7 Alternative Investments to Help You Enrich Your Portfolio

Imagine if something big was to happen in the world – a massive pandemic, a huge war, or an economic crisis. You know, things that happen every few years. How would this impact your current net worth?

Sure, some of your stocks would go up, but some of your assets would lose all their value. Now, for just a brief moment, imagine if all your money was in a single asset. Just how big of a gamble are we talking about?

To avoid this scenario, you need to diversify your portfolio.

Here’s an example to explain what exactly we are talking about.

Well, imagine if three resources were coming from a single region of the world. If there’s economic or political turmoil in that region and the supply is disrupted, the costs of these three resources would grow on the market. All three of them. 

When you have tightly intertwined assets, they usually follow the same trend and move in the same direction, so investing in them (although they’re separate assets) doesn’t help secure your portfolio.

Real estate

Let’s face it, the only reason why you’re not already investing in real estate is because you believe that the buy-in is too costly. After all, you must buy a house, an apartment, or a commercial property, which is a once-in-a-lifetime investment for many people.

The truth is that there are alternative ways to invest in real estate with a much smaller initial capital. Some of these methods are:

• Real estate crowdfunding: Collaboratively gathering funds to invest in a real estate project is crowdfunding, while, in some scenarios, it can also be characterized as syndication. 

• Real Estate Investment Trusts (REITs): Instead of buying properties directly, you can invest money in companies that buy real estate. These REITs are often traded on the stock exchange; some may even pay dividends.

• Real estate partnership: You can always pool your funds with someone else to buy the property. This way, you split the costs, get the equity, and potentially even get the rent money later on.

• Rent-to-own: This method allows you to negotiate the lease to purchase at the predetermined price at one point. It’s like buying futures – you agree to a certain price regardless of what the real estate market looks like at that moment. 

In other words, avoiding an entire asset category (in this case, real estate) because you don’t have enough money to buy a building is like avoiding buying gold because you can’t afford a gold mine. It’s outright ridiculous and in the way of your best interests as an investor.

Cryptocurrencies

When picking asset types to diversify your portfolio, you’re looking for low-correlation assets. One such asset is cryptocurrencies. 

Even more importantly, if you don’t restrict yourself to household tokens like Ethereum or Bitcoin, you gain more to add to your portfolio. Some of these new tokens have an incredibly high-risk, high-reward ratio, which means that they have the potential to increase your assets, not just preserve them. In a scenario where they grow at the same moment when some of your other assets start going down, they could even out this net shift.

Also, you must understand that some of these ICOs and new crypto releases are at a bargain price. Their growth potential, on the other hand, is virtually unlimited. Imagine if you discovered and bought Bitcoin at $1. How much money would you have right now?

Also, due to the growth and development of blockchain technology, crypto is an asset type with potential growth (especially with the growth of utility coins and stablecoins).

Still, if you’re buying crypto to diversify, you need to adopt a slightly different strategy than if you did. The key thing is that you adjust your investment goals to your investments.

Precious metals

The main two assets are fiat and stocks, so when we speak about diversification, our main objective is to find an asset with the lowest possible correlation. You see, stocks and fiat money are closely tied to people’s trust in institutions; when this falters, the value of stocks and fiat money decreases while the price of commodities increases.

First, it’s an atavist reflex for people to trust an asset they can stuff in their backpack. The majority of your assets only exist in the digital world. It’s not like you’ve ever visited the HQ of the company you own shares of. Also, most of your money’s in the bank. What if they just spontaneously decide to restrict your access to these funds? A coin or bullion that’s in a home safe won’t be as easy to alienate.

Second, precious metals have an intrinsic and historical value. Since the dawn of time, few substances have been more valuable than gold and silver in the Western cultural sphere.

Third, these materials are often used as a hedge against inflation. Since inflation is a big concern, this might be one of the first things you want to consider. 

Peer-to-peer lending

Peer-to-peer lending is a way to get much higher returns and even create a passive income with a low buy-in. Just remember that the risks are a bit harder here, by default, since all the people with stellar credit scores are probably still getting loans from traditional banks and credit unions.

Diversification among the asset group is also incredibly important. Namely, you don’t want to dump all your investment money into a single crypto when buying cryptocurrencies. You also don’t want to spend all your funds on a single precious metal when you can get gold, silver, and platinum simultaneously. With P2P lending, you can diversify by lending to different borrowers. You can assess these borrowers according to different categories to get more out of it.

This is also a great passive source of income, which is amazing for people who invest in long-term positions.

Art, wine, and designer bags

Anything can be a great investment if you take an investor’s approach to the subject matter. 

Buying art with a perspective to gain value in the future (either due to the author’s nature or for some other reason) may be a good idea. However, this only holds true if you know something about art. In other words, it’s not a smart investment if you don’t have an in-depth understanding of the asset.

Designer handbags are an asset that holds value at quite an impressive rate. A Birkin handbag is likely to be just as valuable in a few years, mostly because these bags come in a limited edition. In other words, when the supply is limited, the demand either holds steady or goes up, but the asset always holds value.

Some people invest in rare and luxurious vintages. Again, not all vintages are as valuable, and not all have as great potential. Without a veteran sommelier on your side and hours and hours of research, you can’t look forward to great results. 

Carefully split your investment funds to protect and grow your funds

The more assets you split your investments over, the more secure your funds will be. However, you can monitor too many investments simultaneously, so you must prioritize. Also, you can’t split your money too thin (especially if it’s not millions in investment money we’re talking about). 

Overall, diversifying your portfolio is one of the skills that a young investor needs to master as soon as possible. It’s a scalable skill that benefits first-time investors and some of the richest people in the world. After all, you don’t want to hold all your eggs in one bag.