5 Alternative Investments All Investors Should Consider

5 Alternative Investments All Investors Should Consider

Traditional investments such as stocks, bonds, and cash represent the pillars of a good investment portfolio, which is why they remain the most traded commodities in the investment arena. However, there are numerous other investment opportunities out there that could, at the very least, help you diversify your portfolio, mitigate risk, and ensure a positive ROI.

These are called alternative investments and they encompass everything from real estate and venture capital, to precious metals, art, jewelry, and even cryptocurrencies in certain cases. Because of their low correlation with bonds and stocks, alternative investments are more liquid than their traditional counterparts, and they effectively mitigate the intrinsic volatility of investments in the public arena. With that in mind, let’s take a look at five alternative investments that can help you diversify your portfolio and enhance your ROI.

 

Venture capital investments

As a subcategory of private equity investments, venture capital investors specialize in giving financial support to up-and-coming companies. These companies can be in the early stages of conception, or they can be in their growth stages, thus in need of adequate financing to transform a lucrative business idea into reality. As an independent venture capital firm, or a part of a venture capital group, you can raise funds from institutions or affluent individuals in order to funnel the capital to companies in early stages of development.

Venture capital investing is not without its inherent risks, and you will need to research the viability of the company seeking financial support thoroughly. This will allow you to minimize risk, prevent common pitfalls, and steer the company in the right direction early on in order to secure your investment and a positive ROI. Once the company starts generating revenue and gains recognition in the industry, you can expect this risky move to generate outsized returns.

 

Investing in precious metals

Investing in Precious Metals

Precious metals such a silver, platinum, and gold are some of the most highly-sought after investment assets in the world. This is due to the fact that these commodities have displayed relative stability over an extremely long period of time. Unlike the extreme volatility that permeates the cryptocurrency market, for instance, precious metals remain steadfast as some of the most secure assets in the world.

As such, they represent a sound investment opportunity for investors looking to broaden their portfolio and take advantage of the rising gold price and other precious commodities. Gold, in particular, is considered to be an investor’s safe haven, and a secure place to store financial assets during times of political and economic uncertainty. Along with gold, silver represents a stable and secure investment asset as well, but for the fraction of the price. The key to deciding on the precious metal to invest in will boil down to the liquidity of the market and the price of the precious material in question.

 

Investing in hedge funds

Another alternative investment that can be used to minimize risk and possibly generate positive returns in hospitable and unhospitable markets, is a hedge fund. This is typically an offshore investment fund that pools capital from investors all over the world (including institutional investors) in order to invest in a variety of assets and commodities ranging in classes, markets, and volatility.

By using complex risk management techniques, various types of arbitrage, equity long-short, and monitoring macro trends, the hedge fund is able to invest across a variety of financial instruments and methods. If you invest in a hedge fund, you can expect to preserve your capital, reduce losses, and effectively diversify your portfolio.

 

Real estate investments

Real Estate Investments

Another popular alternative investment type is real estate, made extremely popular in recent years with reality shows documenting the process of procuring a property, restoring it to its former (or even shinier) glory, and selling it to an affluent buyer for an outrageous price. Another contributing factor to this rise in popularity is the ever-increasing urbanization around the world and the potential the 21st-century residential market holds.

As an investor looking to diversify their portfolio and secure physical assets under your wing, real estate might be a sound investment move that can yield a positive ROI. There are risks and expenses you will have to factor into your financial projection, of course, and mind you these risks can hurt your ROI. The costs associated with procurement, restoration, upgrades, and licensing might prove too financially-taxing to safely venture into such a competitive marketplace. Nevertheless, with adequate resources, you can ensure a successful campaign in the real estate arena.

 

Investing in curios

Last but not least, curios (collectibles and rarities) present a sound way to diversify your investment portfolio while possibly yielding a high ROI. It will all boil down to the trading frequency of the collectible in question. Keep in mind that collectibles are not traded as often as traditional assets, and because of that they suffer from increased price variability throughout the year. The price of the asset and the ROI it yields will depend on a myriad of factors beyond your control, which can produce extreme ROI gains or extremely low returns – it’s a game of chance in many cases.

Alternative investments are something every investor should consider at one point or another, as they can produce numerous long-term benefits and help you pave the road to a successful future in the field. With these five alternative investments in mind, you can enter new markets and diversify your portfolio with increased safety and a higher chance of a positive ROI.