The Most Common Examples of Alternative Investments

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Creating an investment portfolio is one of the best financial decisions you can make. When you invest, you stay ahead of inflation, build wealth, benefit long term, and have a better chance of reaching your financial goals.

With the right investments, you can also save for retirement and reduce your taxable income.

However, you might be looking for uncommon methods of investing. If you want an interesting portfolio there are several examples of alternative investments to consider.

What are alternative investments?

In a nutshell, an alternative investment is a financial asset that does not fall into one of the conventional categories of cash, stocks, and bonds. There are many benefits of alternative investments, such as direct tax benefits, independence from the stock market, and direct ownership.

These investments also minimize your risk, reduce volatility, and provide better opportunities for return. For these reasons, diversifying your portfolio with alternative investments is ideal.

Fortunately, finding these types of assets doesn’t have to be a difficult task. If you are wondering about the most common examples of alternative investments, here are several to consider.

Real Assets

One of the best tips for investing for beginners is to purchase real assets. These are valuable tangible assets, such as real estate, precious metal, oil, and more. Real assets are more stable than other forms of investments, but can also be more liquid.

Funding a Startup Company

A great alternative investment to make is funding a startup company. You can do this in a variety of ways, such as becoming an angel investor or a silent partner. Investing in a startup is risky, however, if you believe in the idea and have done your due diligence, you can make a good return on your investment.

Real Estate Crowdfunding

Although investing in real estate used to be complicated and confusing, today, you can get started with just a few hundred dollars. By investing in real estate crowdfunding, you can be one of many investors that contribute to a single project. Real estate is one of the most common types of alternative investments.

Peer-to-Peer Lending

Another alternative investment to consider is peer-to-peer lending. This involves cutting out the middle man and lending money directly to borrowers.

While there are several platforms for this type of lending, you can work with borrowers on your own. Peer-to-peer lending can be risky, but lenders generally enjoy high returns.

Farmland

If you want a diversified portfolio, consider investing in farmland. Productive farmland is a great investment because of its positive return year after year.

You can benefit from cash rental payments and increased farmland values. Best of all, there are many ways to invest, making farmland an accessible investment for many people.

Fine Art

One of the most common alternative investments is fine art. Although art can be expensive, it’s not correlated with the stock market, marking it a perfect alternative investment.

You can buy art directly, or use a service that crowdfunds art investments. Before getting started, make sure to learn all you can about the type of art you want to invest in.

Private Debt

While it might seem strange to invest in someone’s debt, private debt investing is a common way to diversify your portfolio. Private debt includes all debt that is incurred by individuals as well as private businesses.

This debt can include personal loans, business loans, credit card debt, and more. A private debt investment is considered to be a safe investment to make.

Commodities

Commodities are raw materials or agricultural products, such as oil, wheat, energy, natural gas, gold, silver, and more. These materials and products can be a great way to get started with alternative investments. Although investing in commodities can be risky, they are not affected by inflation and can result in high returns.

Wine

If you are a lover of wine and the story and history behind every bottle, consider adding wine to your investment portfolio. Wine appreciates over time, which means the longer you hold onto your bottles, the more valuable they become. You can also invest in wine by purchasing wine stocks or crowdfunding your investment.

Hedge Funds

A common type of alternative investment to consider is hedge fund investing. This involves contributing to a pool of money that is run by a manager.

This type of investing is not for the faint of heart, managers are aggressive and the investments are high-risk high return. Although hedge funds are risky, they are managed by experts, can accommodate your investment style, and allow you to profit from the rise and fall of markets.

Private Mortgages

When you think of a mortgage, you likely think of an agreement between a financial institution and a private lender. However, private mortgages can be a great addition to your investment portfolio. You can invest in a few ways, such as buying an existing note, lending directly, investing in a mortgage REIT, or investing in a mortgage-backed security.

These Are the Most Common Examples of Alternative Investments

If you want to diversify your investment portfolio, these are the best examples of alternative investments. Consider investing in a start-up or peer-to-peer lending. You can also purchase real assets, participate in real estate crowdfunding, or buy farmland.

If you want to add to your portfolio, consider private mortgages, or hedge funds. You should also consider fine art, wine, commodities, and private debt. Choose one or more of these alternative investments to add to your investment portfolio.

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