Courtesy of ShutterstockAlternative investments are assets that fall outside traditional stocks, bonds, and cash, offering investors new ways to diversify and potentially boost returns.
These investments can include real estate, private equity, hedge funds, commodities, cryptocurrencies, art, and collectibles.
Un conventional , many alternatives are less correlated with stock performance, which makes them appealing for managing risk during economic uncertainty.
While they can vide opportunities for higher yields and portfolio tection, alternative investments often come with unique risks, lower liquidity, and more complex entry requirements.
For investors seeking to broaden their strategies, exploring the best alternative investments can open doors to fresh growth and long-term wealth-building potential.Table of ContentsWhat are Alternative Investments?9 Types of Alternative Investments to ConsiderReal EstateSee All 14 ItemsWhat are Alternative Investments?Alternative investments are assets that don’t fit into traditional stocks, bonds, or cash.
They include things real estate, private equity, hedge funds, commodities (gold, oil, etc.), cryptocurrencies, and even collectibles art or rare wine.
These investments often have higher risks but can offer big rewards and help diversify a portfolio.
Un stocks, they can be harder to buy and sell quickly, and they sometimes require specialized knowledge to invest in.
They’re with wealthy investors and institutions looking for ways to grow their money beyond traditional .9 Types of Alternative Investments to ConsiderThe range of alternative investments beyond the traditional asset classes is wide.
The list below isn’t close to exhaustive, but it does represent the best alternative investments you can make right now.Real EstateReal estate is the largest investment asset in the world.
in real estate means you are buying land or a residential or commercial perty.
Alternatively, it can mean that you’re doing either of those through a real estate investment trust (REIT).Buying residential or commercial real estate as an investment can vide you with cash flow through rental income.
It can also appreciate over time, bringing you equity.If you don’t want to collect rent and take care of a perty, you can invest in a REIT.
A REIT manager invests your money in different perties, manages them, collects rent, and s the annual fits with you. many alternative investments, real estate requires expertise and patience.
You must do your re and understand your risks.Residential or commercial rental perty: You buy a building and collect rent.Real estate investment trust: Your money is pooled through a REIT manager who buys perties, manages them, and s the rent with you.Land: You can subdivide the land, develop it yourself, or let it appreciate.An added benefit of real estate is that the market is far less volatile than stocks and bonds.>>Invest in Real Estate: Arrived LendingLending allows you to earn interest on what you loan and also earn your money back when the loan is paid off.
Here are two types of lending used in alternative :Peer-to-peer lending (P2P): Done online without financial institutions, you can use this to select your borrower based on income, credit, and other factors, and typically charge a higher interest rate.Mortgage debt: You can buy defaulted mortgages at a discount and fit from the difference between what you paid and what is paid back, or lend to borrowers who want to buy or refinance.Lending is an alternative investment that can give you high returns.
However, this investment also has risks: default, fraud, and failure of online platforms.>>Invest in Lending: YieldstreetFine Art and Collectibles in fine art has typically been left to high-net-worth individuals.
That said, famous paintings and other collectibles — rare coins, vintage cars, jewelry, wine, trading cards — are being bought and sold among retail investors.Collectibles are a tangible investment and typically appreciate.
However, to avoid being scammed, you need expertise, and you will find these investments harder to turn into cash if you have a financial need.>>Invest in Fine Art: Masterworks>>Invest in Collectibles: Public.comGold and Precious MetalsThere are several ways to invest in gold and other precious metals, such as silver, platinum, and palladium.
You can buy physical metal, such as bars, coins, or jewelry, or you can invest in gold exchange-traded funds (ETFs), gold mutual funds, mining stocks, or futures.These securities track the price of the precious metal.
They are more liquid than when you’re holding the physical metal. You can buy stock in companies that mine gold and silver for a higher return.
However, mining company stocks come with a higher risk.>>Invest in Gold and Precious Metals: American Alternative AssetsCommoditiesIf you’re in commodities, you’re trading raw resources and materials.
Gold is a commodity, as are oil and natural gas.You can buy futures contracts or gain access through ETFs. Commodities can be volatile, though.
Thus, it’s important to think how gasoline fluctuates because of oil prices.
But commodities offer diversification and a hedge against inflation as the rise in price helps you.>>Invest in Commodities: Plus500CryptocurrenciesIf you have a tolerance for a volatile asset and are ready for virtual alternative , cryptocurrencies such as Bitcoin, Ethereum, Tether, Solana, Binance Coin and more might be for you.
These digital or virtual currencies use a decentralized ledger known as Blockchain for security and transactions.The price of cryptocurrencies has shot up as their ity has grown.
The price in May 2016 was $500. It traded at $45,800 on Jan. 2, 2024, according to Forbes.
Ethereum is right behind Bitcoin, selling for $11 in April 2016 and $2,416 in January 2024.These digital currencies don’t have much regulation, but governments are increasingly beginning to look at issues of consumer tection, financial stability, competitiveness, and financial inclusion.>>Invest in Crypto: GeminiCrowdfundingThrough an online platform, you can raise money from a large number of people for a , ject, or cause.
This is known as crowdfunding, and it can allow you to invest your money in a way not available through traditional .It can also be a great way to diversify your portfolio, earn a higher return, or impact your community.
However, it also comes with high risk, such as fraud, lack of regulation, volatility, and illiquidity.>>Invest in Crowdfunding: FundrisePrivate EquityPrivate equity is a way for you to invest in companies whose stocks are not publicly traded.
As an investor, private equity doesn’t just allow you to diversify your investments and earn a high return.
It also vides you with an opportunity to influence a company’s management and strategy.Illiquidity as well as higher risks and costs are the downsides.
Thus, this kind of alternative investment is better left for investors who can weather high volatility and a long-term commitment of capital.Hedge FundsA hedge fund is an investment fund that trades assets that are relatively liquid.
Hedge fund managers use different investment strategies — long-short equity, market neutral, and quantitative strategies — to attempt to earn a high return on their investments.
Hedge funds are exclusively the dominion of institutional investors and high-net-worth individuals.Understanding Alternative InvestmentsOnce strictly the domain of institutional investors and high-net-worth people, the alternative investment industry has recently soared in ity.
Individual investors might have stayed away because some alternative investments are complex, and most are illiquid, which means they can’t be sold quickly to get cash.According to the Chartered Alternative Investment Analyst Association (CAIA), alternative investments represented $18 trillion in assets under management (AUM) in 2020.
In other words, they made up 12% of the $153 trillion global investment market that year.PwC’s estimate of global AUM is lower, reaching $145.4 trillion by 2025.
However, investments in alternative asset classes are expected to reach $21.1 trillion, or 15% of the market, by 2026.Alternative investments are assets that aren’t traditional stocks, bonds, or cash.
They include, but extend beyond, these assets:Real estateLendingGold and precious metalsCommoditiesFine art and collectiblesCryptocurrenciesCrowdfundingPrivate equityHedge fundsThe number of alternative investments has grown because investors want assets with lower correlations, which refers to how two securities move in relation to each other.
This is desirable because interest rates have risen, and inflation has remained high.A lower correlation also means that assets are less ly to move in the same direction if the economy dips.
In addition, most alternative investments aren’t tied to traditional financial .Find Your Alternative Investment and DiversifyWhen selecting alternative investments, it's important to conduct thorough re and due diligence.
Each alternative asset class comes with its own set of risks and rewards, so understanding how these investments fit into your overall financial goals is key.By finding your alternative investment options and diversifying your portfolio, you can better tect your wealth against market downturns and capitalize on a broader range of investment opportunities.
Working with a financial advisor or investment fessional can help you navigate the complexities of alternative investments and tailor a strategy that aligns with your risk tolerance and objectives.Frequently Asked QuestionsQWhere should I invest $1000 monthly for a higher return?
A If you can invest $1,000 monthly and want higher returns, consider options index funds or ETFs, real estate syndications or REITs, or alternative assets private equity, startups, or crypto.
QHow to get 15% return on investment? A Earning a consistent 15% return is ambitious and usually involves higher risk.
Common ways include in growth stocks, private equity, real estate development, startups, or crypto—all of which can der high returns but come with volatility and potential losses.
QWhat is the 7% rule in ? A The 7% rule in is the idea that, on average, the stock market has historically returned 7% annually after inflation over the long term.
Many investors use this figure to estimate future portfolio growth and plan for retirement, though actual returns can vary year to year.
Sarah EdwardsSarah Edwards is a finance writer passionate helping people learn more what’s needed to achieve their financial goals.
She has nearly a decade of writing experience focused on budgeting, investment strategies, retirement and industry trends. Her work has been published on NerdWallet and FinImpact.