When you think about investing, your first thought is likely buying stocks. If it is, you’re not alone. Believe it or not, more than 50% of households in the United States invest at least some of their money in the stock market.
Though stocks are a great way to increase your income and build your savings, they’re not without their risks. When companies underperform, your stock returns will be lower.
The best way to hedge against loss and underperformance of your stocks is to diversify your portfolio. Alternative investments make that diversification both fun and lucrative. Here are a few great options to consider.
1. Real Estate
One of the best ways to diversify your investment portfolio with non-stock investments is to buy real estate. Buying investment properties allows you to create a sustainable and predictable source of income by renting the properties to long-term tenants.
Once the property increases in value, you can always sell it for a profit and use the proceeds to buy additional properties or other investment types.
If the thought of being a landlord isn’t something that strikes your fancy, you can always invest in real estate portfolios. These portfolios allow you to contribute a much smaller amount of money while letting you still receive a portion of the profits. The size of your profits directly relates to the amount you invest.
The more money you contribute, the more you’ll stand to earn.
2. Precious Metals
Investing in precious metals like gold, silver, and platinum are great ways to change up your investments. By doing so, you’re investing in an option that has a fairly predictable value that rarely ever goes down.
That means you’ll be able to sell your precious metals when prices are up but won’t have to worry about losing tons of money in a volatile market. This is because the values won’t fluctuate the way stocks, bonds, and other investments do.
3. Crowdfunding and Peer-to-Peer Lending
Instead of starting a business and investing your personal money and time into the process, you can diversify your portfolio by investing in someone else’s.
Look for a list of private equity options and choose companies or industries you’re passionate about. As the companies grow and earn profits, you’ll receive a set percentage on a regular basis. If you can, invest in funds with several startups rather than just a single business.
These companies use your investments to bring their ideas to life. You’re essentially giving a startup the funds they need to grow while sharing the liability with other investors. You won’t have to worry about losing tons of money because a single company underperforms.
4. Fine Art
Another great alt investment option that will let you express your sense of style is fine art. When you invest in artwork, you’re supporting the local economy and helping it grow. But more importantly, you’re investing in work that will likely grow in value over the years.
The amount of return you see on each piece of artwork you buy largely depends on the type of art you buy and the artist that made it. Like many alternative investments, it’s best to buy artwork that you love and that adds value to your home.
If you’re not wild about the art, don’t buy it, even if you think the artist might grow in popularity.
Cryptocurrencies are quickly becoming some of the most popular alternative investments on the market. These currencies are digital forms of cash and have values that change by the hour.
This makes them risky and there’s no guarantee that you’ll be able to make a profit or sell for what you paid for each share.
If you’re considering investing in cryptocurrencies, do your research. Look at the way each one performs on average throughout the year. Then, only invest what you’re comfortable with.
Remember, cryptocurrency investments should never make up the bulk of your alternative investment portfolio. You stand to make great returns, but the unpredictable nature of these currencies makes the risk of loss very high.
6. Certain Collectibles
You won’t likely get rich quick with these investments, but they can be a great alternative to things like the stock market. If you’re considering investing in collectibles, try to follow your passions.
For example, if you’re a huge fan of baseball, consider collecting cards or memorabilia. If you love trading card games, look for high-value cards in your chosen game universe.
Whatever it is, as long as you get some joy out of the collection, it can be a worthwhile investment.
Keep in mind that investing in collectibles isn’t something you should do to make a fast buck. You should only pursue this option if you’re passionate about the thing you’re collecting and have a general idea of what’s considered valuable.
When you invest in commodities, you’re investing in physical goods, not shares of a company. The types of commodities most often traded range from crude oil and copper to coffee and wheat.
These investments have values that fluctuate based on consumer demand. While those values will change, they’re still fairly stable.
Why? Because almost everyone needs these commodities in some form to live a comfortable life.
The best way to invest in commodities is through futures markets. Ask your financial advisor or investment platform for guidance on which futures are right for your personal situation.
Diversify Your Portfolio With These Alternative Investments
If you’ve been looking for ways to diversify your portfolio but don’t want to stick with the standard stocks and bonds, keep these alternative investments in mind. Before you invest your money and time in them, think about your goals. This will help you choose investments that make the most sense for your needs.
As long as you use alt investments as supplemental investments, you’ll protect yourself against loss and increase your chances of a sustainable income.
Looking for more tips and tricks to help you build your income for the long term? Check out our latest posts.