Alternative Investments
Expert Recommended Alternative Investments: How They Work and When To Invest.
Oct 18, 2024
Expert Recommended Alternative Investments: How They Work and When To Invest.
As alternative investments grow in popularity, we recently came across an insightful article by Security.org featured on AOL that offers expert recommendations on various alternative investments. In this blog, we summarize the key points from the article and explain what makes these alternative assets appealing, while also highlighting the best times to consider adding them to your portfolio.
What Are Alternative Investments?
Alternative investments are financial assets that fall outside the traditional categories of stocks, bonds, or cash. These include assets such as real estate, private equity, commodities, hedge funds, and even cryptocurrencies. As noted by Steven Kibbel, a certified financial planner (CFP®), these investments often operate independently of traditional markets, offering a way to diversify portfolios. However, they also come with fewer regulations and may require more upfront capital, which is important to keep in mind when making investment decisions.
How Do Alternative Investments Work?
Each alternative investment works differently. Real estate, for instance, can generate returns through property appreciation and rental income. Meanwhile, commodities like gold serve as inflation hedges, and private equity offers opportunities to invest in companies with high growth potential but higher risk. Venture capital also comes with the chance to invest in new, unproven businesses that may offer substantial returns if they succeed.
On the riskier end of the spectrum, hedge funds employ sophisticated strategies like arbitrage and leverage to aim for higher profits, while cryptocurrencies remain highly volatile and speculative, relying heavily on blockchain technology.
Top Recommended Alternative Investments
Here are some of the most expert-recommended alternative investments, according to Kibbel and other financial experts featured in the article:
Cryptocurrency: An Increasingly Popular but Volatile Option
Cryptocurrency has garnered attention as an alternative investment, but not without skepticism. Robert Johnson warns that calling them "currencies" is misleading due to their volatility, noting that traditional finance tools cannot be applied to determine their intrinsic value. While some investors speculate on the potential returns from cryptocurrency, it is important to recognize the risks before diving in.
When Should You Invest in Alternative Assets?
Deciding when to invest in alternative assets depends on several factors, including your situation, risk tolerance, and financial goals. According to Kibbel, alternative investments can be a good fit for experienced investors looking for higher returns and diversification. However, these investments are often less liquid, meaning they cannot be easily converted to cash if needed for short-term goals.
If you are an experienced investor, alternative investments may offer diversification benefits, as their performance often correlates with something other than traditional investments like stocks and bonds. However, it is crucial to assess your financial plan and ensure that you do not need quick access to these funds, especially when dealing with illiquid assets like private equity or real estate.
Alternative investments offer unique opportunities to diversify portfolios and potentially earn higher returns, but they also come with added risks and liquidity constraints. Whether it's real estate, private equity, or cryptocurrency, doing extensive research and understanding your financial situation is key before diving into these assets.
How Capital Engine® Works
About Capital Engine®
Capital Engine® provides forward-thinking organizations with efficient and scalable private capital and investor management solutions, for both traditional and digital assets.
Built for high-performance capital raising, our technology helps leverage the opportunity to better originate and showcase a diverse selection of private investment deals and offer these to investors i.e. a deal’s potential viability can be better assessed, market appetite determined and transaction promptly closed.
Our clients include broker dealers, family offices, wealth managers, incubators, accelerators, social impact and real estate funds, in providing customized SaaS solutions to power private capital and alternative investment platforms, with a strong focus on investor management services.
Interested in Raising Capital
Request a Call / Demo
As alternative investments grow in popularity, we recently came across an insightful article by Security.org featured on AOL that offers expert recommendations on various alternative investments. In this blog, we summarize the key points from the article and explain what makes these alternative assets appealing, while also highlighting the best times to consider adding them to your portfolio.
What Are Alternative Investments?
Alternative investments are financial assets that fall outside the traditional categories of stocks, bonds, or cash. These include assets such as real estate, private equity, commodities, hedge funds, and even cryptocurrencies. As noted by Steven Kibbel, a certified financial planner (CFP®), these investments often operate independently of traditional markets, offering a way to diversify portfolios. However, they also come with fewer regulations and may require more upfront capital, which is important to keep in mind when making investment decisions.
How Do Alternative Investments Work?
Each alternative investment works differently. Real estate, for instance, can generate returns through property appreciation and rental income. Meanwhile, commodities like gold serve as inflation hedges, and private equity offers opportunities to invest in companies with high growth potential but higher risk. Venture capital also comes with the chance to invest in new, unproven businesses that may offer substantial returns if they succeed.
On the riskier end of the spectrum, hedge funds employ sophisticated strategies like arbitrage and leverage to aim for higher profits, while cryptocurrencies remain highly volatile and speculative, relying heavily on blockchain technology.
Top Recommended Alternative Investments
Here are some of the most expert-recommended alternative investments, according to Kibbel and other financial experts featured in the article:
- Real Estate: Real estate offers protection against inflation and provides a consistent income stream for investors, making it one of the most popular alternative investments.
- Private Equity/Venture Capital: Private equity can deliver significant returns if the invested company goes public or is acquired. However, these investments often involve liquidity risks, requiring investors to commit for the long term.
- Commodities: Investments in commodities like gold tend to perform well during economic downturns, offering reliable returns when the stock market is underperforming.
- Real Estate Investment Trusts (REITs): REITs allow investors to access real estate without owning the property directly. As Robert Johnson, PhD, CFA, noted, REITs offer liquidity while providing diversification across different types of properties.
- Collectibles: For those with niche interests, collectibles such as rare vehicles, wine, or art can appreciate over time, though they come with illiquidity risks and require specialized knowledge.
Cryptocurrency: An Increasingly Popular but Volatile Option
Cryptocurrency has garnered attention as an alternative investment, but not without skepticism. Robert Johnson warns that calling them "currencies" is misleading due to their volatility, noting that traditional finance tools cannot be applied to determine their intrinsic value. While some investors speculate on the potential returns from cryptocurrency, it is important to recognize the risks before diving in.
When Should You Invest in Alternative Assets?
Deciding when to invest in alternative assets depends on several factors, including your situation, risk tolerance, and financial goals. According to Kibbel, alternative investments can be a good fit for experienced investors looking for higher returns and diversification. However, these investments are often less liquid, meaning they cannot be easily converted to cash if needed for short-term goals.
If you are an experienced investor, alternative investments may offer diversification benefits, as their performance often correlates with something other than traditional investments like stocks and bonds. However, it is crucial to assess your financial plan and ensure that you do not need quick access to these funds, especially when dealing with illiquid assets like private equity or real estate.
Alternative investments offer unique opportunities to diversify portfolios and potentially earn higher returns, but they also come with added risks and liquidity constraints. Whether it's real estate, private equity, or cryptocurrency, doing extensive research and understanding your financial situation is key before diving into these assets.
How Capital Engine® Works
About Capital Engine®
Capital Engine® provides forward-thinking organizations with efficient and scalable private capital and investor management solutions, for both traditional and digital assets.
Built for high-performance capital raising, our technology helps leverage the opportunity to better originate and showcase a diverse selection of private investment deals and offer these to investors i.e. a deal’s potential viability can be better assessed, market appetite determined and transaction promptly closed.
Our clients include broker dealers, family offices, wealth managers, incubators, accelerators, social impact and real estate funds, in providing customized SaaS solutions to power private capital and alternative investment platforms, with a strong focus on investor management services.
Interested in Raising Capital
Request a Call / Demo
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