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
- Peer-to-peer lending
- Hedge fund investing
Taking a closer look at each of them.
1. Real estateAlternative 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.
Did You Know? A 1031 exchange can also be considered an alternative investment because it allows investors to diversify their real estate holdings and increase their returns. Instead of selling a property and paying capital gains taxes, investors can use the proceeds to purchase a new property, which may offer more significant potential for appreciation and rental income.