Consider the reasons to look for alternative investments today. Diversifying into alternative investments can help investors deal with some of the risks associated with …
Consider the reasons to look for alternative investments today.
Diversify into alternative investments can help investors deal with some of the risks in the stock and bond markets today, including inflation and a lower yield due to a low interest rate environment. Alternative assets, or non-traditional investments, go beyond stocks and bonds. They can include real estate, physical commodities, private debt, and private equity. While the alternatives come with their own risks – like illiquidity, less regulation, and in some cases higher entry costs – the risk-return trade-off may be worth it. While some alternative assets are more accessible than others, today’s investment landscape offers opportunities to invest in the private markets, or unlisted assets. Here are seven alternative investing ideas to consider.
In today’s economic climate, where investors worry about high inflation, you may want to consider allocating a portion of your portfolio to gold. This asset class is historically known as an inflation hedge, and gold investors may be able to protect their purchasing power since the precious metal tends to earn more than the rate of inflation in the market. over time. There are many ways to invest in gold, including investing in gold stocks such as Barrick Gold Corp. (ticker: GOLD), Sibanye Stillwater Ltd. (SBSW) and Newmont Corp. (NEM), or gold exchange-traded funds, including SPDR Gold shares (GLD) or iShares Gold Trust (AIU). You can also invest in physical gold coins or bullion. Gold has a low barrier to entry which means there is no minimum requirement to start investing in the precious metal. Unlike other alternative investments such as real estate, gold is a liquid investment, which means that it is easy to buy and sell. You can easily enter and exit gold investments since investors can access it in the public market.
Crypto-currencies constitute a growing market of great interest to individual investors. Crypto markets are easily accessible to almost any investor through cryptocurrency exchanges such as Coinbase, Binance, and Gemini. In recent years, digital currencies have shown little to no correlation with traditional assets, making them a suitable alternative investment to achieve diversification, depending on your tolerance for risk. Among the different crypto-currencies on the market, Bitcoin has the longest track record and the best brand. As cryptocurrencies like Bitcoin gain in popularity, the case for adoption and utility grows stronger. Bitcoin is also considered to be a kind of digital gold, holding a type of value similar to the precious metal. Additionally, the blockchain technology that powers cryptocurrency is seen as the technology of the future that can help innovate and streamline business operations and processes. Crypto and the technology that goes with it is a promising area in alternative investments.
Immovable is a traditional alternative asset that is often allocated alongside stocks and bonds in an investment portfolio. These investments – such as residential homes, commercial properties, or real estate investment trusts – are common forms of alternative investments. Real estate is considered a hedge against inflation because as consumer prices rise, the value of real estate increases. As a result of the pandemic, the housing market across the world is experiencing a shortage of residential homes for sale as there is high demand among buyers. This has resulted in an increase in the value of homes, a positive point for investors who have devoted themselves to this real estate asset.
In a volatile market environment, investing in commodities can be used in a market risk management strategy, as they are considered an asset class with low correlation with equities. In addition, commodities are a traditional hedge against inflation. As the price of goods and services increases in an economy, commodity prices follow. Commodities are an asset accessible to almost any investor, unlike other alternative investments which may require accreditation. You can easily trade gold, agriculture, energy stocks, and other commodities on public exchanges, usually in the futures market. Investors can also gain exposure to the commodities markets through an exchange-traded fund such as the First Trust Global Tactical Commodity Strategy Fund (FTGC).
Ad hoc acquisition companies, or shell companies with blank checks, are created specifically to raise capital through an initial public offering and buy a business. When you invest in an SPAC, you want to have complete trust in the management team, because they are the ones who find the investment opportunity on your behalf. SAVS offer investors the possibility of accessing investments on the private market, historically reserved for institutional or accredited investors. Although individual investors can invest in SPACs, they can only do so when they are available on the public markets. As more market participants look for ways to increase returns, the demand for alternative investments such as SPACs may increase. This is because when investors embark on an investment that ultimately goes public at ground level, the return can be much higher than the returns that investors normally see in the public market.
Another alternative investment is private debt, sometimes referred to as private credit. Private debt is debt held or offered to private companies – and some investors may want to access it. These offers tend to have little correlation with public procurement. Investors should be aware of the risk-return profile of private debt markets. Because private debt is an illiquid investment, you cannot easily enter and exit the transaction. However, this unique risk tends to be accompanied by more attractive returns on investment, higher than those of the public market. Investments in private debt include direct loans, distressed debt and mezzanine loans.
Direct loan is a type of private debt. Direct lenders include non-bank entities that provide capital to businesses in the form of a loan. These companies tend to lend short term capital which provides debt to investors in this area of ââthe private market. As these operations are carried out outside the public market, direct loans have little correlation with traditional investments, which allows portfolio diversification. For investors who are qualified and comfortable taking more risk and looking for more return, this subset of private debt could be a suitable investment option.
Seven alternative investment ideas:
– The PSPCs.
– Private debt.
– Direct loan.
More American News
7 alternative investments that could suit your portfolio originally appeared on usnews.com
Update 02/11/21: This story was posted at an earlier date and has been updated with new information.