When you start earning money, one of the major factors that you need to think about is how you will invest your money. Investments are of various types. Among them, you will probably be aware of the common ones like fixed deposits, mutual funds, stocks, cash, etc.
Here, we are going to speak a bit off the track from these traditional investment methods to help you in asset diversification.
We will learn about the alternative investment forms which are not so common to learn about. Let’s get started to know about Alternative investments.
Why Should You Consider Alternative Investments?
You might be wondering why you should go for these alternative investments when there are so many common methods available. Well, here you will enjoy the potential to enjoy uncorrelated returns.
These investment opportunities have a very low correlation with the board market. This means if the broad stock market starts performing down, still you will have the money performing well through these investments.
During the financial crisis in the year of 2008, stocks and bonds started performing very poorly. At that time, only the alternative investments made through art, wine, gold, and real estate, survived well. This kind of investment is very important if you are looking forward to reducing your overall risk factor in investments.
What is Wine Investment?
Wine investment means the practice of purchasing and storing bottles of wine so that when the capital price increases in the future, you can gain your profit edge easily.
This is a bit different from traditional asset investment. Here, wine investment depends on so many factors like market demand, vintage nature, producing region, etc. By owning a vintage wine collection, you will be able to build up your brand and with time, expand your portfolio in this investment sector.
Another main advantage is that wines are tangible assets and you can share them with others, unlike the traditional assets. If you own the rare wine collections, it will attach the perfect shine to your portfolio.
Investment in Real Estate
Apart from wine, considering real estate for investments can be another great decision in risk management. You can choose the type of property you want to invest in like a house, condo, retail property, office space, etc. With time, the rate and valuation of these properties increase at a steep rate, giving you a good return when you sell them in the future.
Shall You Invest in Hedge Funds?
Hedge funds are a special category of investment funds with a long-term growth potential. Here, you can find the implementation of different strategies like:
- Global Macro: Here, you need to make broad bets on the macroeconomic trends going on in the Global Market.
- Event-Driven: Here, you get the chance to capitalize on different types of events like bankruptcy, mergers, acquisitions, etc.
- Long-Short Equity: Here, you get to mix the long-position combining with the short position selling to perfectly hedge the market exposure.
- Futures: You can trade different future contracts on various categories of asset classes.
- Distressed Security: Here, you have to invest in those companies that are financially troubled at the moment.
Artwork investment involves buying art pieces with the idea of having a future income out of it. This term refers to the purchase of rare coins, paintings, sculptures, collectibles or other forms of art with the intention of their revaluation in future, when they may be sold for profit.
This kind of art investment can be a success if one apprehends the different aspects of the art world. This entails the study of various art forms, periods, and famous painters. You must also be aware of current trends and market dynamics. The art experts or joining the art investment groups provide valuable intel and knowledge.
On the other hand, there are also risks involved while investing in art. The art market can be volatile; the value of artwork could fluctuate due to variables like changing preferences, economic conditions, or shifting cultural tastes. The fact that selling the artwork is hard and requires a lot of patience because of the difficulty of finding the right buyer is also one of the challenges.
Despite these difficulties, investing in art pieces is both profitable and satisfying as a person. Apart from the financial benefits, owning art gives confidence to the investors to interact with the cultural legacy and in turn promotes the preservation and value of artistic expression.
What Should You Keep in Mind While Investing?
- You should know the ins and outs of that field.
- Don’t invest without consulting with anyone successful in that field.
- If you are starting, first try with a small amount and then, gradually expand your portfolio.
- You need to understand that you have to be patient and wait for the right time to come.
- Keep your investments diversified, to reduce the overall risk factor.
By now, we have updated all the details about Alternative investments. These options can help you to broaden the returns of your money in the future. You should invest in traditional options like stocks, mutual funds, etc but along with that try out these too. You will find how the real growth of finances occurs only after trying! All the best!