Investment experts recommend balance and diversity in creating an investment portfolio, including alternative investments. But what exactly is an alternative investment? As it turns out, would-be investors have a variety of outlets for their money. Although alternative investments like hedge funds are strictly for big-money investors, other alternative investment instruments are available to investors of nearly all income levels.
The Finer Things
Are you drawn to fine art? Many museum quality paintings, sculptures and other artworks are actually within financial reach of many affluent investors. The same is also true of fine wines, jewelry or high-end automobiles. The key to making a financial gain with investing in many luxury commodities is to make buys based on potential and be willing to hold onto your purchases for years or even decades. Once an artist has been “discovered” as a genius or an auto model recognized as a classic, prices jump to levels far beyond all but the best-heeled investors.
The bursting of the housing market bubble did not put an end to real estate investments. Many homeowners facing tight credit turn to private investors for hard money loans that are secured by the property for which the loan is being made. Investors interested in making hard money loans are not limited to homes – shopping centers, parking lots, hotels and other commercial properties are also fair game. If you’re not quite financially flush enough to purchase an entire commercial property, real estate investment trusts, abbreviated as REITs, trade like stocks and provide investors with shares of real estate.
Antiques Road Show
It’s not likely that you will discover an original Ming Dynasty vase or a Mickey Mantle rookie card in your attic. Nonetheless, ordinary people can and do discover valuable antiques among their possessions or through very inexpensive purchases made at garage sales or thrift stores. If you have more substantial resources available to invest, antiques of established value are a viable alternative to the volatile stock market.
Cash for Gold
In difficult economic times, prices for gold and silver often skyrocket. While it’s unwise to believe that prices will continue to rise indefinitely, gold, and to a lesser extent, silver, have long been recognized as relatively safe alternative investment interests. As an alternative, you can invest in investment grade coinage, although its value often fluctuates to a certain extent.
No Business Like Show Business
If you buy an interest in the next “Rent” or “Angels inAmerica,” you are almost guaranteed to make many times your initial investment. Of course, you may also lose every penny you’ve sunk into a show if it turns out to be a flop – or if the star walks out, or any of a hundred possible mishaps occur. In this respect, investing in entertainment ventures is nearly as risky as playing the stock market. Many shows also require a large up-front investment, although you may catch a relative bargain if you invest early enough in the production cycle or are able to contact the producer directly.
So-called peer lending is another alternative investment that yields potentially large gains for relatively small initial investment. With peer lending, investors make loans through a clearing house that screens borrowers and ranks them according to credit score, income and other factors into risk categories. Loans with higher risk levels also carry higher yields, but default rates are usually low.
A twist on peer lending is micro investing, that allow investors to purchase an interest in a business or innovation, much like angel investors, but on a much smaller scale. Just as in peer lending, business ventures and their owners are vetted and screened rigorously. However, micro investing often requires investors to wait years to earn a return on their investments – and many ventures fail.
Guest post was contributed by Dan Harrison. Dan is a New York based forex trader and freelance writer. Having previously worked for Goldman Sachs, he enjoys revealing trading insights in forex indicators.