After the global economic crisis back in 2008, investors have been striving towards diversifying their investment portfolios. The most popular investment types are stocks and bonds, but these investments are heavily correlated with the state of the global economy. That being said, if the world enters yet another crisis, the stock and bond market is most likely to crash. Although it may seem that the world has recovered from the previous market crash, the global instability and political issues indicate that there might be another crash in the near future.
That’s why investors are looking for other investment opportunities other than stocks and bonds. These investment opportunities are also called alternative investments. Alternative investments carry specific risks, based on the nature and the type of investment. However, they also provide certain security that stocks and bonds are unable to, especially during difficult times. Therefore, here are a few alternative investments all investors should be aware of.
Precious metal investments
Precious metals have always been an excellent alternative investment opportunity. Metals, such as silver, gold and even valuable platinum, are highly collectable and often traded. That means, there’s only a slight variation to their market price and low volatility. Precious metals provide a hedge against economic crisis, instability and inflation. They provide security for funds and even an opportunity to gain profits. Precious metals are also highly sought after for various reasons. For example, there’s a cultural and inherited value to precious metals.
They can also be used in various industries, such as electronics, medicine, manufacturing and so on. What’s more, precious metals are also used in jewelry, cutlery and other collectables. In other words, precious metals are often used in variations, which makes them a valuable investment. Any investors that are looking for a more stable investment option other than stocks and bonds should definitely consider investing in precious metals. You can invest in bars, coins and bullions to secure your funds for the future.
Investing in real estate
Real estate is yet another alternative investment type that can provide security and substantial profits to investors. In addition, real estate investments can also be an excellent long-term investment type, due to the high demand for various properties. Investors have an opportunity to buy properties, wait until the prices go up or invest in renovations that will boost the property’s price, and then sell the property for profits. This technique is also called flipping properties. Aside from that, investors can decide to keep the property and generate profits through rental income.
As a property owner, you’re also a landlord, which means you can rent out property to whomever you wish and as long as you wish. Rent is a predictable income, which means you’ll always have expected profits to rely on. Investor partnerships are uncommon in the real estate industry as well. Investors share multiple property ownership and resources to maintain properties, as well as share profits from the rent. As a landlord, you’re also entitled to property appreciation, such as tax return and mortgage interests.
Venture capital investments
Venture capital is a subsidiary of private equity investments. It’s also a good alternative to stocks and bonds for investors who have enough funds to invest. Venture capital investments consist of investing in startup businesses or small companies in their earliest stages of development that have the potential to become lucrative and successful on the market. Basically, investors fund business growth and development in exchange for the shares of the company once the company is ready to have its stocks on the market.
Even if the stock market collapses, a company can still remain operational and successful, thus generating profits for the investor. Venture capital requires a hefty investment, but it can be well worth it in the end. In most cases, investors target businesses that can start generating substantial profits in three to five years. Large companies, such as Twitter, Facebook and even Google were funded by venture capital investors.
Investing in collectables and curios
Other alternative investment opportunities can be found in curios and collectables. Investors with a knack for antique items and valuable collectables can diversify their investments quite easily. These investments include collectables, such as stamps, coins and other items. What’s more, you can invest in vintage wines, arts, books and other things. However, these investment types carry a certain risk. Prices can vary based on the historical value, demand, and other factors.
These items aren’t commonly traded, which means it may take time to find an interested party willing to procure an item from you. In addition, if you don’t have the skills or the expertise to spot a unique piece, you may invest your funds into a fraud and lose your entire investment. Items that are most commonly traded are old and rare coins. These items hold value based on the precious metal they’re made of if nothing else.
Stocks and bonds, although being the most popular investment opportunities, don’t provide the security investors need, especially during global instability. That’s why alternative investments are becoming increasingly popular. In an effort to diversify their portfolio and secure funds for future use, investors are looking for investment types that can withstand the challenges of an economic crisis.