5 Alternative Investments for the Beginning Investor
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In medicine, in order for a patient to know truly what choices they are making before undergoing a procedure, the physician explains the risks, benefits, and alternative options before getting an “informed consent.”
The purpose behind this is to educate the patient to the point where they should be capable of making a sound decision regarding the subsequent course of medical action.
As Jim Dahle of the White Coat Investor has previously stated, “there are many roads to Dublin,” when it comes to investing.
The most popular tried and true method of index fund investing is definitely a sound way to build your wealth.
For the vast majority of people index investing will be more than sufficient to get them to their desired destination.
However if all you are reading about is index funding over and over again it may feel like you are indeed trapped in an Echo Chamber.
Even though you may not want to invest your hard-earned dollars in what most consider alternative investing, it is prudent to at least be aware of some of the options out there so that you can truly make an “informed consent” and design a portfolio that is suitable to your risk profile.
I have written in the past about how I have zigged when others zagged with regards to investing, highlighted by my post, “What’s The Alternative?”
But this just scratched the surface of what is out there in the alternative investment realm.
Jacob H, from Providentmetals.com was kind enough to provide the following submission to highlight some of the potential alternative investments out there.
As a reminder, this is NOT an endorsement to invest in alternatives, rather it is meant to be more of an introduction to give you a little broader scope of investing possibilities out there.
[Disclaimer: Jacob and I have no financial relationship.]
When someone mentions the notion of “investing,” the first type of investments that come to mind are the traditional commodities: stocks, bonds, mutual funds.
While these are the most common forms of investing that people think of, they’re missing out on a whole other world of investments if these are the only ones they consider.
The world of alternative investments is rife with a number of opportunities in which you, as a keen investor, can accrue notable wealth through commodities usually not considered.
Investors often look towards alternative investments for a number of reasons, including: the lower tax treatment these commodities experience; the long-term benefits these commodities offer; the specificity and uniqueness these commodities possess; and the passion and hobby-esque joy that investing in these commodities might offer.
If you’re a beginning investor, or a seasoned investor interested in alternative investments, you can greatly benefit from the following options available.
1. Real Estate.
Whether investing in a home of your own, which you plan on renovating and upgrading over time, or buying and owning property in the event of becoming a landlord, there are notable gains to be made from investing in real estate.
If you’re taking the former route, this means you’re increasing the value of your own property over time, treating it as much an asset as you are a home.
If the latter option seems more enticing, you can purchase property such as a house or apartment complex and rent it out to tenants.
With a down payment and a loan from the bank, you can begin renting out this property, receiving both income and appreciation from your investment.
If you’re concerned about the risk of an investment like this, this venture can become a joint-venture, entering contractually with a financial partner to lower overall costs and risks.
Further, if you’d like to be in possession of the property but not work as a manager, you can hire a home management company to handle the more technical aspects of being a landlord—repairs, accidents, collecting rent, etc.
2. Precious Metals: Gold and Silver.
When it comes to alternative investments, gold and silver have long been favorites for investors, and their popularity still holds even to this day.
Gold and silver make for outstanding investments due to their tangibility, market value and differentiation from cash-based investments.
With the value of the USD dropping from year-to-year, and the world becoming evermore digital, there is a benefit to having an asset that is both physical (in the event of digital collapse) and has maintained its historical worth.
Numerous types of investments can be made into the gold and silver market, allowing for investors to make unique, and often stunning, additions to their alternative investments portfolio, including gold American Eagle coins, high-quality minted silver proof rounds and various collectible, narrative-driven precious metal pieces.
If you’re unsure of where to start, or need a helpful hint on some terminology, our bullion buying guide offers insights as to how to track and evaluate the market.
3. Fine Goods: Art, Wine and More.
Considered real assets, these tangible assets garner their value from the preciousness they contain.
In the case of artwork, investors can buy noteworthy pieces from auctions and estate sales, preserving the pieces to watch them accrue value over time.
Anyone venturing into this avenue should obviously have a background, or deep interest, in fine arts, knowing which artists’ works will make for the smartest investments.
In the case of wine, many experts are saying that there is no better time than now to invest in wine.
Whether you decide to begin investing into your own collection of wine or invest into a wine portfolio manager, you can receive a notable return on investment (ROI).
If you decide to embark on the former option, filling your home wine cellar with expensive and rare wines, you’ll also need to take the time to ensure your bottles are properly stored and maintained over time.
4. Private Equity.
Compared to investing in real assets, private equity is the process in which investments are made into companies that are not publicly traded.
ROIs are often made when companies end up offering public stock or make a merger with another company, thus allowing for a payoff to be made to notable investors.
Areas of interest for most private equity investors come in the form of companies in technology fields, as smaller start-ups that become successful will often undergo buyouts or mergers at some point in their future.
These companies often include fields of medicine, telecommunications, energy and more.
However, to receive a notable return, most individuals will have to invest a significant amount of capital from the start, most often over $200K.
If you happen to have this dispensable type of wealth, it can prove to be quite advantageous for you.
5. Hedge Funds.
Similar to mutual funds, hedge funds are investment funds that collect money from numerous investors, spreading capital invested into various areas in an attempt to increase the overall ROI for all investors involved.
The most common hedge fund investment strategy is to invest into public equity, making them different from private equity and venture capital schemes, wherein investors have more ability to monitor their investments and allow them to invest and sell more easily.
The usual areas in which hedge funds invest and trade are in stocks, commodities, futures, derivatives and other options.
These trends, which often rely on micro-transactions and equity long-short transactions, can increase the risk of investing, but can pay off with notable returns.
If you are intrigued by the market of alternative investments and have any questions about how to get involved, especially within the precious metals sector, don’t hesitate to ask us any of your questions.
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