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Although common investments like stocks and mutual funds may be the first thing that comes to mind when you think about investing, there are plenty of other options out there. In fact, the number of available alternative investments is increasing as you can easily find and invest in many different alternative assets online.
Investments aside from stocks, bonds, and cash are typically considered “alternative investments“. Because this definition only excludes a few types of investments, there are countless possibilities that could fall under the umbrella of an alternative investment.
In this article, we’ll provide a list of alternative investments, and look at details like the pros and cons, and how much you should invest in alternative asset classes.
List of Alternative Investments
Let’s take a look at many of the most common options. We’ll also cover a number of alternative investment platforms that make it easy to get started. Of course, there are plenty of others out there, but this list should give you a lot of options if you’re looking to get started.
The purpose of this article is to provide a list of alternative investments. This information should not be taken as financial or investment advice. Be sure to do your own due diligence before investing.
Over the past few years, the popularity of cryptocurrency as an investment has continued to rise. Bitcoin, Ethereum, and other leading crypto tokens have produced outstanding returns for retail investors, although the ride is extremely bumpy.
Cryptocurrency is an alternative investment that has a very low correlation to the stock market, although that certainly does not mean it lacks volatility. Many investors are drawn to crypto because of the chance for returns that outpace just about any traditional investment. However, it’s also a risky investment that could result in losing money. As a result, you should be careful when buying crypto and only invest what you can afford to lose.
There are several different ways to invest in crypto. Here are a few of our favorite platforms.
Public.com offers about 25 different cryptocurrencies, and they make it as easy as buying a stock. You don’t need your own digital wallet, as Public.com will store it securely for you. Getting started is easy, and you can begin with any budget.
One of the ways that Public.com stands out from other investment platforms is through social networking features and an inclusive, supportive community. You’ll be able to connect with and learn from other investors, making it a great option for beginners.
Public.com offers fractional shares so anyone can start investing. You'll love the social aspect that makes it possible to connect with other investors. Get a free stock slice worth up to $300 when you open an account through our link.
- Commission-free trades of stocks and ETFs
- Buy and sell 27 different cryptocurrencies
- Fractional shares
- Easy to use and beginner-friendly
- Connect with a supportive community of investors
- "Themes" help you to find investments that interest you
Titan is an active investment management firm, but it was created with the average investor in mind. They have a few different funds or strategies you can choose from, but for the purposes of this article, we’re focusing on their crypto strategy.
When you invest in Titan Crypto, you’ll own a portfolio of cryptocurrencies managed by Titan’s crypto experts. They handpick and manage the portfolio based on the cryptoassets they believe are primed for long-term growth.
Investing in Titan Crypto could be an excellent option if you’re interested in cryptocurrency but you don’t feel like you have the expertise to pick the best investments. Let them handle it for you and you’ll have a chance for outstanding growth.
There is a 1% annual management fee associated with Titan Crypto, as well as the other strategies offered by Titan.
Titan provides world-class asset management for the average investor. You can get started with as little as $100 and get similar benefits as investing hedge funds and with robo advisors.
- Potential for outsized gains
- Excellent historical returns
- 4 strategies to include in your portfolio
- Managed cryptocurrency fund
- 100% liquidity
Non-fungible tokens (NFTs) have become an extremely popular alternative investment option in the past few years. Similar to cryptocurrency, NFTs are digital assets that involve a high level of risk, but also offer the potential for excellent returns.
NFTs are valuable because they create digital scarcity and are used to prove originality and ownership of art, music, and other assets. Expert opinions on the staying power of NFTs as an investment are mixed, but many people have done extremely well with investments in NFTs so far.
When you’re ready to invest in NFTs, there are a growing number of marketplaces like Rarible that make it easy to find investment options.
Real estate is one of the most popular alternative asset classes, and there are many different ways that you can invest in real estate. Here are some of the options that you might want to consider.
Real Estate Crowdfunding
Although owning rental property can be a great way to build wealth, not everyone wants to be a landlord. However, it’s possible to invest in real estate without the headaches and hassles that come with owning and managing property.
In recent years, real estate crowdfunding has opened the doors that allow more people to get started with real estate investing. As an investor, you can reap many of the benefits of owning real estate without the need to deal with managing the property or tenants, and you can get started with a much smaller amount of money.
There are many different platforms that allow you to invest, and a few different types of real estate crowdfunding platforms. Some platforms allow you to invest in individual properties, while others allow you to invest in portfolios of properties. Most platforms specialize in a particular type of property (such as commercial property, apartment buildings, single-family homes, etc.). Some options are available only to accredited investors and others are available to anyone (you’ll need a net worth of at least $1 million or an annual income of $200,000+ for single filers or $300,000+ for joint filers to qualify as an accredited investor).
Although there are many different real estate crowdfunding platforms out there, arguably the most popular right now is Fundrise. Fundrise is open to all investors (not just accredited investors) and you can get started with as little as $10. With Fundrise, you’ll be investing in a portfolio of properties rather than a single property, which helps to decrease your risk.
Fundrise also offers an excellent user experience with plenty of reporting and transparency so you can feel comfortable with your investments. They have an excellent track record, although the exact performance will vary from one investor to the next. Fundrise offers a few different core strategies, like investing for passive income or for long-term growth, based on your investment objective. If you want an easy way to invest in real estate, Fundrise is an excellent choice.
Groundfloor is another real estate crowdfunding platform for non-accredited investors, but it’s much different than Fundrise. While Fundrise makes it easy to invest in a diversified real estate portfolio, Groundfloor allows you to choose the specific properties and projects you want to invest in.
Most of the projects on Groundfloor are house flips or renovations. You can browse the opportunities available (new ones are added daily) and see the details of each project. If you want to invest, you can start with as little as $10.
The projects on Groundfloor are short-term investments, typically a few months to a year in length. Historically, investments on Groundfloor have produced an average return of more than 10%, so it’s possible to do very well with these types of peer-to-peer loans.
Investing in rental properties can be a great choice because it’s a proven path that’s helped to build wealth for many millionaires and billionaires. You could invest in income-generating assets like commercial properties, single-family homes, condos, duplexes, and apartment buildings.
Landlords make money through monthly rental income, as well as appreciation in the value of the real estate.
Another reason why this is an attractive option is that it can be done on a small scale or a large scale. You could purchase a single rental property or build a rental empire.
For more, please see our article How to Generate Income from Rental Property.
If you’re looking for an easy way to start building wealth with rental properties, Arrived is a platform that might interest you. With as little as $100, you can invest in specific rental properties of your choice. You won’t have the responsibilities of a landlord, so it’s a passive investment.
Also, instead of needing thousands of dollars for a down payment, you can get started with just $100. The capital requirements of buying rental properties is a major barrier for new investors, but that’s not the case with Arrived.
As an investor, you’ll earn regular payouts from the rental income, plus you’ll have the opportunity to benefit from appreciation.
If you’re looking to buy a rental property, be sure to check the marketplace at Roofstock. It’s a real estate listing site specifically for rental properties. You’ll get access to financials and specific metrics that matter for rental properties, so it makes your search easier and more efficient.
REITs (real estate investment trusts) are another excellent option if you want to invest in real estate without the need to own or manage any property. A REIT will own a portfolio of properties and generate ongoing income, which is then passed on to investors.
There are REITs that specialize in all different types of real estate, as well as some general REITs. There are also a few different classifications of REITs as some are publically traded and others are private. Publically-traded REITs offer liquidity since they can be sold at any time, but non-traded REITs will often offer better potential returns in exchange for the lack of liquidity.
Two of the top options include:
Another way to invest in real estate is farmland investing. Farmland can be an attractive asset because it produces ongoing rental income as well as the potential for appreciation in value with relatively low volatility.
Crowdfunding has also made it far more possible and practical to invest in farmland, although (at this point) the farmland and agriculture crowdfunding platforms are open only to accredited investors. That means many investors won’t qualify at this time, and higher minimum investments are required.
AcreTrader is one of the leading platforms that makes it easy to invest in farmland. You’ll be investing in a specific property with a cash yield and an anticipated appreciation. The minimum investment will vary depending on the property, but typically minimums will range from about $3,000 to about $10,000.
FarmTogether is another platform that is very similar to AcreTrader.
Although real estate investing often focuses on apartment complexes and single-family homes, another viable option is to invest in mobile homes. Many mobile homes are located within specific communities where the tenant rents the land that their mobile home sits on, and others are located on privately-owned land.
As an investor, you can own (or own a share of) a community or individual mobile homes. Getting started with mobile homes can require less capital than traditional rental properties since the values are generally lower.Amazon product
The last option that we’ll cover for investing in real estate is the tax lien. When a property owner does not pay their property tax bill the municipality can sell a tax lien to an investor. As the investor, you’ll be paying the property taxes and you’ll have the right to foreclose on the property if the owner does not pay you back, including interest.
The specific details of tax liens vary from state to state, with maximum interest rates being set by the state. Investors are able to earn decent returns, but it does come with some risk, especially for those who aren’t experienced with tax liens.
In order to get this investment, typically you’ll need to win an auction based on the interest rate that you expect to be paid.
Have you ever considered art as an investment? The artist is the most important factor that influences the value. Fine art from world-class artists can prove to be a worthwhile investment, while work from unknown artists is unlikely to generate a decent return.
Unfortunately, the average person does not have the capital to purchase an original piece from a master like Andy Warhol or another blue-chip artist. However, Masterworks is a relatively new platform (open to all investors, not just accredited investors) that allows individuals to purchase shares of blue-chip art from renowned artists. Masterworks hand picks pieces that they expect to appreciate at 9-15% per year.
You can purchase the ownership of royalties that allow you to make money from the work of artists and musicians. If they need to raise money, artists and musicians can sell the rights to royalties, and that leads to opportunities for investors.
Royalty Exchange is a platform where musicians can raise money, and people like you can invest and buy royalties.
While it may not be the first investment opportunity that comes to mind, fine wine has the potential to be one of the most productive alternative asset classes in your portfolio.
With Vint, you can buy shares in collections of fine wine. The target hold is 3-7 years, and you’ll be paid when the collection is sold. The wine experts at Vint choose wines that have the potential to produce strong returns, and they sell at the right time to maximize returns for investors.
Vinovest is a little different because the Vinovest wine experts will prepare a portfolio specifically for you. They handle all of the details and even store the wine for you in a secure facility. They’ll also advise you on when to sell, and they’ll facilitate the sale for you.
If you’re looking for a hands-free alternative asset that provides the potential for outstanding returns, Vint and Vinovest could be excellent options.
Invest in Small Businesses
While you can easily invest in publicly-traded businesses through the stock market, there are also some alternative investments that make it possible to invest in private businesses. In many cases, you’ll be investing in small businesses or startups that need funding for one reason or another. Here are some of the specific options.
When you invest in business bonds, you’re essentially providing a loan to a business. These businesses may not be able to qualify for a loan through a bank.
With Worthy Bonds you can invest as little as $10 and start earning a fixed interest rate of 5%. The bonds are a 36-month term, but you can cash them in at any time. Worthy Peer Capital issues loans to American small businesses, and the loans are secured by liquid assets (like inventory) that have a greater value than the loan, reducing the risk for investors.
Small Business Financing
Offering financing is another option for investing in small businesses, and there are several platforms that facilitate the process.
Kickfurther allows you to invest in a way to will help small businesses to grow. One of the major challenges for many growing retail businesses (online or traditional) involves cash flow. Kickfurther helps businesses to raise money that will be used to purchase inventory.
FundingCircle offers another way to invest in small businesses. Investors have historically received 5-7% returns and loan terms can be up to 5 years in length. Loans are issues to American small businesses that pass their approval process.
Private Equity or Equity Crowdfunding
Of course, the stock market makes it easy to invest in publicly traded companies. You can also invest in private companies, but the process isn’t as simple. As a private equity investor, you’ll own a minority stake in a business. As a private equity investor, you’ll typically have no involvement in the operations of the business, but you’ll be able to benefit from the business’s success.
Equity crowdfunding makes it possible for anyone (although some platforms are open only to accredited investors) to invest in privately-owned businesses in a more convenient way. Many startups and small businesses need to raise capital, and turning to crowdfunding is one of several options, in addition to traditional venture capital.
The difference between a Kickstarter campaign and equity crowdfunding is that backers through Kickstarter are typically investing by purchasing a product before it has been created. Once the product has been created and backers have received their product and any other benefits that were promised, the arrangement ends. But with equity crowdfunding, the investors are actually investing in the business with a long-term role.
Crowdfunder is a platform where you can browse available investments with a wide variety of startups. Most of the opportunities available through Crowdfunder are open only to accredited investors, and the minimums and specific details will vary depending from one opportunity to the next.
At StartEngine you can browse available investment opportunities in a wide variety of startups. There are investment options for both accredited and non-accredited investors with minimum investments that are often less than $1,000.
EquityNet is a platform for accredited investors. You can browse thousands of startups that are looking for funding, with a lot of details provided for each business. You’ll need to create a free investor account to get access to some details.
Gold, Silver, and Other Precious Metals
While several of the investments covered in this article have only become available in recent years or gained significant interest recently, gold is an investment that has been around far longer than the stock market. Silver and platinum also present options for investors.
There are many different ways to invest in precious metals, and particularly gold. You could purchase bullion, bars, or coins. You could also invest in ETFs or mutual funds that in turn invest in precious metals.
Unifimoney provides one of the easiest and most convenient ways to buy gold or other precious metals. You can purchase in any amount and they’ll store the assets for you in a secure facility. They store it on your behalf, so you actually own the metal and can request to have it sent to you if you prefer. Of course, you can also sell through Unifimoney whenever you want.
Vaulted is a web and mobile app that makes it very easy to buy gold. Although Vaulted is relatively new, it’s backed by McAlvany Financial Group, which owns ICA, one of the largest and longest continuously operating full-service gold brokerage firms in the United States. The gold that you purchase through Vaulted will be stored securely for you at the Royal Canadian Mint, or you can choose to have it delivered to you.
Oil and Gas
Like precious metals, oil and natural gas have demand that makes them valuable, and there are a few different ways to invest. You could purchase stock in particular companies within the industry, buy mutual funds or ETFs that specialize in oil or gas, or invest in limited partnerships.
Although investments in oil and gas do offer the potential for nice long-term gains, there are some significant risks that you need to be aware of. The biggest risk is price volatility. Prices for oil and gas tend to bounce around a lot, and that makes your investment less stable. If you’re investing in specific companies, there’s also a risk of a catastrophe like an oil spill. For example, BP stock fell approximately 50% in 2010 due to a spill in the Gulf of Mexico.
Life settlements are a type of alternative investment that doesn’t get as much attention or publicity as some of the others covered in this article. Maybe part of that reason is that it’s a bit morbid to discuss.
Life settlement involves someone selling their life insurance policy. The price paid for the policy is typically less than the death benefit but more than the cash value of the policy. After the transaction, the investor continues to pay premiums on the policy and then collects the benefit after the insured’s death.
You can invest in funds that manage and invest in life settlements. The appeal of this investment is:
- The historical returns are strong
- The risk if often viewed as low, relative to the high potential for gains
- It is completely uninfluenced by the stock market
Some life settlement funds are open only to accredited investors, so it may not be a viable option for everyone.
A structured settlement happens when someone wins a lawsuit and is awarded payment over a set period of time. For example, someone seriously injured in an accident may receive a series of payments over the course of several years.
However, the plaintiff who is awarded the money may prefer to have cash in a lump sum now rather than waiting for all of the payments to be made, which can take many years in some cases. There are companies out there that will purchase the structured settlements. That company pays the plaintiff a lump sum and the payments are then made to that company going forward.
This type of investment can be appealing because they are usually held by very strong, stable insurance companies viewed as low risk. However, the investment tends to be extremely illiquid, which presents other challenges for potential investors.
Antiques and Collectibles
Certain antiques and collectibles, including coins, can be seen as alternative assets. Hopefully, any investments that you make in collectibles turn out better than my “investments” in sports trading cards when I was a kid in the 1980s and early ’90s.
Many people choose to invest in collectibles partly as a hobby and not strictly as a typical investment. Antiques and collectibles can be difficult to sell or even to determine a true value, and price swings can also be significant.
Like any other investment, it’s a good practice to have strong knowledge and understanding of any antiques or collectibles that you invest in.
Rally is a platform for buying and selling collectibles. With Rally, you’ll purchase a share of a portfolio of collectible assets that’s been acquired by Rally, so it’s a bit different than owning the collectible yourself and having it in your home.
A hedge fund is a partnership where fund managers oversee the pooled assets that have been invested into the hedge fund. Typically, hedge funds are open only to accredited investors and institutional investors. Hedge funds also typically come with very high minimum investments, so they are an option for only a small percentage of sophisticated investors.
The goal of a hedge fund is to increase return and minimize risk, however, many people view hedge funds as a high-risk investment. Hedge fund investors hope to make money on their investment in any market condition.
Carl is an online platform that’s making hedge funds available to the individual investor thanks to minimums that are much lower than many traditional hedge funds. However, Carl is still open only to accredited investors. The minimum investment of $20,000, while significantly lower than most hedge funds, is still higher than most of the other options covered in this article.
Above, we’ve looked at 20 specific alternative investment options. YieldStreet is different because it’s a platform that includes many different types of alternative investments.
YieldStreet aims to help investors generate passive income with alternative assets. You’ll need to be an accredited investor in order to invest in any of the offerings currently listed at YieldStreet, although their website mentions that they are exploring ways to open some investments to everyone.
At YieldStreet you’ll find different investment offerings that are open to new investors for a relatively short period of time. There are usually not more than a couple of investments open at any particular time. Investments include art, real estate, settlements, and more.
Pros of Alternative Assets
Here are some of the reasons why you may want to consider options from this list of alternative investments. Please keep in mind that the details of each investment are different and not all of these will apply to every opportunity.
Many investors turn to alternatives as a way to create a more diverse portfolio rather than having everything wrapped up in stocks, bonds, and cash.
Potential for Higher Returns
Some alternative investments are attractive simply because they offer a high ceiling that may not be possible with other types of investments.
Some, but not all, alternative investments can serve as a source of investment through dividends or rental income. If living off dividends is your goal, you should consider adding some alternative assets to your portfolio.
Not Dependent on the Stock Market
Some alternative investments are not impacted by the stock market (or at least, not directly impacted). These types of investments can be very attractive because of the potential to somewhat protect your portfolio during rough economic conditions.
In some cases and certain situations, an alternative investment may offer a more favorable tax treatment than other types of investments. Please consult a tax professional for advice related to your personal situation and the specific investments that you are considering.
Cons of Alternative Assets
While there are some significant reasons to consider alternative investments, there are also some drawbacks.
Risk of Loss
While the level of risk will vary from one investment to another, in general, alternative investments will involve risk. There are certainly some options available that are considered to be more conservative, but some alternative investments are not regulated or are lightly regulated, and come with the risk of a partial or complete loss.
Part of the reason that alternative investments can be a little riskier than more traditional investments like a mutual fund or ETF is due to the fact that they tend to be less familiar to most investors.
As a general rule, it’s not advisable to invest in anything that you don’t understand, and that means that you may need to do more research before moving forward with an alternative investment. If you choose to invest without sufficient due diligence, you’re more likely to expose yourself to risk.
Although there can be some tax advantages to alternative investments, there are also potential complications, which is one of the reasons why it’s a good idea to speak with a tax professional before making an investment.
Some Options Require a High Minimum Investment
While the details for each investment will vary, some require a high minimum balance that may be out of reach for some investors. Although this is true, there are definitely some alternative investments covered in this article that don’t require a lot of money to start investing. There are options for everyone, but you’ll have more options if you have a large amount to invest.
Some are Only Open to Accredited Investors
Again, the details of each investment and asset class will vary, but there are several investments covered in this article that tend to be open only to accredited investors. That means that only a small percentage of people will really be able to pursue those investments.
How Much Should You Invest in Alternatives?
Now that we’ve looked at all of the details of alternative investments, you may be wondering, “How much should I invest in alternatives?” Of course, the answer will depend on several different variables. Depending on who is providing the advice, you may find recommendations to invest anywhere from 3% – 20% of your portfolio in alternative assets (somewhere around 10% is common advice).
It’s also important to keep in mind that “alternative investments” is a very broad term. Many of the investments that fall into this category are completely different from each other and have no correlation to one another, and they can serve different purposes within a portfolio.
Now that you’ve seen this list of alternative investments, choose one that is a good fit with your financial goals and your investment strategy.