So you’ve followed the traditional investing advice up until now: diversified your portfolio, regularly allocate to a retirement account, and dabble in a mixture of stocks and bonds. But you’re looking to expand even further into some alternative investments. Here are 10 alternative investment ideas for seasoned investors to consider.
1. Venture Capital
Startup investing was once restricted to only venture capitalists who were able to meet certain high capital requirements needed to invest. Today, you can participate in this investment opportunity with smaller checks.
Investing in venture capital (VC), affords you the opportunity to obtain a share of equity in development as well as new startups.
Since VC targets businesses early on in their growth stages, investments tend to be more unpredictable and normally have extended wait times on yield returns. Still, some investors have seen success in their startups, having seen an average 9X return on their investment over a 10-year period. Despite the worldwide pandemic, in 2020 VC returns continually hit all-time highs.
2. Crowdfunding Startups
You’re not an accredited investor, but you wouldn’t mind potentially tapping into the broad world of early-stage startups. Consider crowdfunding. It lends you the opportunity in early-stage startups to gain a minority equity stake, along with smaller investors, at low obligation costs.
Crowdfunding has evolved in the past 10 years as a prominent path for startups to accumulate traction for conventional financing.
For instance, Oculus raised $250,000 in crowdfunding, which they subsequently sold to Facebook in 2014 for $2 billion.
3. Pre-IPO Shares
Visualize an initial public offering (IPO) issue price of $120 on Snowflake (SNOW), just to later learn that by market opening, shares had risen to $245 on its first trading day. You could have easily earned nearly a 105% return in a few short hours.
This enables you to invest funds in startups that are more mature prior to the IPO date that’s shared with retail investors.
4. Private Equity
Courtesy of its exceptional returns, private equity is forecast to hit a whopping $5.8 trillion by 2025, according to Deloitte.
Private equity institutions pool private capital to seize a stake in ownership in developed, private companies. This option is open to anyone making private equity investments utilizing their self-directed IRA.
5. Private Credit
Private credit refers to privately negotiated loans and debt-financing done by non-bank institutions. Private credit dominates payoffs via public forms of debt, at a yearly return rate of roughly:
- 5.9% for one-year loans
- 9.2% for five-year loans
6. Real Estate
Real estate investing can act as a hedge against inflation, generating a consistent 9.4% to 10.5% annual proceeds in residential and commercial real estate investments over 25 years.
In addition to primary residences, real estate investments include REITs, commercial real estate, warehouses, raw land, house flipping, rental properties, and crowdfunding done through online platforms.
Art yielded a 6% growth in sales in 2019, only to become more popular in 2020, according to Sotheby’s, who reported a growth of about 4X the sales in art from the previous year.
While art is the investment that keeps on giving (by serving as beautiful home decor that can be enjoyed daily), it’s imperative for art investors to preserve the artwork properly.
If you’re not up to the task, it’s possible to buy shares of fine art via online platforms such as Masterworks.
Cryptocurrency is one of the most popular alternative investment ideas to hedge against inflation. In fact, Bitcoin generated a 50% return in 2020.
But just like any other investment, there are risks to investing in cryptocurrency, and they can be quite volatile. It’s important to do your due diligence before deciding how much of your portfolio you want to allocate to crypto.
While one of the less popular alternative investment ideas, farmland investments investments have generated an immense amount of stable returns since at least the early 2000s. As the demand for sustenance continues to grow, the size of farmland is being reduced as suburbia and metropolitan cities evolve, resulting in higher land value.
Farmland also offers growth from the land’s appreciation as well as any profits gained from the crops.
Investing in farmland can be simple via online platforms such as AcreTrader.
10. Hedge funds
Hedge funds are actively managed funds that typically invest in non-traditional, high-risk investments. Hedge funds use aggressive strategies such as leveraging, shorting, and derivatives to increase investment returns.
Hedge funds are typically only available to accredited investors, with minimum investment requirements ranging from $100,000 on the low end to $1 million.
Managing alternative investments
Investing in alternatives is the first step, but managing them is a close second. If you’re an investor in alternatives looking to manage your alternatives in one spot, and see real-time performance tracking just as you would for traditional investments, get started with AltExchange today (first $1 million in assets tracked for free).