Alternative investments are an increasingly popular option for those looking to diversify their portfolio beyond traditional stocks and bonds. While there are many types of alternatives, they share the goal of delivering returns above those of conventional assets while also providing a degree of protection from downturns in the overall market. The downside is that many of those alternatives usually require a larger degree of investment, and it’s often not as easy to cash out if you need your money back in a hurry. However, if you have excess funds to invest, it is worth considering alternatives in addition your foundation investments. Here a few alternative investments to consider.
1. Coins
There are two types of coins to consider for investment purposes. Bullion coins are produced by national governments, usually in gold. Their worth is linked to the value of the gold. In turbulent times, for example during wartime or after the global financial crisis, this has made bullion coins a safe haven. Collectible coins on the other hand have a value that is connected to their level of scarcity. Rare coins can rise in value considerably over time. Old British coins can be valuable because, in addition to being rare, they are made from precious metals like silver, gold, platinum, and palladium. Because of their rarity, and the quality materials they were originally created with, according to the Coin Expert these products hold significant value for collectors throughout the world.
Most silver coins saw the highest return with an average increase of 15.3%. So even if you decide to invest in coins for their bullion value, they can still hold long-term investment potential. You can view these silver coins either as a long-term investment and/or as a hedge that can protect your portfolio from the volatility of other assets. Plus you will have a tangible asset you can enjoy, and pass down for generations to come.
2. Private equity
Another popular type of alternative investment is private equity. Private equity is a bit less flashy than some other types of alternative investments, but it can still provide a great return on investment over the long term by investing in the right businesses. One of the most popular ways to invest in this asset class is through a fund. Such funds pool together investors’ money and direct it towards different businesses that have been vetted or pre-approved for potential success. In fact, according to some websites, many more individuals are expanding their portfolios to include more private equity since there are several benefits associated with such an approach including diversification, lower correlation with traditional investments, instant liquidity, and very talented managers who know how to pick winners.
3. Property
Another type of alternative investment is real estate. Property investment has been a popular choice for many years and won’t go away anytime soon, and for good reason. The value of property has fairly solidly gone up year on year, with a few blips, over many decades.
Methods of investing in property include buying to let, joining a property investment group or buying shares in a property investment fund. With the ongoing housing shortage, buying to let is likely to provide steady rental income. But you need to find the right kind of property in the right area and take into account any renovation and ongoing costs of upkeep. Most buy to let mortgages are based on repayment of interest only, so if interest rates rise sharply the profitability of this investment may be endangered.
Of course, buying your own home is another form of property investment, one that provides you with a home and then a potential pay-out if you chose to downsize when you are older. Many self-employed people see this as an alternative to paying into a pension.
4. Art
One final type of alternative investment that is worth mentioning is art. Although it may not be for everyone, art can be a great way to diversify your portfolio and add some flair at the same time. The key to investing in art is to find pieces that are undervalued relative to their true worth. This can be a bit tricky, but if you do your research and partner with a reputable art advisor, then you should be able to come up with a few good candidates. Just keep in mind that it may take some time before you see any significant returns, so don’t invest all of your money into this alternative assets class. Experts recommend that you should look to invest around £8,000 in a piece, but if you’re willing to take a chance on less well-known or potentially undiscovered artists, then you could enter the market with as little as £300. And if they prove not to become discovered you will hopefully at least have an item of beauty that you can leave to your descendants.
There are many different types of alternative investments available out there, and each has its own unique set of pros and cons. If your foundation investments are in place and you are looking for higher returns, these alternatives may be worth considering. But high risk by definition can also result in losses, so never invest more than you can afford to lose.