Beyond the Stock Market: Alternative Ways to Build Wealth

Investing in the stock market has proven to be an incredible way to build wealth. Investments in alternative assets might be an excellent addition to your portfolio for some investors, but there are other ways to invest too. Any investment not traded on the stock market or bond market is considered an alternative investment. Here are some pros and cons of investing in alternative assets.

• Real estate
• Crowdfunding
• Peer-to-peer lending
• Commodities
• Hedge fund investing
• Cryptocurrency
• Art

 

Taking a closer look at each of them.

1. Real estate

Alternative investments include real estate that is not your home but generates passive income. Real estate investment can create reliable cash flow streams, although buying property is costly.

2. Owning rental property

You can earn a profit by renting a residential or commercial property. If your tenants are reliable, maintenance and repairs are less of a concern. You can hire a property management company if you want to own real estate but need assistance managing it. As a management company, you would not only give up most of your rent but also be responsible for repairs. Despite this, you would not be liable for overseeing day-to-day operations, collecting rent, or managing your property.

3. Real estate development and resale

It is more profitable to purchase and improve properties and resell them than to collect rent, and it is risky to flip real estate due to the specialized skills and experience required. The processes involved in purchasing, improving, and reselling a property are time-consuming, expensive, and stressful.

4. Crowdfunding

Crowdfunding aims to raise small amounts of money from many investors to fund a project or venture. The majority of crowdfunding takes place online through digital platforms.

5. Equity crowdfunding

Investing in start-up companies through equity crowdfunding is called equity crowdfunding. Investing in growing companies is easy, thanks to platforms like GoFundMe, Kickstarter, and Patreon. It is possible to commit capital in debt and equity in crowdfunding companies. Crowdfunding requires time and effort, as you must thoroughly research and understand the companies you invest in. Additionally, you need to understand the crowdfunding platform’s fees.

6. Real estate crowdfunding

Real estate assets can also be crowdfunded. Plenty of real estate investment platforms, such as CrowdStreet and Fundraise, are available to investors. Before investing any capital, you must fully understand the property assets, just as you would with equity crowdfunding.

7. Peer-to-peer lending

You run the risk of not getting money back whenever you lend it. If you need to repossess a peer-to-peer loan, you cannot because it is an unsecured loan. Diversifying your money across multiple loans with different risk profiles, however, reduces the overall risk of this type of investment.

8. Commodities

Many commodities include agricultural commodities like wheat and corn, energy commodities like natural gas, industrial metals like steel, and precious metals like gold. Those with an appetite for material things focus on gold and other precious metals since most investors cannot own most commodities in their physical form.

9. Hedge fund investing

It is common for hedge funds to make large directional bets on the stock market, but they also invest in sophisticated forms of securities to mitigate losses. Losing all your money is possible when investing in a hedge fund, but you can also gain exposure to a profitable investment strategy.

10. The cryptocurrency market

Blockchain technology enables cryptocurrency, which is digital money. You can easily buy cryptocurrency like Bitcoin (CRYPTO: BTC) using an exchange such as Coinbase (NASDAQ: COIN). It is easy to acquire cryptocurrency, but investing in this emerging alternative asset is risky. Many emerging digital currencies are out there, and it is impossible to determine which ones will be widely adopted due to their price volatility.

11. Art

The pleasure of owning something visually appealing can be acquired by investing in art. Artwork only sometimes increases in value, and you must store and maintain it securely.

Are alternative investments suitable for you?

Alternative investments are available to investors with high incomes or high net worth. Generally, you must be an accredited investor if your net worth, excluding your home, is more significant than $1 million or your annual income is greater than $200,000. Alternative assets often require a lot of capital, and the investments can be illiquid, making them difficult to buy or sell. The majority of online marketplaces for alternative investments have multi-year holding requirements. Once you’ve considered the above elements, you can identify the most attractive alternative investments.