When it comes to saving money, many of us stick to the basics: bank deposits, pension plans, insurance, and, most likely, mutual funds. But how do the wealthy make money?
2020 was an eye-opening experience that taught investors the value of consistent returns combined with risk mitigation measures. With interest rates falling and financial asset valuations skyrocketing, you may be wondering if there are any unconventional investments you can make to protect yourself from the whims and fancies of the capital markets. For ages, investors have stuck to the good old low-risk and decent returns vehicles. These investments have just helped to shield from the inflation wrath, rather than bringing profits. Finding the right balance between profits and risks has always been a little tricky. Stepping out of the comfort zone and exploring unconventional options will help to tackle this situation. Alternative investments options are a great way to diversify the portfolio, and to diversify the risk involved.
What Are Some Of The Features of Alternate Investment Options?
Alternative investments can help investors to make more money than traditional options like gold, stocks, and bonds. Also, alternative investment funds allow experimenting with risk, ticket sizes, and tenures.
There are few alternative funds that cover up the loopholes of traditional options, such as private equity funds which are alternative property investments that are conceptualized to democratize Real Estate. Some key features of the alternative investments opportunities are:
- Investors get to diversify their portfolios.
- Alternative opportunities yield higher profits than traditional vehicles like stocks and bonds, but also have higher risks associated.
- Comparatively, these are less liquid than the usual investments.
- Both institutional and noninstitutional players can invest in alternative investments.
So, the following are some worthy alternative investment options.
- Diamonds and Antiques: Diamonds, the most loved stones in the world, are also one of the most preferred alternative funds. The appreciation of these gemstones over time is very high. Investors can directly invest by buying diamonds or can indirectly buy shares of any diamond mining firm. Diamonds have proven to be very rewarding when considered for investing, and the market has shown steady growth. The important factor that decides their performance is the quality of the diamonds. Antiques are one of the most unconventional ways of making money. Art, jewelry, and other vintage things that have value are considered antiques. Investors can make a good amount of profits by investing in the right kind of antique stuff. Antiques also have a fluctuating market just like any other conventional investment. Collecting valuable antiques with high demand and low availability will fetch the investor more profits. Low Liquidity and less available buyers are a few drawbacks of investing in Antiques.
- Wine: Wine along with being the best drink for many is one of the best investments for making a fortune. Investing in fine wine is benefited from high profits if given enough time. Age like a fine wine- heard the saying? Just as it says, for wine to become fine requires a lot of time, the same implies investment here. Wine investment is risky like many other alternative investment funds. Along with budget and time, investing in wine also requires a lot of patience. The investor should be backed by solid research and keep out an eye for the wine from the best vineyards. A quality vintage wine is something that never goes out of demand. Investing in larger bulk often yields higher profits.
- Digital Currency: Digital currencies had a lot of hype earlier which came to an end with the market downfall in 2018. But the market picked up again, and today the investors consider the cryptocurrency alternative investment as a potential aid for building wealth. There are lots of cryptocurrencies apart from the most famous Bitcoin. Even though there is an increased interest from investors, there is no regulatory authority for cryptocurrencies. Interference of government authority will bring in the long due structure, and help in strengthening the existing system of cryptocurrency alternative investment. The potential to generate high profits with less budget and a relaxed process without the involvement of any restrictions and rules makes cryptocurrency alternative investment funds the best.
- Peer-to-Peer: The financial markets do not operate linearly. The difficulties that small businesses face in raising loans are orders of magnitude greater than those faced by their larger counterparts around the world. A lengthy and complicated application process, coupled with frequent rejections, discourages financially sound small businesses from seeking traditional bank loans. There are several P2P platforms available today that assist businesses in bypassing banks to raise funds from Peer-to-Peer (P2P) lenders. Peer-to-peer lending(P2P) firms have revolutionized lending and borrowing by removing the middlemen. P2P platforms bring together the potential lenders and borrowers, thus money is exchanged, without the involvement of banks or any brokers. These platforms are more beneficial than traditional financial institutions as the borrowers get loans for a lesser interest and buyers can earn more profit in a short time. These are short-term loans and investments that start with the minimum budget allowing any investor to invest in P2P. These firms also have options with varying degrees of risk and investors can choose according to their risk tolerance.
- Private Equity: Private equity is an alternative investment fund that pools money and invests in unlisted private companies. Unlisted private companies that require huge capital, raise funds in the form of private equity without issuing any debt instruments. These firms invest in different sectors like startups, Real Estate, venture capital, etc. Both institutional and non-institutional investors who are looking to add a risky investment to their portfolio can invest in PE. Investors get capital appreciation and return depending on how the investment performs and the firm also collects a certain percentage as a management fee. These investments are usually long-term and range between 3-7 years and after the tenure investor can exit from the fund. Assetmonk is a private equity platform that allows alternative property investment in high-growth potential Real Estate properties.
- Hedge Funds: Hedge funds are pooled capital funds collected and invested in multiple streams for reducing the risk. These funds enable easy portfolio diversification by investing in multiple assets at the same time. Investors can have experience investing across different assets and varying risk options. Hedge fund firms invest in Stocks, Real Estate, Commodities, etc. Though it is a risky investment option and profits from hedge funds are considerably good. These firms along with being beneficial to the investors are equally benefited by investors charging a management fee along with the good percent of profit. These funds are considered to be more liquid than private equity and venture capital funds.
- Fractional ownership: Fractional ownership investment modules are gaining more and more popularity offering low ticket sizes in reputed commercial Real Estate properties. Fractional ownership allows investing in a fraction of the property of high net value assets. It’s an alternative investment option to investing in a single property that would often require taking a loan from a bank. These investments provide stable passive income along with a good percentage on the sale of the fraction of property after the tenure. There are multiple alternative funds for investors who want to try their hand at unconventional options. These unconventional options help investors to check their risk tolerance and also to experiment with tenure and budget. Having an alternate investment will lead to risk diversification of the investment portfolio as well, and this way the investor will have something to hold on to even when the traditional options fail.
- Commodities: Commodities can be metals, nonmetals, agricultural products, and so on. Participation is possible through futures contracts available on the MCX and other commodity exchanges. It does not necessitate as large a ticket size as in AIFs. The investor must be aware of the price movement of the commodity, how futures contracts work at MCX/other exchanges and have a trading account with a member of the exchange. It is possible to figure it out if you have an interest in a specific commodity and the time to learn about the other relevant aspects.
Assetmonk is the online platform that helps you sort your investment in metropolises across India. Invest in the high-yielding properties under the Growth, Growth Plus, and Yield categories of assets that we offer. You can enjoy a steady passive income by investing in small ticket sizes through fractional ownership. For further details, visit Assetmonk.
Alternate Investment FAQs:
A.Fractional ownership, private equity, hedge funds, Wine, and diamonds are some of the best alternative investments that generate high profits.
A.Alternative investments are worth a try especially if you are willing to experiment with your investment portfolio. These are usually high risk and also provide higher profits than traditional options.
A.Alternative investments are usually high risk than the traditional opportunities yield higher profits than traditional vehicles like stocks and bonds but also have higher risks associated.
A.Wine is a good long term investment that provides good capital appreciation. Looking for the best wine and giving the investment enough time will help you make a good amount of profits.
A.Alternate investments like hedge funds, private equity, diamonds, and antiques are some high-risk investments that also provide good returns and capital appreciation.