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- Investors may want to get more creative as economic risk factors like inflation, interest rate hikes, etc., stack up.
- Because of a low correlation to traditional markets, alternative investments can help diversify your portfolio and safeguard your investments.
- Some of the best types of alternative investments include peer-to-peer lending, REITs, art and private equity.
- Carefully analyze your finances so you can pick the alternative investment with the right combination of risk and reward based on your goals.
A quick look at our recommended alternative investment partners
While stocks and bonds are the most common ways to invest, modern investors are looking to alternative investments as a means of diversification. This is especially true as the economy grows more precarious from inflation, potential rate hikes and other emerging concerns. As those risk factors stack up, you should look to invest in other asset classes outside the traditional markets. Thanks to advancements in the investing world, accessing these different classes is now easier than ever.
Alternative investments such as cryptocurrencies, real estate, peer-to-peer lending, contemporary art and wine can help to diversify your portfolio and therefore provide some safeguards to your investments. Many types of alternative investments have a low correlation with traditional markets, making them great for diversification.
Before you invest, make sure you think about these factors:
- Goals: Are you trying to secure your retirement funds? Perhaps you want to earn more to buy a vacation home? You should clearly define your goals at the beginning of the process to help define everything that follows.
- Your personal risk tolerance: Should you aim for slow, steady growth or a riskier option with a chance for higher returns?
- The timeline for your investment: Are you hoping to access your returns in one year, 30 years or something in between?
- Investment knowledge: It’s important to know and understand what you are investing in and any associated risks.
Considering these factors will help you make an informed decision about which type of alternative investment is best for you based on the potential risks and rewards.
Private Equity REITs
What it is: A Real Estate Investment Trust is a company that owns income-producing residential or commercial real estate, or both.
Why you need it: REITs historically have been considered good investments due to steady dividend income and long-term appreciation on the value of the real estate.
Our recommended partner: Crowdstreet