Alternate investments are assets that don’t fit the usual categories like stocks, bonds, and cash. They often include real estate, private equity, and even cryptocurrencies. These options are gaining popularity as more people look to balance their portfolios, or try something outside the box.

Below, we’ll explain alternate investments and how to get started if you want to add them to your strategy.

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What Are Alternate Investments?

Alternative investments may include real estate, commodities, private equity and digital currencies. These options often behave differently than the market, so some people choose to include them in their strategy.

Let’s look at a few types of alternative investments:. 

Real Estate

Real estate is one of the more well-known alternative assets. You can invest directly by buying property, but you can also take a more hands-off approach by buying shares in a real estate investment trust (REIT). Regardless, it’s a way you might earn income and long-term gains through property value increases and rent.

Private Equity & Venture Capital

Private equity and venture capital involve investing in companies that aren’t publicly traded. These investments often require a larger amount of money up front and are usually only available to accredited investors. While the risk is often high, so are the potential rewards. This is especially true if the business grows rapidly or gets acquired.

Commodities

Commodities include physical goods like gold, silver, oil, and agricultural products. These investments often act differently from stocks and bonds. 

For example, when inflation rises or supply chains are disrupted, the prices of things like oil or wheat can go up, even if the stock market is down. This makes them useful for balancing your portfolio. Gold is a popular choice for those wanting something that may keep its value over time because it tends to be less susceptible to erosion from inflation.

Cryptocurrencies

Cryptocurrencies, like Bitcoin, are digital assets that can be traded or held for potential value growth. They’re still relatively new compared to other investments and often swing in value pretty dramatically. Some investors see crypto as a way to take on more risk for higher reward. Others use it as a small piece of a larger investment plan.

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Benefits and Risks of Alternative Investing

Alternative investments can offer some real advantages. However, they also come with a few things to look out for. You’ll need to understand both sides before investing.

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Alternative investing isn’t for everyone, and that’s all right. However, for those who wish to try something different and can handle more risk, these assets may benefit your portfolio.

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How Much of Your Portfolio Should Be in Alternative Investments?

Your ideal mix depends on your goals, risk tolerance, time horizon and other important factors.  For example:

• If you’re more cautious or require more liquidity, you might want to seek alternative investments that are less of your overall portfolio.  Or you may want to avoid certain alternatives completely.
• You may consider a larger position in alternative investments if you’re open to more risk and don’t require liquidity needs in the short-term..

It’s also worth pointing out that not all alternative investments carry the same risk. Real estate and gold are usually considered more stable, but still lack liquidity. On the other hand, venture capital or crypto are a lot more unpredictable. 

Are Alternative Investments Right for You?

Alternative investments aren’t for everyone, but they can be considered by investors who qualify, depending on  Their individual needs and goals. 

• Younger investors may focus more on long-term growth and be open to accepting  higher risks. Something like crypto or venture capital could appeal to them. 
• Older investors often shift toward preserving what they’ve built. With that, real estate or gold could be better options, as they seek to offer better stability.

Your net worth also plays a role. Some alternatives, such as private equity, often require a higher investment amount or are only available to accredited investors. Others, like REITs or commodities, are easier to get into with smaller amounts.

Before diving in, look at your current goals, your comfort with risk, and how much flexibility you need. 

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How to Get Started with Alternative Investing

Thinking about trying out alternative investments? Here’s an easy way to get started:

1. Know Your Goals: Start by thinking about what you want. Are you looking for growth, income, or more balance in your portfolio? Your goals will guide the types of investments to explore.
2. Pick the Appropriate Types of Assets: Not all alternative investments work the same. Real estate might be a better fit for long-term income, while crypto might suit someone who’s fine with short-term ups and downs. Choose what lines up with your goals and risk comfort.
3. Get Advice if You Need It: Alternative investing often involves more moving parts. A financial advisor can help you understand your options and how they might fit into your overall strategy.

Diversify Smarter, Not Harder

Here are a few quick takeaways to keep in mind:

• Alternative investments have potential to add variety to your portfolio.
• They come with both upsides, like growth potential, and downsides, such as less liquidity.
• How much you invest should be consistent with your goals, age, and comfort level.
• You don’t have to go it alone. Getting professional advice can make a big difference.

Next steps to consider:

1. Review your current investment mix.
2. Decide if you want to explore alternative assets.
3. Research a few options that match your goals.
4. Talk to an advisor for guidance.
5. Start small and adjust as you learn more.

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