond more traditional financial assets (such as stocks and bonds), cryptocurrency can be a great option. Cryptocurrencies are a form of currency. Cryptocurrencies are gaining in popularity as an alternative to traditional forms of currency. This is both strong and weak. The ability to adapt and evolve is what makes it so powerful, but at the same time it can be difficult to control.
Cryptocurrencies have taken the financial world by storm. Digital currencies bring unprecedented levels of financial freedom to people and businesses. Their value has gone up a lot, but there is a lot of uncertainty. Before investing in these assets, it is important to consider the risk. Investments should be made with care. It is important to remember that investments are not guaranteed, and that there may be risks associated with any investment decision.
It is now easier than ever to buy and sell coins on investment portals. It’s potential for high returns has made it popular.
Cryptocurrency Investing Details:
- Massive potential for returns
- Different cryptocurrencies available
- Easy to buy and sell thanks to investment portals and apps
farmland deserves a special mention. As an asset, farmland has the potential to not only generate income through the sale of crops and livestock, but also provide a long-term appreciation in value. For example, farmland can be used to produce food. It is an important resource for many countries, as it provides a way to sustain populations and contribute to the economy.
An alternative investment made in 1990 would have returned over 2000% today. It was not easy to invest in farmland. More and more opportunities are available for investors to gain access to farmland.
Thanks to apps dedicated to this type of investment, it is much more accessible to the general public.
Farmland Investing Details:
- Historically stable returns
- Online platforms available
- Make money from rent payments or land value
- Can protect you from market volatility
The value of collectables increases over time. They can range from rare coins and stamps to vintage toys and collectible cards. Some of the items that fall into this category are stamps, baseball cards, comics, and action figures. Many of these items are popular with collectors.
One baseball card is valued at over $3 million and is a first-edition, one-offs, and rare item. When people learn the worth of their collectibles, they are often surprised. This can be a fun alternative investment in which you can spend more time on the things you like, if you have an interest in the collectible. You can learn more about the history and value of the items, as well as build relationships with other collectors and sellers.
Collectibles Investing Details:
- First editions and one-offs tend to have a higher value
- Must be in a pristine condition
- Most valuable baseball card worth over $3 million
- A fun way to invest
An umbrella is a commodity. The production and exchange of goods and services is dependent on a commodity. Commodities include precious metals such as gold and silver, as well as crude oil, sugar, and coffee. It is possible to protect against inflation by investing in commodities.
You should be able to buy commodities on your investment platform. Investing in commodities can be a great way to diversify your portfolio, adding a degree of resilience to your overall investment strategy.
Commodities Investing Details:
- Commodities are economic goods or services
- Gold, silver, crude oil, and wheat are examples of commodities
- Can be bought through ETFs or physically
- Can help you diversify your investment portfolio
8. Tax Liens
This is interesting. I’m going to learn more about it. Tax liens are claims against the owner of a property who has failed to pay his or her taxes and you can buy them in an auction. It is possible to generate a return on investment with minimal risk by buying a tax lien.
You can buy tax liens at auctions or online. It is important to understand the legal requirements and responsibilities that come with investing in a tax lien.
Tax-lien Investing Details:
- Tax liens are claims against unpaid property tax
- Individuals can buy tax liens and then collect the taxes and interest from the property owner
- Can be very lucrative (but is high-risk)
Similar to art, pieces of jewelry may accumulate in value over time. Their investment potential makes jewelry an attractive choice. You should have an understanding of the market as well as the specific properties of jewelry that can contribute towards greater value to invest in jewelry. It is important to be aware of current trends in the jewelry market to ensure you are investing in something that will remain desirable over time.
When buying or selling a piece, try to keep your emotions out of the equation and make sure you take the time to get the piece verified. If you research the artist and their work thoroughly, you will be able to make an informed decision.
Jewelry Investing Details:
- Certain jewelry accumulates value over time
- Understand which pieces are most likely to increase in value
- Make sure you have pieces independently authenticated
- Do not get emotionally attached to your investments
10. Angel Investing
Angel investors invest in businesses that are still in their infancy. Angel investors are willing to take risks on businesses with huge potential for growth. Equity is a percentage of the business for your investment. It is possible to build long-term wealth with equity, which is an investment in the future of the business.
You can make money if you sell your stake. When calculating your expected return, be sure to factor in any taxes and fees associated with the sale. It can be risky, but the potential return can make it worth it. To understand the risks associated with investing, it is important to carefully consider all of the possible outcomes.
Understand the market to increase your chances of success. To stay ahead of the competition, you should conduct thorough research and identify potential opportunities.
Angel Investing Details:
- Invest in up-and-coming businesses
- Many opportunities to invest in growing markets such as FinTech
- Investment is against company equity
- Research the market and the company before investing
Over time, good wine increases in value. It can be a great investment for people who are knowledgeable about the industry. Cheap wine doesn’t. It’s important to have an understanding of different wines and good vintages. Knowledge of how to pair wines with food is a must for a wine enthusiast.
As wine is consumed, certain bottles become rarer over time, increasing the value of your investment. Buying a bottle of rare wine is an excellent long-term investment that will appreciate in value as time passes. Wine should be kept in perfect conditions so that it doesn’t turn into vinegar.
You can find apps that will allow you to buy wine and store it for you, which will help you minimize the risk. You can use these apps to find and purchase the perfect bottle of wine.
Wine Investing Details:
- Wine from a good vintage can increase in value over time
- It is consumable, so it tends to become rarer over time
- Appropriate wine storage is important to protect your investment
- Online platforms can take care of purchase and storage for you
12. Precious Metals
Precious metals are used for a lot of things. Due to their rarity, malleability and durability, precious metals are ideal for a wide range of uses. They are in high demand and can be used as an alternative resource. As a result of their increasing availability, renewable energy sources are becoming more attractive. Precious metals are part of a group of real assets. Precious metals can be used as a hedge against inflation.
You can outright purchase precious metals such as gold bullion and store it yourself – or invest in them through mutual funds and ETFs. They act as insurance policies and are one of the more common types of alternative investments. They are often used to make an investment portfolio more diversified.
Precious Metals Investing Details:
- Precious metals are used for a variety of goods
- In high demand making them a safer investment
- Can be purchased outright such as in gold bullion
- A great option for portfolio diversification
13. Mineral Rights
You can sell the rights to extract minerals from your property to a company. You need a lawyer to make sure you understand the terms of the agreement. Minerals refers to any precious resource that can be mined from the ground, including oil, coal, and diamonds. Many minerals are used in the manufacturing industry to create a range of products.
It’s important to take the time to do your research. It’s important to find reliable sources for your research. Resource extraction is a very competitive market. Companies must strive to find new and innovative ways to increase output and keep costs low.
Mineral Rights Investing Details:
- Mineral is a generic term that refers to extractable resources
- Minerals rights are the rights to extract those resources
- It’s a highly competitive market so do your research
- You can buy rights for a lump sum and then collect payments
14. Hedge Funds
Hedge funds allow you to invest in different strategies and asset types. Hedge funds are managed by professional money managers who have experience in the financial markets. They are formed by a limited number of investors. The manager raises capital and invests it. The manager wants to maximize returns on capital invested in alternative investments.
There are many hedge fund strategies. Hedge funds can provide investors with increased returns and reduce risk. Hedge funds invest in public equity, which is different from venture capital and private equity. Long and short positions, leverage, and derivatives give hedge funds greater flexibility than other types of investments.
The downside of hedge funds is that they are very exclusive and only accessible to accredited investors. Hedge funds are more expensive than other investments due to their higher fees.
Hedge Fund Investing Details:
- Hedge funds are flexible (not as regulated as mutual funds)
- A good way to diversify your portfolio
- Typically aimed at professional, accredited investors
15. Start Your Own Business
One of the most rewarding investments is starting your own business. It is important to understand that starting a business requires a lot of time and risk. Do your homework and draft a business plan to see how much money you will need to get it off the ground. It’s a good idea to consult with business advisors who can help you navigate the process of starting a new venture.
A good business plan will show you how much you can make over the course of three to five years. A realistic business plan will help you to set realistic goals and stay focused on making your business a success. This can help you make a decision. It’s important to consider the long-term implications of your decision before making a final choice.
Investing In Your Own Business:
- One of the most rewarding forms of alternative investing
- Draft a business plan to see how much capital you need
- Work on your income projections
- Has the potential to give you more flexibility
Frequently Asked Questions
What are the four most common alternative investments?
There are a lot of investment alternatives. Before committing to any investment, it is important to research the options available. The four most common investment alternatives are:
- Real estate
- Precious metals
- P2P lending
The low barrier to entry makes them attractive to different types of investors. Investment trusts have the potential for capital appreciation over time.
Are alternative investments a good idea?
There are a number of things that affect whether or not alternative investments are a good investment. It’s important to consider the risks and rewards of any investment before making a decision.
Make sure you understand the market of your investment and that it fits within the overall investment and risk management strategy of your portfolio. Ensure that your investments are still the right fit for your risk management strategy by conducting thorough research. When applicable, you should useReputable Intermediaries. Do your research and verify the credentials of the people you plan to use. This will let you know if you are investing in the real thing. Before you commit your money, it’s important to do your research and verify the authenticity of any investment.
Is ETF an alternative investment?
Since they can be added to your 401(k), they are not considered to be alternative investments. The convenience of traditional 401(k) investing can be sacrificed in favor of the beneficial investment option of ETFs. Even if commodities can be listed in your 401(k) it can still be considered an alternative investment. It’s important to understand the fees associated with an exchange traded fund so that you can make educated decisions about which investments are right for you.
Are alternative investments high-risk?
Not all alternative investments are high-risk. Real estate and commodities can be made with a lower risk profile.
It is not considered high risk to invest in property. Property can provide a steady return on investment over time, making it an attractive option for those looking to Diversify their Portfolio. It’s important to understand your risk appetite and risk tolerance. It is important to understand your risk appetite and tolerance in order to make investment decisions. This can help you make a decision on which investment is best for you.
Finding The Right Alternative Investments For You
It can be difficult to decide which investment to go for with so many different options. By speaking to a financial advisor, investors can gain more clarity on which investments are best suited to their individual needs and goals.
The important thing here is to pick an investment you understand – both as a product or service, as well as the risk associated with it. This can help you balance your investment portfolio, improve your risk strategy, and make your investment a financial success. To maximize your success, it is recommended to seek professional advice from a financial advisor who can provide guidance on the best investment strategies for your unique situation.
Understanding your risk tolerance is important, as well as choosing investments that are right for how much risk you are willing to tolerate. It is important to remember that having a higher risk tolerance does not guarantee higher returns.
If you want to learn more about alternative investments and eventually invest in them, you should speak with your financial advisor.