Illustration by Natasha Huckleberry
Simply put, an alternative investment is a financial asset that does not fall into any of the traditional investment categories. Conventional investment categories include bonds, stocks, mutual funds, and exchange-traded funds (EFTs).
Those who are adventurous might also invest in real estate investment trusts (REITs). Others might also consider investing in a metals ETF and invest in silver, platinum, gold, and other metals.
If you are considering alternative investment options, avoiding scams and get-rich-quick schemes should be a top priority. It is also crucial that you employ investment management strategies that have been proven to work.
Want to invest your money in alternative investments? Below are some of the best options available at your disposal:
Also known as P2P lending, peer-to-peer lending is considered relatively new. P2P services online offer loans for personal use, businesses, or anything else you can imagine. If you join the pool of P2P investors, you will help fund the loan once a borrower qualifies.
No bank is involved in P2P lending. Your money will be pooled with other investors' money and you will get a fixed repayment monthly. The repayment will include the interest you are owed. Typically, the returns are higher than what you will get from standard savings vehicles.
The primary risk of P2P lending is that you will be loaning money to people who could not get a loan from other traditional loan outlets. Fortunately, you can determine the credit rating and other parameters for the borrower. You also have the option whether to approve the loan or not.
If you choose to invest in real estate, you have the option to buy and own properties. You can also invest in a duplex, apartment, or multi-family dwelling and have tenants living there. Often, you make a downpayment, and the bank will finance the rest. You will collect the rental income and appreciation from the property.
Before investing in real estate properties, ask yourself if you have what it takes to be a landlord. It is important to remember that the role comes with many headaches—accidents happen, things can break, and tenants can fall behind on rent. If you want the benefits of property ownership minus the headache, there is an option available for you as well.
For instance, you can hire a property management company. The company will take over the responsibilities that come with being a landlord, including collecting rent, making repairs, dealing with tenants, and many more. While this can cost money, it will save you from a lot of unnecessary stress and headaches down the road.
If you don't like running your own business, you have the option to own a part of someone else's business. Startup companies that need money offer shares of their companies on equity crowdfunding sites. If you own a part of the company, you will get a return if the company thrives.
Of course, if the company fails, you can end up losing a part (or all) of your money. Over the years, there have been a lot of equity-funding success stories. Cruise Automation, a company that develops self-driving vehicle technology, is one classic example.
General Motors bought the company back in 2016. The sale gave an air of legitimacy to the crowdfunding industry and provided a substantial profit to the investors. With just a few hundred dollars, you can start investing money in equity crowdfunding.
Gold is widely considered a liquid asset and a tangible inflation hedge. It also has a long-term store of value. As such, it is often a sought-after asset class and can be a robust competitor to stocks. Gold is also seen as a great diversifier because it has a low correlation with other assets like stocks.
You have various options if you want to invest in gold. You can buy and hold physical gold like bars or coins, have a gold account, invest in gold exchange-traded funds (ETFs), or invest indirectly through futures and gold mining stocks and other options. If you are a small investor, it is ideal to opt for direct methods like buying gold coins or bars.
When investing, it is ideal that you keep your portfolio diverse. In other words, you need to consider a variety of stocks or invest in non-stock investment vehicles. You also need to consider where your money will grow best, depending on your risk tolerance. Keep in mind that the higher the risk, the bigger the potential reward.
Rachael Harper is the Content Marketing Strategist of Bennett & Porter, a wealth management and insurance firm based in Scottsdale, Arizona. When not writing, she makes use of her time reading books and playing bowling with her family and friends
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