Offering different values and rate of returns, alternative investments are complex non-traditional investment assets that do not fall under stocks, bonds, and cash. They can be in the form of tangible assets such as equity, real estate, hedge funds, and financial derivatives, or personal possessions like precious metals, antiques, wines, coins, and commodities.
Compared to traditional investments, the liquidity levels of the assets in alternative investments are quite low. For example, real estate properties are not easily sold and converted to cash. Likewise, there are few buyers of antique pieces.
Non-traditional investment assets are complex in nature and have different economic values. Due to the difficulty in determining their real value, these assets are often susceptible to scams and fraud especially because government regulation is largely absent. However, serious threats can be avoided by observing proper assessment process.
An 1894 Karl Benz’s Velo antique French bicycle is an example of assets with indefinite economic value. This item has great value but proper pricing scheme is unknown.
When it comes to investments, placing funds in more than two investment tools reduces risk levels. In addition, diversifying a portfolio is likely to maximize yields. Consequently, many investors capitalize on stocks, mutual funds, real estate, and jewelry at the same time.
Being the most secured form of alternative investment, real estate assets are residential or commercial properties which are available for either a short or long-term scheme. Investors may buy, sell, or rent them to the market. However, the problem with real estate is that it requires large capitalization, hefty tax payments, and sizeable maintenance budgets.
This type of asset is common among sophisticated investors. It typically requires significant asset levels of at least 1 million dollars as the initial outlay. Hedge fund investors have high-risk tolerance.
Venture Capital. Venture capitalists help startup companies or small businesses grow and expand. More often than not, banks and other financial institutions drive away these potential business owners.
Business Franchising. You can own a business through a franchise, wherein the franchisee abides by the standard procedures and branding guidelines of the franchisor.
Whole life plans, annuity insurance, and retirement funds are alternative investment assets.
Requiring minimal capital, many investors buy and sell different currencies through the foreign exchange (ForEx). The forex market does not sleep, so the opportunity for growth is high and fast.
By venturing into these types of assets, you can:
There is no magic equation when it comes to investments. Like in any other way of making money, persistence is required in order to succeed. But as always, a well-informed decision can truly make a difference. If you need expert advice on growing your money, get in touch with us.
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