Alternative investments are, actually, anything which does not involve classic investment vehicles like bonds, stocks, options and real estate.
In long-term portfolios, alternative investments play a key balancing role, bringing quick and sometimes high yields, so the investor has more money to reinvest in serious, “heavy” assets.
Some types of alternative investments are often unpredictable in terms of profits and risks, so it is wise not to put all the money in one “alternative”basket, but rather give it a 30% share of the whole portfolio.
Alternative investments often offer an important advantage. An opportunity to invest even small amounts of money (from 500$-1000$) draw the attention of many investors (including speculators).
Before diving into alternative investments deeper, you may find it useful to find out what type of investments matches your needs and goals the most.
So, if you are considering giving a try to the alternative way of investing your money, take a look at one of these ideas:
1. Hedge Funds
Hedge funds create investors pull in order to gather the money for bringing to life serious investments strategies. Earning money by being a part of a hedge fund is a brilliant opportunity which attracts high-profile individuals, top-managers, and corporations.
Hedge funds invest in high-yield financial assets like stocks, futures, options and other equities’ derivatives. Gaining impressive profits makes them a very delicious investment pie for wealthy investors. Usually, there are certain set of requirements to investors who want to join the hedge fund, and one of the requirement is having a considerable amount of money to invest (starting from hundreds thousands of dollars). Mutual Fund is the more “affordable” version of a hedge fund for an individual investor.
Being totally anonymous, crypto-currency has a pretty controversial reputation and there is a reason for it. From one side, Bitcoin is a highly volatile asset and the demand on it is constantly growing, so it can potentially bring a fat return if a “buy and hold” strategy is applied.
From the other hand, Bitcoin is an unregulated digital asset, non-endowed with real money or gold. There is always a risk of data leaking and system hacking like it has already happened recently after Bitcoin was presented to the world.
There are few ways to invest in Bitcoin: trading, getting the interest, and just holding the currency in hopes its price will rise over time.
3. Commodities, precious metals
Investing in commodities, as well as investing in gold, silver, and other precious metals is considered high-risk investments which promise big gains in return. In a complex investment portfolio, it allows an investor to earn a current profit while other, low-yield but safe assets are“waiting” for the date of being paid off. Often, about 20% of the whole portfolio is directed in trading high-volatile commodities which are usually traded through futures contracts. In order to deal with futures, you will need to establish a brokerage account with the required minimum initial deposit of money.
Gold is good for long-term investments as an “anti-crisis” asset. It’s a well-known fact, than at the times of global crisis (caused by war, financial markets collapse, etc), gold is always rise in price, so you will never lose having Gold in your investment portfolio.
4. Property Trusts
REITs – Real Estate Investment Trusts has a different concept of investing money comparing to investing in Real Estate directly. By investing in REITs you do not buy a property, but instead you “buy” a share in a real estate investment portfolio which is managed by the Property Trust.
The profit, received from the Real Estate which was bought collectively by many investors (like you) is shared among them proportionally. The pros: you don’t have any expenses for maintaining the property. The cons – you don’t own the property so you can get only a share of the final (or operational) profit.
5. Venture Capital
Investing in venture capital reasonably considers a high-risk investment which brings a high return as well. Venture capital is money, invested and involved in different businesses (usually small-to-medium businesses or startups). Venture capital operates similarly to mutual funds with the only main difference that mutual funds invest money in financial assets like stocks, options, and futures, while Venture Capital manages money, invested in different businesses with good commercial potential and low risk of failure (bankruptcy).
6. Pieces of art, Antiques, Rare coins
This is the investment with the longest term, where the investor buys and holds a piece of art in hopes it willskyrocket in price over time. Rare pieces, artifacts, coins are also attractive to investing money in because there are thousands of private art “hunters”, collectors, who are ready to pay unreasonably large amounts of money to get something they are obsessed about.
Paintings, antique statues, furniture, vases, and jewelry – such assets will only go higher in price with the time, therefore wealthy people prefer buying it as an equivalent of money and gold.