Alternative Assets: Investing Beyond Stocks, Bonds, and Cash

When most people think about investing, the first thing that comes to mind are stocks, bonds, and cash. While these traditional investments still have a place in any portfolio, investors are now looking beyond these options to include alternative assets in their portfolios.

Below you will find an overview of acquiring various assets and their potential benefits and risks. Consider the following when deciding if these investments are suitable for you.

What are alternative assets?

An alternative asset is a financial investment that does not fall into the conventional equity/income/cash classifications. These assets are best defined as investments that are not stocks, bonds, or cash. This includes categories such as Private Equity, Real Estate, Venture Capital, Commodities, Tangible assets, and others.

Alternative assets can be used to diversify a portfolio and generate higher returns than traditional investments. Most alternative investments tend to be less correlated with the stock market, which means they can provide stability during market volatility and periods of uncertainty.

Understanding alternative investments

Some of the most common alternative investments include venture capital, real estate, and hedge funds. Each asset has its own unique risk and returns profile, so investors must understand each one before investing thoroughly. Learning about these investments can help you make more informed decisions about allocating your money.

More types of alternative Investments Include:

Real Estate: Real estate investing is a great way to diversify your portfolio, as it is not directly correlated with the stock market. Real estate can be divided into two categories: commercial and residential. Commercial real estate consists of office buildings, retail space, and other properties used for business purposes. Residential real estate includes single-family homes, townhouses, and apartments.

Commodities: Commodities are natural resources such as gold, silver, oil, and corn. Individuals can trade them on commodities exchanges such as the Chicago Mercantile Exchange. Commodities are often used as a hedge against inflation, as their prices tend to increase when the cost of living goes up.

Currencies: Currencies are traded in the foreign exchange market. The most popular currencies include the U.S. dollar, the Euro, and the British pound. Investors can use currencies to hedge against inflation and diversify a portfolio.

Insurance: Insurance products such as life insurance, health insurance, and property insurance can be considered alternative investments. They do not have the same characteristics as traditional investments such as stocks and bonds. Individuals can use insurance products to protect against unexpected events such as death, illness, and property damage.

Newsletters: Newsletters can also be considered an alternative investment. They are not traded on an exchange and do not have a set price. Instead, the price of a newsletter is based on the supply and demand for the product. Newsletters typically focus on a specific industry or sector, such as technology, business, or health care.

A couple of good resources if interested in this specific kind of alternative asset includes:

1. Duuce.com: Duuce is the very first marketplace for buying and selling newsletters. They’re a website brokerage platform focused on finding, auditing, and listing the top E.U. websites.
2. Letterxchange.com: Letterxchange is a global online marketplace for buying and selling newsletters, focusing on the U.S. market.

NFTs: NFTs, or non-fungible tokens, are a type of cryptocurrency that represents ownership of a digital asset. NFTs are unique and cannot be exchanged for other investments. They are often used to describe collectibles, art, or in-game items.

Art: Art can be an excellent alternative investment, as it is not correlated with the stock market. Buying art can be a way to diversify your portfolio and protect against inflation. It is essential to research and purchase pieces you believe will appreciate or generate income down the road.

Collectibles: Collectibles such as coins, stamps, and baseball cards can be considered alternative investments. They are not traded on an exchange and do not have a set price. Instead, the collectible price is based on the supply and demand for the product.

Automotive: Cars are typically viewed as depreciating assets. However, certain vehicles are considered collectible and can appreciate. These include classic cars, vintage cars, and luxury cars. Automotive investing can be a great way to diversify your portfolio with proper research and execution.

Cryptocurrency: Cryptocurrency is a digital currency that uses cryptography to secure transactions and limit the creation of new units. Cryptocurrency has proven to be a popular alternative investment class, with Bitcoin, Ethereum, and Litecoin as some of the more popular choices for tokens.

What other kinds of alternative assets are there?

While some of the most common types of alternative assets are listed above, it is surprising how many investors can use other kinds of investments to build a well-diversified portfolio. This includes different categories such as wine, accessory dwelling units (ADUs), music, video games, and even Startups.

If you are interested in learning more about not-so-common alternative assets, check out Alts. Co; Alts.co is a newsletter and podcast that talks about investment alternatives that aren’t as popular. They have the world’s most prominent alternative investing community, with 25,000 members on their newsletter and Discord.

If you or someone you know is interested in investing in Startup companies as an alternative asset, a great resource to check out is Microaquire. MicroAcquire helps startups find investment. For free, they will help startups get started on the path to acquisition in just 30 days.

It is essential to do your research and be aware of risks. Startups are a high-risk, high-reward investment and should only be used as a small part of a diversified portfolio.

Why invest in alternative assets?

You should consider investing in alternative assets because they do not move in correlation with the stock market, so they can be a great way to reduce risk. Many of these investments have the potential to appreciate over time, making them a solid investment choice.

You should consider investing in alternative assets if you’re looking to:

1. Portfolio Diversification: By investing in assets that are not highly correlated with traditional investments like stocks and bonds, you can help reduce the overall volatility of your portfolio.

2. Achieve higher returns: Alternative assets have the potential to generate higher returns than more traditional investments.

3. Hedge against inflation: Some alternative assets, such as commodities, tend to do well when inflation is on the rise. This makes them an excellent way to protect your purchasing power from erosion over time.

4. Enhance risk-adjusted returns: While alternative assets may be more volatile than traditional investments, they can also offer higher expected returns. This means that, over the long, you may be able to achieve better risk-adjusted returns by including them in your portfolio.

5. Get exposure to new markets: By investing in alternative assets, you can gain exposure to new markets that may be difficult or impossible to access through traditional investment vehicles.

6. Gain insight into unique investment opportunities: Alternative asset managers often have unique and proprietary investment strategies that can be difficult to replicate elsewhere.

7. Benefit from the expertise of specialized managers: Some alternative asset managers have considerably more expertise in their specialty than generalist investment managers. As a result, you may experience higher yields this way as an investor.

As you can see, there are several good reasons to consider adding alternative assets to your portfolio.

What to be wary of:

When investing in alternative assets, it is essential to be wary of scams and fraudulent activity. 

There are many schemes that unscrupulous individuals can run to take advantage of unsuspecting investors. Some of the most common scams include Ponzi schemes, pump and dump schemes, and insider trading.

Ponzi schemes: A Ponzi scheme is a type of investment fraud that involves paying returns to investors from money paid by new investors rather than from any actual profit earned by the company. This scheme typically collapses when the amount of new investment slows down or dries up altogether.

Pump and dump schemes: Pump and dump schemes are another type of investment fraud. In this scam, the perpetrators artificially inflate the price of a stock or other security by spreading false or misleading information to lure in unsuspecting investors. Once they have bought up the security, they sell it off at an inflated price.

Insider trading: Insider trading is securities fraud that involves illegally using confidential information about a company to profit from stock trades. This type of activity can damage a company’s share price and lead to significant financial losses for investors.

What to look for:

When looking for alternative assets to invest in, it is essential to do your research and diligence. There are some factors you should consider before making any investment decision. 

Some of the critical things to look for include:

Different alternative assets might be an ideal means to diversify your portfolio and decrease your stock, bond, and cash reliance. However, there are several dangers to consider. Before making any investment decisions, conduct extensive due diligence and consult with a certified financial planner.

Who can buy alternative investments?

Anyone can buy alternative investments today. You don’t need to be a millionaire to invest in them. Many options are open to investors of all levels of wealth. Take time to learn about the different types of alternative investments and find one that best suits your budget and needs.

The Net Worth Myth

Most alternative assets have been accessible solely to financially sophisticated investors, such as institutions or high-net-worth individuals designated accredited investors by the Securities and Exchange Commission (SEC). This is because most alternative assets are not traded on regulated exchanges and are seldom inspected by the SEC.

That said, many people believe that to purchase many alternative investments, they need to be considered high net worth individuals. This, however, is not true. There are plenty of opportunities for individuals with more modest means to get involved in these investments. What’s important is that you understand the risks and rewards associated with each financial asset to decide whether it’s right for you.

Should I invest in alternative assets?

When considering whether to invest in alternative assets, it’s essential to understand your investment goals and risk tolerance.

If you’re thinking about investing in alternative assets, talk to a financial advisor about how you can start small and gradually add more risk to your portfolio. Be careful not to overleverage or under-diversify your portfolio, and always remember to monitor and track your investments regularly.

How do I invest in alternative assets?

There are many ways to invest in alternative assets. You can invest in them directly or through an investment vehicle such as hedge funds, mutual funds, or exchange-traded funds (ETFs). You can also invest in alternative assets through crowdfunding platforms or online marketplaces.

When is the best time to invest in alternative investments?

After researching which alternative investments you would like to purchase, the next step is to determine when to buy them. 

The most crucial factor to consider is the current market conditions. Watch the market. You don’t want to purchase an alternative investment when the demand is already high, and prices are due for a drop. You want to buy when the market is low, and prices are beginning to rise. This will help you maximize your profits.

There is no one perfect time to invest in alternative investments. The best time to invest will vary depending on your financial situation and market conditions.

Final Thoughts

The average investor is not limited to investing in stocks, bonds, and cash. They can also invest in initial public offerings using brokerage services. 

Additionally, there are a variety of asset classes available with stocks in alternative industries for those just looking to get started. People looking to purchase alternative investments should know that accredited and non-accredited investors can explore many options, such as bond markets, financial assets, hedge funds, and other possibilities. Annual income is an important consideration when investing in alternatives as those who earn more can typically afford more risk.

If you’re thinking about investing in alternative assets, Maccelerator.la community membership is a great resource to learn more about investing, startups, and alternative assets. Our website has information on various investment options, and our team of experts can advise you or your company according to your need. Visit us today to get connected!