Alternative Investments

6 Different Types Of Alternative Investments

If you don't know yet, diversification is the most effective technique to minimise investment risk. There are always risks in any investments, but some assets, such as alternative investments have low risks. These investments are different from traditional ones such as stocks, bonds, or a savings account. Aside from that, these assets provide greater yield, but most of them are illiquid. If you are an investor and want to diversify your portfolio, listed below are some alternative investments worth considering.

Precious metals

Alternative investments like gold and silver and other precious metals in your portfolio may significantly offset other assets' performance in the categories since valuable commodities like gold do not move in a cycle with standard investments. Gold and other precious metals tend to go higher when currency fluctuates and inflation takes over. Precious metals are great alternative investment opportunities when the inflations are higher. As a result, when inflations affect a particular currency's buying power – say the euro weakens against the dollar – the price of gold tends to rise. Therefore, it is common to find sophisticated investors investing their money in gold during the market and economic downturns.

Commodities

Typical examples of commodities include grains, gold, beef, oil, and natural gas. Another great alternative investment opportunities to diversify your portfolio are commodities. This is because commodities tend to move in opposition to stocks; some investors also rely on commodities during periods of market volatility. Supply and demand are the driving forces within the commodities market. The scarcity of supply can impact the demand and lead to higher prices.

Start your own business

You can use your money to invest in your own business, which has the potential to produce the highest returns of all your investment choices. If you think you got what it takes to be an entrepreneur, you should start your own business as alternative investments. The only downside of this is when you fail, it will damage your financial aspects and your physical, emotional, and mental aspects. However, your businesses can produce a steady income and grow over time. Some businesses have very low start-up and ongoing costs. These include virtual or online businesses, like teaching, consulting, coaching, and IT support. One way to approach this is to put part of your money into a business and invest the rest elsewhere. Taking this route can spare you from several sleepless nights. Another way is to create a part-time business that you can do at night and on weekends. This way, you don't have to give up regular employment security, you will also get extra income.

Start-ups and private companies

If you don't want to own your own business, you may want to consider owning part of someone else's. Start-ups that need funding provide a percentage of their companies' shares on equity through crowdfunding websites. However, if you don't know any websites, you can hire an alternative investment management company that handles start-ups funding on your behalf.  If you invest in the company in the stock ownership site, you can be part of it. If the company succeeds, a reward will be obtained. The risk is that if the company fails, you will lose some or all the money.

Forex trading

One of the best alternative investments is trading pairs of foreign currencies. The Forex market is the traders' favourite playground for years. Since currencies rise and fall in value against each other, you can profit by profiting from these fluctuations as an investor. Aside from trading currency pairs, you can also trade contract for difference or CDFs. These are interesting instruments in Forex. They allow you to speculate on the currencies' potential future values without you having to buy them.

Peer to peer lending

Although peer to peer lending is new and comes with risks, it can yield higher returns if done correctly. However, If you are unsure about peer to peer lending, you can always hire or ask for guidance from a professional alternative investment management company.  This system works by connecting people who need to borrow money with those who have money to lend. These financial matchmaking sessions eliminate the need for bank intermediaries. As a lender, you can get higher interest rates than your savings account. Borrowers usually pay less than traditional mortgages. You will also be charged for peer-to-peer platform or website services. In an ideal world, however, this system applies to all involved parties. The risk lies with the borrower. If they cannot get a traditional loan and do not have access to peer-to-peer loan opportunities, their credit history is poor or they are not eligible for a regular loan.

Investment portfolio diversification is a great technique to minimise investments risks while maximising returns. Alternative investments are great ways for you to diversify your portfolio, and they provide greater returns than traditional investments. However, it would be best to study them first before you put your hard-earned money on them. Also, you can ask for recommendation or guidance from investors you have experienced in alternative investments.