Getting Started with Alternative Investments

alternative investments

The global economy, politics, and inflation can cause volatile market swings. It’s no wonder savvy investors are turning their heads toward alternative investments.

How can you use alternative investments to build and safeguard wealth, while still getting healthy returns?

What is an Alternative Investment?

Alternative investments offer a way to take advantage of market inefficiencies. Because of that, alternative investment doesn’t fall into the conventional investment categories: stocks, bonds, and cash.

Mainly, alternative investments are the ones not generally available in 401(k) and traditional stock market investing such as:

  • Venture capital
  • Commodities
  • Hedge funds
  • Whisky Casks
  • Real Estate
  • Art
  • Collectible cars
  • Wine

The best part about alternative investments is that they don’t necessarily correlate to the traditional stock market. Alternatives are generally less volatile and can be a more stable way to safeguard your wealth from uncertainty brought on by the stock market and global economy.

Many alternative investment options have a higher minimum investment, are more complex, and more illiquid than traditional stock market investments. It can be tough to sell an alternative investment because buyers are more limited since alternatives can be rare.

For example, suppose you purchased a collectible car and are looking to sell it. The pool of people looking to buy that particular car may be small.

It definitely creates a lot to think about. So what are the reasons you might want to consider alternatives as an investment strategy? Read on to see why investors are continuing to diversify with alternatives.

Why Choose Alternative Investments?

A lot of investors turn to alternatives to safeguard their wealth and avoid some of the uncertainty in the stock market. Traditional investments can experience dramatic shifts in value with political changes, fluctuations in currency, and the overall performance of the economy.

Here are some of the best reasons for you to add alternative investments to your portfolio:

  • Broader Diversification: Creating a portfolio of alternatives helps broaden the amount of diversity you have in your overall investment strategy.
  • High Returns: Alternatives have the potential to create unparalleled returns for investors willing to stray from traditional investing.
  • Lower Volatility: Alternative investments won’t experience the same volatility as traditional investments because they’re not affected by the same factors.
  • Safeguard Wealth: With the above factors, an alternative investment gives you a great way to safeguard your wealth and invest in something besides “paper”. 

What to Look for in Alternative Investments

When you start evaluating alternative investments, you’ll want to look at several factors before committing. It ultimately comes down to personal preferences and tolerances.

Here are a few characteristics of alternative investments you’ll want to look at:

  • Ease of Investing
  • The Flexibility of Investment Amount
  • Liquidity
  • Customer Support
  • Risk of Fraud or Scams
  • Performance History of Investment
  • Exit Strategies

Building up your portfolio with alternative investments is a great way to further diversify and step away from traditional stock market investing. The returns you see with alternatives can be unmatched with traditional investing, but the investments generally carry more risk.

You’ve only seen a sample of what our Alternative Investment Guide covers. Download the full guide to learn more about alternatives and see the 5 best alternative investments for your portfolio today!

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