Investing has long been synonymous with traditional assets like stocks and bonds. However, as financial markets evolve and investors seek ways to diversify their portfolios, alternative investments have gained a lot of attention and popularity. These alternative investments and assets offer novel opportunities and can serve as valuable additions to a well-rounded investment strategy. It should be noted that all forms of investing carry inherent risk. No tool, strategy or technology can eliminate risk, and as a general rule, investors should never invest more than they can afford to lose. Here are some alternative investments worth noting:
- Real Estate Investments: Real estate is one of the oldest investment options. Beyond owning physical properties, investors can explore Real Estate Investment Trusts, or REITs, which allow them to invest in a portfolio of income-generating real estate assets without the need to directly manage properties.
- Private Equity: Private equity involves investing in private companies which are not publicly traded. This type of investment often requires a longer holding period, as these companies may take time to develop and mature. This alternative investment typically requires a higher level of expertise and due diligence.
- Hedge Funds: Hedge funds are investment funds that employ a variety of investment strategies to try and generate returns for their investors. These strategies can include long and short positions, leverage, and derivatives trading, among many others.
- Commodities: Investing in commodities involves putting money into physical goods such as gold, silver, oil, or agricultural products. Commodities can act as a hedge against inflation and provide diversification benefits. Investors can also gain exposure through commodity futures contracts, exchange-traded funds, or ETFs, or by simply purchasing physical commodities.
- Cryptocurrencies: The rise of crypto, led by Bitcoin and to a lesser extent Ethereum, has introduced a brand new world of alternative investments. Crypto assets operate on blockchain technology and have gained attention volatility, extremely high risk, and novel nature.
- Collectibles and Tangible Assets: Often not even considered as an investment, collectibles such as art, wine, cars or anything else of value can offer a unique and uncommon investment alternative. Taking collectibles a step further and we have NFTs, which are blockchain-adapted and have been used for several years now as a form of investment by some investors.
All In All
Financial markets are more than just the stock market. There are crypto exchanges, currency markets, commodity markets, real estate, and so much more. Many investors will diversify their portfolios as an attempt to mitigate risk. By incorporating a well-researched and balanced mix of traditional and alternative assets, investors can potentially build a more resilient and dynamic investment portfolio.