Ten Alternative Investments

Keep Gran’s Certificates of Deposit on hold for now – the following ten investment options can help you to intelligently diversify and broaden your own portfolio.

Investors execute most of their decisions by determining an appropriate risk versus reward figure for each transaction. Balanced portfolios are then created by allocating a certain share of working capital towards low risk, low return options (that may comprise the “long-term” component of the portfolio), and placing some capital in the high risk, high reward bucket, too. When creating this diversified portfolio, it pays to consider alternative investment options that can drive profits while tapping into markets that many investors simply do not understand. Here are ten alternative investment opportunities that can help any investor to create wealth in today’s dynamic global market.

Fine Wine: Yes, you read that right. Fine wine can be an incredibly lucrative alternative investment option. That said, it does require a modicum of industry knowledge in order to remain a safe investment. Quality wines of proven lineage do age quite well, and values tend to rise predictably – just ensure that your wine storage area is safe and secure. Unlike most other investment options, wine is often physically held in the owner’s home or business.

Senior Living/Commercial Investment Properties: The population is ageing, and the need for commercial properties that can accommodate our valued older relatives and friends is real. Investing in a senior living facility can unlock a portion of these incredibly profitable business ventures – a sector that is poised for massive growth during the upcoming years. 

Precious Metals: Though not necessarily considered “alternative” by all investors, precious metals are, in fact, higher risk, moderate return investments that should be a small part of any balanced portfolio. They often deliver reliable long term returns, while acting as a stout hedge against market uncertainty. As global average interest rates will likely rise during 2016, gold and precious metals may provide some balance in a shifting market that has become accustomed to low interest rates. 

Fine artwork: According to the Mei Moses Fine Art Index, the value of artwork has climbed an average of 10.5% per year since the mid-20th century. Art as an investment vehicle often requires several thousand dollars in the early stages, though you can get away with purchasing less expensive pieces from lesser-known artists if you’re willing to take a larger risk on these unproven works. One great benefit of investing in artwork: you’re able to enjoy the beauty of each piece as it hangs on the wall, something that cannot be said for a treasury note!

Private Equity: This process involves investing in a company that does not issue stock on a public market. Instead, you’ll likely receive an equity position in a business in exchange for a specific amount of upfront capital. Some companies will agree to royalty arrangements instead of equity. This type of investment option can be lucrative (early investors in Apple, anyone?), but putting money into an unproven business can be challenging. Purchasing shares in an ETF, or exchange-traded fund, can reduce the amount needed to “buy-in,” and can mitigate risk to some degree.

Futures: An alternative investment option that has gained significant traction over the years is the futures market. A future is essentially an educated guess as to how a commodity, currency, or stock will perform down the road, with the investor making money if the price fluctuation mirrors his or her prediction. Those with a keen understanding and insight into the market in question often fare much better than those who invest indiscriminately in the futures market.

Wood/lumber: Invest in wood, you say? With global demand increasing by the day and supplies being tempered by a more aggressive focus on sustainability and environmentally-conscious manufacturing techniques, wood will inevitably increase in price over the coming years. Many markets – especially those which are experiencing a strong housing market with robust building starts - will demand large quantities of wood to support future building projects.

Forex: Currency swaps have created millionaires for decades now. But that doesn’t mean that it is considered mainstream. Though the currency marketplace moves more money per day than any other public financial marketplace, it isn’t as widely accepted as, say, the NYSE or other stock market. To help diversify the portfolio, consider currency trading as a way to add a potent investment option that can deliver serious returns in a short amount of time.

Hedge Fund: One of the best ways to diversify a portfolio and lower the overall exposure to risk is to allocate some of the portfolio’s working capital to a managed hedge fund. These alternative investments utilise pooled funds that invest in a wide variety of strategies, all with the goal of delivering an active return for the investor. 

Coins: Having a tangible investment is important to many, and coins can deliver this feature with ease. There are two types of coins that can be used as an investment: bullion and collectible coins. Bullion coins do not derive their value from the coin’s actual scarcity. Instead, the commodity price related to the coin’s base metal drives the valuation. Collectible coins, on the other hand, are inherently valuable due to their rareness, condition, and desirability in the market. They can drive powerful returns and could help to add diversity to a portfolio.

The ten alternative investment ideas outlined here can easily balance any smart investor’s portfolio, while still delivering terrific returns with managed risk. Whether you’re considering currency swaps or fine wine, classic artwork or vintage coins, add breadth and depth to your portfolio today by including one or more of these options to your stable of holdings.

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This article may contain opinions and is not advice or a recommendation to buy, sell or hold any investment. No representation or warranty is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however we have put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing.

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