Stocks and bonds are easy to access, widely understood, and can offer strong long-term returns. That is why most investors start with them. But having all your eggs in these two baskets can be nerve-wracking when the markets get rocky or interest rates fluctuate.
Thankfully, you can explore alternative investments. These assets do not always move in step with the stock or bond markets. Also, they can help smooth out your portfolio’s ride while opening up new opportunities for growth. Investments beyond stocks and bonds include the following:
Real Estate
Real estate has been a go-to option for diversification. Rental properties can offer real income. Real estate often holds its value over time, especially during inflationary periods.
But you do not have to be a landlord to invest in real estate. Real estate investment trusts (REITs) let you invest in commercial or residential properties without hands-on management. These publicly traded options offer exposure to property markets with less hassle and more liquidity. You can also explore real estate crowdfunding platforms that allow you to invest small amounts in large developments, giving you access to deals that used to be available only to high-net-worth individuals.
Commodities
Gold, silver, oil, and agricultural products offer another layer of protection against inflation and market swings. Gold, in particular, has been a safe haven asset during times of economic uncertainty.
You do not need to buy physical gold bars or store barrels of oil in your garage. You can look into ETFs that track the price of various commodities, making it easy to include them in your portfolio without dealing with the logistics. Commodities can help offset losses when traditional assets struggle because they often behave differently from stocks and bonds.
Private Equity and Venture Capital
Private equity and venture capital can offer exciting possibilities if you are comfortable with a little more risk and a longer time horizon. These involve investing in private companies, which can be either startups through venture capital or more established businesses through private equity funds.
These investments are usually less liquid and can take years to pay off, but they offer the potential for higher returns. Some platforms now allow everyday investors to participate in private market deals with smaller minimum investments than in the past. This corner of the investing world is not for everyone, but you might want to explore it if you want exposure to the next wave of innovation and growth.
Cryptocurrencies
Bitcoin, Ethereum, and other digital currencies have made headlines for their rapid gains and steep drops. They are volatile but offer a new asset class that does not directly correlate with traditional markets.
You should treat crypto as a speculative part of your portfolio. Thus, it should be something that could pay off big but should not be counted on for stability. Many investors allocate just a small percentage, such as 1–5%, to this area.
Collectibles and Tangible Assets
Art, vintage wine, classic cars, or rare coins can also be considered investments. These alternative assets often gain value over time and do not fluctuate with financial markets. But they require more expertise to assess value and can be harder to sell quickly.
New platforms have made it easier to invest in collectibles by offering fractional ownership. This means you can invest in a piece of valuable artwork or rare item without needing to spend six figures.