Types Of Alternative Investments Everyone Should Know

Investment is a great way to make money without lifting a finger! All you need is your capital and the best investment option. But the question is- What is the best investment medium?

Time-tested mediums like fixed deposits, shares, gold, and cash are often the first preference. But you may be missing out on the big profits that the best alternative investment opportunities can offer. So, we have listed the top 8 alternative investment options that can make you a fortune if you act quickly! Sounds interesting? Let’s begin!

What Are Alternative Investments?

An alternative investment is an alternative to investment plans in ‘conventional’ assets. Conventional categories include cash, stocks, and bonds. And alternative investments include all other investment options and types such as:

• Private equity
• Venture capital
• Managed futures
• Peer-to-peer lending
• Hedge funds
• Commodities
• Collectables
• Real estate
• Structured products
• Derivatives contracts

The Top 8 Alternative Investments

Let us now explore the pros and cons of the 8 best alternative investment options that will help you gain impressive returns. Here are the most profitable yet relatively safe alternative investment opportunities you should consider:

Private Equity

Private equity funds invest in companies not listed on public exchanges. These companies cannot raise capital from the public as they are not listed. But you can make private equity investments in them and earn as they grow.

Investing in profitable businesses through private equity can bring you very high returns. But the investment period is very long, and the risks are high if you make the wrong choice.

Commodities

Commodities are tradable assets such as oil, grain, metals, energy, and agricultural produce. They can be bought and sold quickly and protect you against inflation.

The downside is that commodities markets are very susceptible to market instability. So, you must make well-informed decisions to lower the risks of loss.

Hedge funds

Hedge funds collect money from investors and invest it in equity markets or international/domestic debt. They usually offer high returns to investors. However, hedge fund managers charge a high management fee of 2% to 20% of your total annual returns. The risk involved is also significant.

Real estate

Real estate investments usually need large sums of money. But real estate investment trusts allow you to invest in real estate with as little as Rs. 5000!

Using these methods, you can have fractional ownership in grade A properties or buy entire properties if you have the funds. But, real estate is a long-term investment plan with high taxes and maintenance costs.

Venture capital

Venture capital funds invest in young startups that need capital to develop themselves. You can earn large returns if the fund invests in successful startups. And this is especially true in a large startup ecosystem like India.

However, venture capital investments always carry the risk of losses. And this is because even the best ventures can fail in the uncertain business world. Moreover, you won’t have control over business decisions while investing in a company.

Collectables

Collectables include a wide range of unique physical assets that are likely to appreciate over time. Investing in collectables involves purchasing and maintaining special items until they are sold at a much higher value. These include items such as:

• Fine art
• Rare wines
• Vintage cars
• Mint-condition toys
• Stamps
• Coins
• Other artworks or antiques

Collectables can bring you very high profits. However, there won’t be any regular income from the items and you would have to pay for their maintenance regularly.

Peer-to-peer (P2P) lending

Modern P2P lending involves direct lending between peers without including banks. And this means lenders and borrowers can earn high interest using authentic P2P lending platforms. Currently, these platforms offer an impressive 18-22% net returns.

On the flip side, P2P lending involves the risk of the borrower defaulting. So, you must research and take expert help before going for P2P lending.

Angel funds

Angel funds are investment funds that collect money from several investors and invest it into new businesses. Investors receive high dividends once the new business grows and becomes profitable.

Unlike venture capital, angel funds involve direct individual investments without any intermediary. Hence, they allow better control over the use of your investment. However, angel funds are subject to unpredictable business risks. They also involve higher complexities and higher losses than venture capital.

When Should You Prefer Alternative Investments?

Alternative investment plans are usually more profitable, stable, and less regulated than traditional mediums. They are a great option to improve returns and diversify your investment portfolio.

However, you must have high expertise, large capital, and time to spend. That’s because alternative investments involve higher complexity, higher fees, and lower liquidity. They are also less predictable and less transparent as compared to traditional investments.

So, you should go for alternative mediums only if you have the required capital backed by proper expertise or guidance. You may also approach financial consultants to make the best alternative investment options that provide higher returns at minimum risks.

Summing up

This blog has covered the best alternative investment options that offer good returns without high risks of loss. We saw that the 8 best alternative investment options are-

• Hedge funds
• Private equity
• Commodities
• Real estate
• Venture capital
• P2P lending
• Angel funds
• Collectables

Each option has its unique pros and cons. And it is up to you to build a portfolio by investing in the correct mediums. But alternative investments can get tricky and hurried decisions can land you in a financial fix! So, you must check the pros and cons and verify the terms before investing in any medium.

Do you still have doubts or concerns? Solve them by taking expert advice from a trusted financial agency like Piramal Finance! The experts at Piramal will help you make the best alternative investments easily so you can make the most of your savings.