Investing

Choosing The Best Alternative Investment

Women looking at art and antiques

Investment doesn’t always have to mean pension funds or a stocks & shares ISA.

There are lots of other options out there for those who want to be a little more adventurous. Alternative investment is a broad term, referring to anything that sits outside the mainstream market. It might be a physical asset – fine art or fine wine, for example – or it could be a financial investment such as cryptocurrency. It could even mean using your cash to help grow a business, through angel investment or a crowdfunding opportunity.

This is one of the things that’s so exciting about alternative investments – they can be tailored to match the personality of the investor. With stocks and shares it’s common for people to be quite detached from their fund, perhaps not even knowing exactly where their investments are. With alternative investments you can get a little more stuck in, choosing a market that interests you.

Weighing up the risks and benefits

When things go well, many alternative investments have been known to outperform the stock market, meaning that you get a better rate of return. High returns are great, but they also come with more risk – which means that you need to decide how brave you want to be when you’re investing.

Those who are earlier in their investment careers can typically afford to take bigger risks, while older investors or those who will need the money sooner often choose to use a little more caution.

If you already have some of your money invested via more traditional routes, then adding some alternative assets to your portfolio can also be a good way to diversify.

Examples of alternative investments

  • Cryptocurrencies such as Bitcoin and Ethereum. The growing popularity of crypto investment means that it’s easier than ever to buy in and start earning money. It has gained a huge following, not least due to the large returns that many investors have seen over the past few years. It’s also very volatile, so we would recommend doing some solid research before you start.
  • Crypto trading. Fans of digital currencies could also consider trading crypto through a platform such as bitcoin blueprint. This involves using software to analyse the performance of different currencies, and making trades accordingly. The software can also trade automatically on your behalf. Crypto trading uses the market volatility to its advantage by betting on whether the prices will rise or fall.  
  • Real estate. Hardly an unusual asset, but still part of the alternative investment playbook. There are lots of different ways to invest in property, but if you choose to buy directly then make sure you consider the practical work involved with flipping a house or becoming a landlord.
  • Art and collectibles. Unlike many other types of investment, buying art or other collectibles such as antiques gives you something to physically own, which can be displayed or admired until the time comes to sell. Of course, you also need to consider the security and preservation of your purchase!

Which one is right for you?

Each alternative investment has its own risk/reward profile, so a big part of choosing your investment should be deciding how much risk you’re willing to take on. When considering how to invest, you should also think about the associated fees. For instance, there are a range of costs associated with buying property which you wouldn’t incur through a more straightforward investment. You could also choose to invest in a mix of different assets with the aim of benefiting from their various strengths.

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