Everyone’s portfolio is one-of-a-kind, leading to unusual investments. The length of your investment horizon and the risk you accept may influence your alternative investment moves.
Whatever your goal is, strange investments based on your investing approach will almost certainly be the fitting complement to the rest of your portfolio.
For a first-time investor, these investments might be a bit daunting. However, having a wide range of alternatives might be beneficial.
Figure out what the best alternative investments are for your investment plan. To do so you must have a clear idea of what you want from your portfolio.
Based on popular investing methods, we’ve divided down some of the top 6 alternative investments. Here’s what you need to get started.
1. Cryptocurrency and derivatives
Cryptocurrency and derivatives trading is not for the faint of heart. Cryptocurrencies initially garnered mainstream attention in 2017, resulting in a significant surge for them. Popular choices include Bitcoin, Ethereum, and Litecoin.
If you purchased one Bitcoin for $432.36 on January 1, 2016, it would be worth slightly over $33,000 in 2021. Sure, it’s difficult to predict if a crypto investment will pay off, but the returns on many cryptocurrencies are unrivaled.
Derivatives can also give a good return if you have the knowledge and foresight to make the proper decisions. Derivatives, such as options trading and futures, may offer significant profits—if you can make the right moves.
GameStop shares climbed rapidly earlier this year as part of a short squeeze that trapped many institutional investors who had shorted the company’s share price. Options and futures contracts, when used appropriately, may provide investors with a sizable profit.
The considerable profit comes with significant risk when it comes to these two investments. Trading options and futures to time the market is tough and fundamentally unsafe. That hasn’t deterred many ordinary investors from investing. In fact, in the first 11 days of 2021, one central online trading platform attracted 380,000 new customers. In 2020, the firm had 5 million users.
So, if you wish to participate in this alternative high-yield investment, be prepared to join a legion of like-minded traders with this strange investment.
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Farmland investing provides a value proposition that real estate cannot: it gives investors historically consistent growth, access to a booming property type, and several revenue sources all in one transaction.
You get the benefits of real estate investing (stable returns) with a greater average rate of return over a shorter period of time.
In 2010, the typical acre of farmland in the United States cost $2,000. That number is now closer to $3,160 per acre. FarmTogether’s farmland investment possibilities have a 10-year target hold date, allowing investors to track decade-long trends to predict where farmland value will move in the future.
Farmland investments earn top marks for alternative asset diversification for a variety of reasons. Investing in farmland gives you access to an asset that has an inverse connection with inflation.
The price of agricultural products generally rises when the value of the dollar depreciates due to inflation. As the cost of the commodities cultivated and produced there rises, farmland becomes more valuable. You gain from both since you get a portion of the harvest earnings.
This makes farmland investment an excellent choice for those looking for a way to diversify their portfolio. Its various revenue streams and historically consistent value appreciation make it an excellent method to diversify and recession-proof your investments.
During periods when the stock market is volatile, gold has become a near-shorthand method of referring to a safe haven for investment capital. When traditional investment performance is all over the place, this commodity and precious metals, in general, can provide investors with a wise location to put their money that has a track record of growth.
Gold investors have seen their money rise while also protecting their investments in a reliable commodity. In January 2016, an ounce of gold would cost around $1,237. The same ounce of gold now would cost $1,741.
Of course, the average price has changed throughout that time, but the overall trend has been higher.
One of the main advantages of investing in farmland, for example, is that there is less direct exposure to the commodities market. Because of the crop it grows, the farmland in which you invest is linked to the world of commodities.
When agricultural prices rise, this may be a huge benefit. At the same time, your investment money isn’t directly connected to the commodities market, allowing you to diversify your revenue streams.
4. Alternative Investments in Real Estate
It’s essential to keep in mind that not all real estate investments are made equal. Some are very speculative, while others are as basic as owning your own house or rentals.
When we talk about real estate’s potential to deliver consistent returns, we’re referring to the latter. These forms of real estate investments have traditionally performed better than others.
Your house is also an investment, even if you don’t recognize it. Your net worth includes the value of your property, which you may access in a variety of ways. The most frequent is, of course, selling it and pocketing the difference if you acquired it for less than you sold it for.
If you currently own a home, you might want to diversify your portfolio by acquiring other types of real estate. Buying a rental property, stock in a real estate investment trust (REIT), or farmland are all examples of this.
Rental properties may grow in value while also providing passive income, and REITs allow you to hold a portion of one or more properties under a fractional ownership structure.
What used to be the domain of ardent fans and (fortunate yard sale customers) has evolved into a substantial alternative asset class. Collectibles are something that almost everyone is acquainted with, whether it’s a mint-condition baseball card or the Notorious B.I.G.’s crown. Both items are now more coveted than ever before.
Fractional ownership possibilities have allowed individual investors to enter the collectibles market. Now, dedicated Ferrari enthusiasts may acquire a piece of history or a part of a classic Ferrari.
Collectibles aren’t for everyone: returns aren’t always consistent, and sales might be irregular. However, there are few, if any, more intriguing and innovative methods to put your money to work. The desire for collectibles and rarities is rising.
6. Private equity and hedge funds
When you have a large sum of money to invest but don’t want to go through the hassle of picking stocks, funds, bonds, and other assets by yourself, you’re probably ready to delegate part of the job to a professional.
You can’t go wrong with private equity or hedge funds for many ultra-high-net-worth individuals. Individual investments are made easier with the help of these institutions.
Private equity funds manage a portfolio of assets ranging from real estate to privately owned businesses, with the goal of maximizing profits above and beyond what traditional Wall Street movements can give. Private equity businesses take a long-term approach to their investments.
Hedge funds devise ways to maximize the profits from short-term investments. Individuals’ money is also managed by these organizations, which frequently have hefty deposit minimums. Working with a hedge fund comes with a substantial degree of risk. Specifically, there is a significant chance that your investment would depreciate in value.
Why Alternative Investments are Important
Alternative investments aren’t usually correlated to the stock market, so they may be utilized to help diversify a portfolio and reduce volatility. Some may also provide tax advantages not seen in typical investing.
The rate of return on alternatives, like any other investment, is not sure, but it can be higher than traditional investments.
According to proponents of alternatives in portfolios, individual investors now have access to sophisticated investments and possibly better returns that were previously only available to institutions such as pension funds and foundations.
According to Preqin, a data analytics firm, the entire market for alternative investments may rise to $14 trillion by 2023. Hedge funds and private equity are alternate investing classes, according to the research.
Part of the explanation for this might be because investment firms have decreased the entrance criteria for mutual funds focused on alternative investments. Furthermore, investors have acquired a preference for something other than the usual mix of bonds, mutual funds, and exchange-traded funds.
Many emerging nations are shifting their focus from savings to investment, making them more appealing to investors looking for fresh possibilities.
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Whatever you’re searching for in your next venture, the world of unusual investments is sure to offer you something different. That may mean investing in real estate, embarking on a cryptocurrency rollercoaster, or sticking with a proven and reliable investment company.
Alternative investments, rather than being the core strategy of a long-term plan, may be viewed as a form of diversification by a savvy investor like you!