7 Alternative Investment Ideas That You Should Try Out
Introduction
When I say alternative investment ideas, I am actually referring to a type of investment which is unconventional. As opposed to conventional investment like stocks, cash and bonds. The alternative investment includes things like managed futures, derivatives contracts, real estate, hedge funds and commodities. In this article, I will share with you seven alternative investment ideas which you can consider for yourself.
Private Equity
“The number of private companies is much higher than public companies and the majority of these companies take on investor capital.”
The number of private companies is much higher than public companies and the majority of these companies take on investor capital. The term “private equity” is a broad term and it essentially covers all the aspects of the private capital markets. Different kinds of private equity firms specialize in different investment strategies. In most cases, a private equity firm takes capital from institutional and non-institutional investors and uses it to raise funds. The funds are subsequently invested in profitable private companies. Upon an exit event, the capital is ultimately returned back to the investors.
Direct Investment
As an investor, you can invest in private organizations and start-ups. This option is far more worthwhile compared to investing in a private equity fund. Angel investing can provide you with good dividends; however, the risk is also high as start-ups so often fail. When it comes to a private organization or a company, investors are usually sought out privately.
Venture Capital
Venture capital is basically a subset of private equity which specializes in start-up or early stage investment. Venture capital falls more into the category of risky assets; however, it also has the ability to produce returns that are outsized in nature. This ultimately depends on the success of the liquidity event. The venture capitalists who invested in companies like Facebook, Twitter and Google are today earning highly valuable returns on their investment.
Real Assets
Real assets are basically tangible or physical assets that have an intrinsic value. Common real assets are oil, commodities, agricultural land and real estate. Collectable and luxury goods also fall into this category. Investors can purchase real assets directly or they may spend through a fund which specializes in real assets.
“Hedge funds are pooled funds that can be invested in a variety of asset types and strategies.”
Hedge Funds
Hedge funds are pooled funds that can be invested in a variety of asset types and strategies. The people who specialize in hedge funds invest through different financial instruments and styles. Some well-known hedge fund strategies are arbitrage, equity long short, macro-trends and distressed assets. Hedge funds are very different from venture capital and private equity. They have higher redemption frequencies as well as liquidity. The phenomenon actually contributes to investors getting more money at the end of the day.
Funds Extracted From Funds
This basically refers to vehicles that develop funds so that they can be invested in other investment funds. Diversification is gained by investors as they invest in multiple asset classes, managers and strategies.
Private Debt
“Using credit to invest is also not that bad an option when it comes to alternative space.”
Using credit to invest is also not that bad an option when it comes to alternative space. Just like equity, private placement bonds are not traded or issued publicly. There is no requirement for these bonds to be credit rated by an agency. In the majority of cases, mezzanine debt or promissory notes are utilized for the financing of a private company, providing investors with a stable cash flow.
Alternative Investment Benefits
Hopefully you will find the above-mentioned ideas useful. I’m going to share some basic advantages that are associated with alternative investing. The benefits are as follows:
- These investments get their market volatility mitigated.
- They have a much lower transactional cost.
- The overall tax benefits are mind-blowing.
The Final Word
These are just a few of the most common alternative investments that you can think about. The alternative investment is a huge subject in itself and you can learn more about it by taking a look at this handy guide written by Aspire-Canada.
Are you thinking of putting any of our ideas into practice? Have courage and start investing to achieve the long-lasting benefits of alternative investments.