Alternative investments are becoming more and more popular, but what exactly are they, and what are the different types of alternative investments?
Alternative investments include a wide range of non-traditional investments that exceed stocks, bonds and cash instruments found in traditional investment portfolios.
Alternative assets can range from tangible items such as art and real estate to intangible options such as hedge funds, pension funds, cryptocurrencies and venture capital. They exceed the boundaries associated with traditional asset classes.
Read on to learn more about the world of alternative investments, including the key characteristics of alternative investments and their benefits.
The Key Characteristics of Alternative Investments
Alternative investments have certain characteristics that set them apart from traditional assets, meaning they have their own advantages and challenges, and of course, investment strategies.
First of all, alternative investments typically have a low correlation with traditional financial markets. This means that their value may not move in correlation with stocks or bonds – which in turn, can help to reduce the overall risk.
Alternative investments also have the potential for higher returns compared to traditional investments such as stocks and bonds. That being said, this potential for higher returns comes with increased volatility and higher risk.
Another key characteristic of alternative assets is their illiquidity. Generally, you can not convert these investments into profit quickly. Art, for example, is generally considered a medium to long-term investment. Likewise, real estate can take a long time to prepare and sell.
Ultimately, investing in alternative assets requires specialised knowledge and expertise. Whether you’re new to the investment scene or you’re simply expanding your portfolio, it’s always best to work with a professional.
Evaluating and determining the value of a piece of art or the potential of cryptocurrency requires a deep understanding of the asset class – so always conduct thorough research and due diligence beforehand.
Exploring The Different Types of Alternative Investments
The world of alternative investments is very diverse – there are many alternative investment opportunities to choose from. Here are some of the key categories in the realm of alternative investments, from real estate to art investment:
Real Estate
Real estate is one of the most popular forms of alternative investment, and arguably, one of the least risky investments out there. Residential, commercial and industrial real estate can be a great investment, providing rental income and potential appreciation over time.
However, like all forms of investment, real estate involves careful selection and research. When investing in real estate, you have to consider mortgage costs, management and market analysis if you want to make the right choice.
Commodities and Precious Metals
Investing in commodities and precious metals such as gold, silver, oil and other agricultural products can be a great hedge against inflation and currency fluctuations.
Precious metals are known for holding their value and are often viewed as stores of value during times of economic uncertainty. Precious metals can be a great way to diversify your portfolio too.
Gold tends to be the most common form of investment in this sector, but silver and platinum are also extremely popular too. Like many forms of alternative investment, this type of investment can be volatile due to factors such as supply and demand.
Cryptocurrencies
Cryptocurrency investment has seen a huge rise in the last few years – digital currencies such as Bitcoin, Ethereum and Tether are popular alternative investment options.
Investing in cryptocurrency offers the potential for significant returns – however, it can be a volatile investment, and there are regulatory uncertainties to consider.
Collectables
Collectables can be a brilliant alternative investment. This type of investment can include a range of items such as comic books, stamps, trading cards, fine wines, jewellery, coins and many more.
There are several factors that can impact the appreciation of a collectable item – for example, quality, rarity, storage conditions, quantity and many more. For example, a mass-produced stamp is less likely to increase in value over time than a limited-edition stamp.
It’s important to keep your collectable items in mint condition – this will help them maintain their value or increase in value over time.
Art
One of the best alternative investments is art. Art is tangible, something that you can enjoy, and it is generally unaffected by financial markets. Many high-net-worth individuals invest in art for a reason – because it’s a great alternative investment.
The art market tends to be resilient against economic uncertainty – take the Great Recession of 2007-2009, for example. The demand for art remained consistent and resisted the economic downturn of the time.
At Grove Gallery, you can invest in art with just £3,000, and expect average returns of 8%-12% per year. We understand that the art market can be difficult to navigate, which is why we are home to an expert team of art advisors.
We can guide you through the process and help you to determine the best art to invest in for your art collection. Begin your art investment journey today with Grove Gallery.
The Benefits of Alternative Investments
Now you have an understanding of the characteristics of alternative investments and the different types of alternative investments, let’s explore some of the key benefits of this type of investment.
First of all, alternative investments can be a great way to diversify your portfolio. This, in turn, can reduce the overall risk exposure to traditional assets.
In many cases, alternative investments can lead to higher returns. For example, investing in blue-chip art may be a more lucrative avenue than investing in traditional stocks and bonds, depending on the economic climate at the time.
Alternative investments can also be a more exciting venture – investing in alternative options can provide more unconventional and unique opportunities. This means you can tap into emerging industries and trends.
Some alternative investments are tangible – they’re something you can enjoy without decreasing their value.
Take art, for example – you can still view and admire the art you invest in without worrying about the value decreasing. The same, however, doesn’t apply to other alternative investments such as cryptocurrency.
Ultimately, alternative investments have reshaped the investment landscape, offering investors a wide range of opportunities to explore that exceed the boundaries of traditional assets.
Whether you have a passion for art, an eye for real estate or you enjoy stocking up on collectables, alternative investment can be a lucrative and exciting venture.
