The popularity of alternative investments has been soaring in recent years. A growing distrust of traditional investment products combined with historically low interest rates have created a growing subculture of investors seeking out new ways to protect and grow their money. In today’s markets, alternatives offer investors a dizzying variety of choice – fine wine, rare collectables, antique toys, vintage cars, there is a market for just about everything! In our following review we will focus on some of the more traditional alternatives which investors are likely to encounter, but first, we highly recommend you watch this short 2 minutes video to get familiarized with the alternative investment landscape:
Now let’s dive into the investments…
Art and antiques
Fine art and antiques have been a popular investment choice for centuries, but their emergence as a prime alternative asset class only really began to take off with the yuppie culture of the 1980s. Today, there is an unprecedented art boom worldwide, with work from prominent artists fetching draw dropping sums of money. In a recent auction at Christie’s, Pablo Picasso’s painting, Women of Algiers fetched a record $160m! Art is becoming the ultimate status symbols, and the growing class of oligarchs all over the world are unlikely to reel their horns in any time soon when it comes to bidding for the works from master artists. If your budget doesn’t quite stretch as far as your local oligarch’s, don’t worry. Affordable art can be found from a variety of different places. Undergraduate and graduate degree shows from students at your local Art School are often an interesting starting point for your collection. If you plan on starting to invest in art, you better be aware of the risks involved. This type of investing can be very speculative and require some careful studying.
Real Estate and Farmland
The real estate sector hit a major speed bump during the 2008 financial crisis, but house prices and rents have come back strongly in the past few years. Investment properties are being snapped up at record pace by overseas buyers looking to secure yield and high end property in hot areas like New York and California continue to smash through record highs. Another popular form of real estate investment has been the purchasing of prime agricultural land. With a growing population, quality agricultural produce looks set to perform well as an asset class going forward. Land with an onsite water supply are particularly attractive as an additional investment play on water prices going forward. With the ongoing drought in California it’s easy to see why investors are interested.
Timber, Rubber, and Fruit Plantations
Finding literal examples of money growing on trees not an everyday occurrence, but in the case of timber and other forms of plantation investments, investors can enjoy the fruits of real life money trees! Although in their relative infancy, plantation investments have been growing in popularity over the past several years. With the right structure and management in place, plantation investments can produce some outstanding returns. Investors must keep in mind that plantation investments are often suited to long time horizon, trees take time to grow, and so will your investment, but with enough patience returns can be highly lucrative. Due diligence is absolutely essential in this sector – investments of this type are unregulated and there are always unscrupulous schemes out there. Do yourself a favor and conduct your own thorough due diligence.
Although firmly part of the conventional financial establishment, Hedge Funds command a great deal of prestige and intrigue within the wider investment environment. Hedge Funds are renowned for specializing in highly focused investment strategies – Designed for high net worth or qualified investors, they are not subject to the same amount of regulatory environments which can stifle performance in traditional funds and provide investors with some unique opportunities in today’s volatile markets. Hedge Funds have long attracted the best minds Wall Street has to offer, highly traders and analysts in quest of a lucrative investment niche. Hedge Fund managers operate an incredibly diverse set of of investment strategies and their ability to utilize leverage boosts both potential returns, and potential losses. Not for the feint of heart, or the financially illiterate, Hedge Funds are amongst the most popular form of alternative investments. Check out Hedge Fund Guide for tips and strategies on how to invest in hedge funds for both beginners and seasoned investors.
Gold and Silver are another more conventional form of investment and have been used for thousands of years as a store of wealth and value. Gold is the ultimate form of money, and indeed the only form of money which has managed to survive this long. Gold has been used a store of value for thousands of years. With the unprecedented degree of monetary easing being conducted by central banks all over the world, investors have been flocking to precious metals as a form of insurance against inflationary pressures, and systemic counterparty risk within the banking sector. Often painted as the domain of conspiracy theorists and doomsday preppers, a typical gold investor is actually much more likely to be your average Jane or Joe. Investing in gold can get very complex as there are several ways to invest in gold. From gold ETFs to mining stocks to pure physical bullion, you should invest based on your own convictions and confidence in the current political/economical landscape. Those who want to invest in gold solely for profit should stick to “paper gold” like stocks, ETFs and mutual funds, while those who think the dollar is heading south should consider gold bullion as it offers the best protection in case of a systemic collapse or a 2008-like scenario.
That wraps up our review of traditional alternatives – it’s important to keep in mind that there are literally hundreds of different sub asset classes out there. Given the unregulated nature of many of these markets investors should always conduct due diligence. Overall, alternatives are becoming one of the fastest growing segments of the financial landscape and are likely to keep up a steady pace of innovation for the foreseeable future.
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