Alternative Investments: What You Need to Know
Wise investors are looking to move beyond stocks, bonds and cash.
They are looking for a way to diversify their portfolio and alternative investments are certainly worth considering.
The reasons for moving into an alternative investments include a need to diversity a portfolio, specific tax incentives or an unusual opportunity – see the examples below.
Read on to discover how alternative investments make sense for your portfolio…
What is an Alternative Investment?
Alternative investments are assets that fall outside the traditional investment categories.
Traditional means stocks, bonds, mutual funds or exchange-traded funds.
Alternative investments include venture capital or private equity, commodities, derivatives, currencies, structured settlements, managed futures, real estate, hedge funds and real assets.
You should note that typically, alternative investments have no correlation to conventional investments.
This is an important characteristic that you may feel to be particuarly relevant right now.
Types of Alternative Investments
Here are a few you may want to become more familiar with.
Private equity means funds or investors invest in private companies. These vehicles may well include start-ups and venture capital and help with financing through the growth of an organisation. These investments can include a wide range of private equity markets. Private equity firms will typically raise funds from institutional and non-institutional investors, which they can then use to invest in a specific investment strategy or private firm.
Venture capital is a subset of private equity that specializes in investing in the early, or growth phase, of a company. A firm will raise funds from high net worth or institutional investors to then invest in companies that are at different funding stages. Venture capital is extremely important to start-ups and companies in their early funding stages because they have no revenue or little to no operational history.
Funding this type of investment can be a risky endeavor but it can yield high returns: Investors who put money into Google, Facebook and Twitter have enjoyed exceptional returns.
Start-up and private firm investing
This type of investing is sometimes referred to as angel investing. Angel investing is a high-risk, high-reward investment strategy since not all start-ups succeed. Is there a way to mitigate this risk somewhat? We suggest there is.
We highlight here an investment opportunity that allows you to invest in the next wave of fast growth technology businesses and allow you to become an early and growth stage investor in leading global technology companies.
This offer is from one of the leading early stage investors in technology in the UK, having already raised over £30 million from international family offices and institutional investors.
A hedge fund is an investment partnership that pools assets from all investors involved. Hedge fund managers raise capital to invest in different financial instruments and strategies. Hedge funds are different from private equity and venture capital investments because they tend to invest in public equities, which means investors can distribute their funds more often. We highlight an unusual BITCOIN hedge fund below.
In 2012 this company created the world’s first Bitcoin hedge fund. One year later, with assets reaching $100 million, the fund ranked as best performing in the history, according to Bloomberg.
Real Estate / Property
A Real estate investment trusts (REIT) is a company that either owns income-producing properties or owns the mortgage on those properties. Typically, REITs specialise in a certain type of property, although you can also find hybrid trusts that offer a mix of property types. The REIT sells shares to investors, which you can purchase directly from the company or through an exchange-traded fund (ETF) or mutual fund. Check this recommended property fund.
Or have a glance at this Cyprus property guide. You can become a citizen of Cyprus, a European Union Country, by investing through the Cyprus Investment Programme. ‘Second citizenship’ can give you very lucrative tax benefits as well as providing a host of other advantages for you and your family.
And theres more
Another consideration is that these investments have low correlation to stocks, bonds, mutual funds or other traditional investments.
This means that these investments can move counter to or in the opposite way of conventional securities. That feature makes them suitable for increasing your diversification within a portfolio, often a boon in a volatile market as we have at the moment. Tangible assets such as precious metals, oil or real estate may also aid the investor to hedge against inflation.
While many alternative investments are often limited to accredited investors, institutional investors or those with high net worth, there are also options for non-accredited investors. Alternative mutual funds or ETFs are available for individual investors.
If you’re interested in investing in alternative investments, speak with us to discover all of the options available.
The Alternative Investment Platform enables you identify the highest performing, the most secure and most promising alternative investment opportunities.