7 Best Alternative Investment Options To Grow Your Wealth
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There is far more to growing your wealth than investing in stocks. I saw this while working in the brokerage industry. I would speak with investors who were using alternative investment options to supplement their work in the stock market. Alternative investments let you diversify your assets to help you weather storms like the one we currently face.
Most new investors believe the only way to grow your wealth is through stocks, bonds, and mutual funds. While I’m a fan of the stock market, there are numerous alternative investments you can pursue to complement stocks and bonds.
Alternative assets, like stocks, are also a terrific way to create passive income. If that is a passion you want to pursue, you can accomplish that with numerous investment options.
Other alternative investments on our list require more money and effort, but are legitimate choices for nearly anyone. If you want to supplement what you’re doing in the stock market, or are simply looking for good business ideas to invest in, this guide provides some solid options.
What is an Alternative Investment?
You may be asking yourself “What is an alternative investment?” and not know how it differs from investing in the stock market.
That’s a common question with a simple answer. It’s merely something that’s different than what you may typically invest in to grow your wealth. There are countless alternative investment options when you look beyond what you know.
Many alternative assets also require physical ownership. Real estate and art are just two examples of this. However, it’s not required for all alternative investment ideas.
In some cases, alternative investment platforms hold the property for you so you don’t have to manage it.
It’s important to keep a few things in mind when investing outside of stocks. Those are:
- They are not meant to entirely replace what you’re doing in the stock market.
- Diversification is vital.
- Invest only in what you know.
- Due your diligence before investing.
Think of investing in stock market alternatives similar to how you invest in the market. You need to ensure you’re comfortable with the risk and that the investment option meets your needs.
Best Alternative Investment Ideas
Here are the top alternative investment choices to grow your wealth.
1. Investing in Real Estate
Investing in real estate is one of the best alternatives to the stock market. Real estate requires a lot of money and is expensive, correct? Yes, real estate has traditionally been a difficult investing avenue for many investors.
Thanks to crowdfunded real estate you can invest in real estate with as little as $500 in some cases, and you don’t need to be a multi-millionaire. Through crowdfunding, you invest in small amounts without needing to physically manage a property.
Think of it as pooling your money with other investors so you both can invest in a property. That’s a win-win in my book.
Fundrise is one of the best investment platforms for real estate investing. You only need $500 to start investing and you can open either a taxable or non-taxable retirement account.
Fundrise allows you to invest in multiple property types, including:
- Commercial property
- New home construction
If you’re in the market for alternative investment ideas, real estate is an excellent niche to consider.
Are you a wine lover? Investing in wine may feel like an opportunity for old, stuffy individuals, or a market that’s not ripe for expansion.
That’s not the case. I know from speaking with my father-in-law, who is a wine connoisseur, that wine goes up in value. Mind you, this isn’t the $15 bottle you buy from Costco each week, but wine from sought after vineyards.
This is wine produced in Tuscany from popular wineries that produce a limited number of bottles each year. As consumers drink bottles, this results in fewer available bottles, resulting in increased value. This creates an investment opportunity.
Vinovest is a new alternative investment platform that allows you to invest in wine. You buy bottles through the platform and they sit in the Vinovest storage facilities.
This lets you invest without having to physically hold the bottles. If you want one of your bottles to drink, they will ship it to you. Vinovest has a $1,000 minimum investment. When you buy ten cases, they’ll plant one tree to help reduce carbon emissions.
Refer others to Vinovest and you can both get three months without fees.
3. Invest in Farmland
Investing in real estate, just like stocks, is a large market. One specialized sub-niche in real estate investing is farmland. It’s often difficult to invest in farmland, but like other areas in finance, crowdfunding makes farmland one of the more legitimate alternative investment options.
Interestingly, what’s intriguing about investing in farmland is that it’s boring. I like boring investments. Why? Because I don’t want to deal with something I don’t know a lot about.
Farmland lets you make money in two ways: leasing it to farmers to grow crops and the value of the land increasing over time. Though not terribly liquid, investing in farmland is a suitable investment idea if you have a good knowledge base.
If you don’t have the capacity to directly invest in farmland, FarmTogether is a terrific platform to receive access to investments. The platform allows you to directly invest, and they manage the investments through a third party.
You do need to be an accredited investor to invest through FarmTogether. That requires you to have a net worth of at least $1 million, outside of your home, and earn $300,000 as a couple or $200,000 as an individual.
You can invest with FarmTogether with as little as $10,000.
Investing in art has been one of the best alternative investment ideas for years. Like real estate, it’s an opportunity that was typically only available to those with significant means.
Thanks to crowdfunding, that is no longer the case. Instead of buying a one-of-a-kind piece of art, you can purchase a small stake in it. Masterworks is one of the leading alternative investment platforms for investing in art.
The process to invest in art through Masterworks is relatively simple. The platform buys a piece of art and sells shares at $20 per share. The platform then files with the SEC so you are protected by applicable securities laws.
Masterworks charges a management fee of 1.5 percent plus 20 percent of any future profits. The platform holds artwork for seven to ten years.
If you appreciate art, and want to add it to your portfolio, look at Masterworks as a legitimate avenue.
5. Buy Precious Metals
Like real estate, precious metals like gold and silver are common alternative investments. Investors usually view precious metals as a safe harbor investment for those investing during a recession.
There are several ways to purchase precious metals. You can purchase ETFs that hold metals in your online brokerage account. There are also mutual funds that specialize in holding precious metals.
Another suitable route to investing in precious metals is buying bullion from places like Vaulted. There are dealers online you can purchase precious metals from for cost. Another simple way to invest in metals is to purchase junk silver. Junk silver is in coins, often pre-1960s.
There are several routes to invest in precious metals, so find one you like and run with it.
6. Peer-to-Peer Lending
Peer-to-peer lending (P2P) is a popular alternative investment option. Through P2P investing you lend money to another individual. They may need the funds to consolidate debt, or fund a home improvement, or some other need.
You allow the person to bypass a bank, and you receive interest on their payments. LendingClub is a leading P2P platform, and they allow you to filter out investment opportunities to find good investment options.
If you like the idea of helping people, P2P lending is an excellent way to help out those in need who might not be able to receive funds through more traditional resources. As an investor, LendingClub claims anywhere from a 7 to 12 percent return, which is attractive.
While P2P lending provides a good opportunity, it is not free from risk. Just a few of the risks involved with P2P lending are:
- Risk of default through poor note diversification
- Platform bankruptcy
- Rising interest rates
- Poor national economic climate
P2P has been around for years, and is a good way to diversify your investing in small amounts.
7. Invest in a Business
The last choice on our list of alternative investment ideas is investing in a business. Running your own business takes significant time and commonly involves a lot of stress,
You can avoid that through investing in a business. And, at times like we’re currently facing you want to invest in recession-proof businesses.
Angel investing is one way to accomplish this, but crowdfunding is often a better choice for smaller investors.
Crowdfunding firms are available online, or you can ask friends or colleagues for local opportunities.
Like other crowdfunded investments you own a partial share of the business. This helps the business owner have access to funds to run their business while still maintain control of the business.
As the business grows, your return increases. On the flip side, if the business struggles you risk loss. If liquidity is a concern for you, this may not be your best choice, but if it’s not, you can search for good business ideas to invest in to diversify your investments.
Investing is a vital part of growing your net worth. While the stock market is suitable for most, it’s not the only opportunity to grow your wealth.
The best alternative investment options let you supplement what you’re doing in the market and help provide added security when the market is down.
Other than investing in the stock market, what alternative investment options do you pursue? Would you ever invest in P2P lending or farmland? What do you think holds people back from pursuing investing in something non-traditional?
Other investment options to consider
John is the founder of Frugal Rules, a dad, husband and veteran of the financial services industry whose writing has been featured in Forbes, CNBC, Yahoo Finance and more.
Passionate about helping people learn from his mistakes, John shares financial tools and tips to help you enjoy the freedom that comes from living frugally. One of his favorite tools is Personal Capital , which he used to plan for retirement and keep track of his finances in less than 15 minutes each month.
Another one of John's passions is helping people save $80 per month by axing their expensive cable subscriptions and replacing them with more affordable ones, like Hulu with Live TV.
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