What Are Alternative Investments: A Short Guide for Beginner Investors

Alternative Investments

For years, stocks, cash, and bonds have been the go-to investment for most people. These traditional options are lucrative, but you should look into alternative investments to  vb 

You can find other tangible or financial assets worth putting money into. Some of these investments come with a certain level of risk, but that goes for any type of investment. 

It can be hard to determine the underlying value with most alternative options. That’s why investors might shy away from them. If you are investing for the first time, here are ventures you may want to consider, depending on your goals and risk-tolerance level.

Real estate is arguably the biggest asset class in the world. Investment properties like residential or commercial buildings are a type of alternative asset. Farmland or timberland can also be lucrative alternative real estate assets.

You may want to make a profit on your property by renting it. However, being a property manager comes with a lot of responsibility. If you feel you aren’t ready to take that step, you may want to consider flipping or selling the property. To be successful, you must sharpen your valuation skills. It will help you determine which properties will bring the most return on your investment.

The real estate industry has much to learn; it can be overwhelming for a beginner. If you can, find a successful, seasoned investor to take you under their wing until you can stand independently. Learning all you can will go a long way with future investments.

  • Private Debt 

The open market has plenty to offer, but you may also want to look into private debt because in the right circumstances it may be possible to get higher yields than you would make in the open market. The types of private debt you can invest in include:

  • Personal loans
  • Credit card debt
  • Corporate bonds
  • Business loans
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Company debt is the most common type of private debt investment. However, beware of credit that comes from companies in distress. This type of investment will be riskier, because the chances of increasing your input are low.

  • Collectibles 

Collectibles is an interesting investment category. For some, investing in collectibles is a passion, but it can also be an investment venture. To do this, you will need to collect and maintain physical items. These can include:

  • Fine art
  • Coins
  • Wines
  • Stamps

You will have to decide what to invest in based on what sparks your interest and has resale value. Some items will increase in value over time, while other collectibles could lose value if you hold onto them too long. A successful investor will understand the difference and know when to hold onto an item and when to sell.

Collecting more than one type of item can give you those that can be sold for profit now and those that can be held onto as they continue to appreciate in value.

  • Private Equity 

Private equity can entail a lot of things. It has a few subsets, including growth capital, buyouts, and venture capital. This is money you will invest in private companies, especially those that are not listed on the public exchange. 

With private equity investing, transparency can be a big hindrance since investors buy in a blind pool without knowing the company first. Be sure to do your research on any company before you commit to this type of investment.

  • Hedge Funds 

When traditional investments fail, hedge funds can be an alternative. You have to employ certain skills to maximize the return on your investment. You will need to educate yourself in tactics like market neutrality, quantitative strategies, and volatility arbitrage.

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Long-short equity is when you invest in a company that shows promise but also bet against it. That way, you have the potential to make money on your hedge fund investment whether the value increases or decreases. 

  • Tax Lien Certificates 

Investing in tax liens is a clever way of including real estate in your investment portfolio without wearing the landlord’s cap or flipping properties. Instead, you will be investing in property tax lien certificates, which offer safe, secured, high fixed interest rates secured by real estate.. 

Tax lien certificate investing is a specialized niche of real estate investing, and therefore some consider them more more complicated than stocks or funds, so the ustaxlienassociation might help show you the ropes and teach you how to stay on top of the process to make the right investment choices for your situation.

One major advantage is that you You may only need a few hundred dollars to get started in tax lien investing. However, this type of investment is not for everyone. Before you commit, ensure that you weigh the risks and rewards to see if it’s the right fit for your goals. 

The Takeaway

Interest in non-traditional investment ventures is growing, with no sign of slowing down in the future. New investors are taking risks exploring off the beaten paths of traditional investing. These are many solid options if you are interested in pursuing alternative investments, but only if you do your homework before you invest. 

Keep in mind that when you’re getting started with alternative investing, there are bound to be a few mistakes before you earn your stripes. But hopefully, this guide will help you make an informed decision from the get-go.


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