What are alternative investments and who can earn from them

Modern investments can be divided into standard (securities, currency) and alternative. Often the latter are also called passionate investments, which means “passion investments” in English, since such assets are often acquired not as a source of income, but out of interest in an object, for example, paintings of a certain period. Recently, investments in digital assets have been added to alternative investments: cryptocurrency, NFT, virtual real estate.

Features of alternative investments

Experts note a low correlation with standard types of investments. Often, the direction of change in their value is opposite to the movement of prices for stocks, bonds and other types of conventional assets. They are not so sensitive to social and political changes.

There is no single trading platform for various types of alternative investments. They are usually purchased at auctions like Sotheby’s, specialized exchanges or from individuals.

This tool is practically not regulated by law. Therefore, there is a lot of fraud in this area and special knowledge and/or expert help is needed. Informal connections in various communities play a certain role.

Despite this, there are many investors who successfully diversify their portfolio using such a tool. The ratio of alternative investments in the portfolio of assets of owners of large capitals can reach up to 40%.

Виды альтернативных инвестиций

Important! Alternative investments can only be long-term. It makes no sense to invest in them for 3-4 years. The investment horizon is at least 7 – 10 years.

Types of alternative investments

The following types are distinguished:

  • material (precious metals, antiques, collectible alcohol);
  • financial (commodity assets, hedge funds, cryptocurrencies);
  • NFT-tokens confirming the copyright of a digital asset.

Despite the increased risks, investors do not refuse to invest their funds in alternative instruments for preserving and increasing capital. Thus, the current value of collectible jewelry has already exceeded $ 200 billion. And thanks to the development of online trading, the process of acquiring assets has become faster and more accessible.

Особенности альтернативных инвестиций

Who is suitable for this type of investment

Such an investment tool is recommended for those who have extensive experience working with traditional assets and who want to diversify their existing portfolio.

Experts recommend investors:

  1. To invest in this type of investment only after a stable passive income from traditional assets is provided.
  2. Diversify the portfolio, i.e. not invest in only one type.
  3. Independently understand the assets and additionally use the help of experts. It is better to develop an investment strategy with an expert in this narrow field.

Alternative investments can be a source of aesthetic pleasure for their owner and increase his social status. But the risks of such investments are higher.

With such investments, it is necessary to take into account the costs of purchase and storage, which can be quite high (expensive expertise, payment of a safe deposit box). And financial success is often determined not only by economic factors, but also by fashion trends, luck and other subjective factors.

Published: 31 October, 2022

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