We all know just how unstable the stock market is, so unsurprisingly most investors nowadays are looking for more secure ways to invest their money. And that’s why o called alternative investments have become so popular recently. So what’s exactly an alternative investment? Well, according to Investopedia, it’s any investment that doesn’t involve the traditional assets – bonds, stocks and cash.
In the past, alternative investments were more popular among richer, high-net-worth investors because some of these investments like fine art for example, require large amounts of money. Also, they are “more liquid” than standard investments, which means they require more time to be cashed in. Despite that, there are some benefits to alternative investments… Read on to find out which ones…
Alternative Investment #1: Rare Art
For starters, we have something that has some history behind it – fine and rare art. This can be a great investment because the price variations in the fine art market don’t actually reflect the highs and lows of traditional stocks and bond.
According to Daniel Gross, during the second part of the last century, the price of art increase with an average of 10.5% every year. And while the stock and the art markets don’t peak at the same time, the art market experiences its own sudden shift that can make investing a bit risky at times.
For instance, we had the fine art boom in the 80s because of the surge of investors from Japan and once again in the middle of the previous decade. However, even the art market wasn’t able to escape the global financial crisis back in 2008.
Now, in order to start buying painting or sculptures from top galleries in the country, most experts advise that you should start with at least with 10,000 dollars. Although, as this Telegraph article mentions, you can find a number of art pieces at Saatchiart.com with costs from 100 to 30,000 dollars.
Alternative Investment #2: Fine Wines
If you’re looking for something less risky, you can try investing in expensive wines. According to Fine Wine PPC research, you can expect to make a steady return somewhere between 6% and 15% yearly. Prices of certain wines vary from year to year, but some sought-after wines tend increase in price.
Collectors of fine wine are notoriously choosy, which means if you want to invest in wine, you have to stay on top of things in order to know which vintage wines will make a good investment. Luckily, you have sites like Wineprices.com that can help you track prices of certain wines.
However, no matter your choice, if you want to make a sizable return, you’ll have to invest in large quantities of wine. Furthermore, you’ll have to invest some money into wine storage, because your investment will have to be stored in a temperature controlled environment.
And that’s actually not the end of your work – remember, wine collectors are incredibly picky. Therefore, you’ll have to spend some money to insure your collection and keep precise purchase records in order to satisfy any potential buyers.
Alternative Investment #3: Rare Coins
If you’re interested in buying coinage for investment purposes, there are two specific types of coins you need to know about. The first one you should know about is bullion coins. They are minted by governments and are usually made of gold, however there exceptions.
Moreover, these coins aren’t collectable, which means they don’t derive their value from rarity. You can easily buy bullion coins through gold dealers for a price similar to the regular price of gold. As CBS News reports, the price of coins will be marked out when you buy it and marked down when you sell it.
And the second type of coins you should know about is collectible or rare coins. Unlike bullion coins, these ones aren’t valued for their weight in precious metals, they are valued for their collectability. Some of the more popular ones include Buffalo Nickels Morgan and Walking Liberty dollars.
You have to be aware that mint condition coins are always valued more than heavily-worn coins. Certain years of coins have a lot fewer minted-condition coins, which makes them rarer and in turn more valuable on the market. You just need to find a reputable dealer to inspect your coins and give you a certificate of authenticity because there are a lot of forgers in circulation at all times.
The Bottom Line
Of course, there are other options out there too – for instance – you could potentially try peer-to-peer lending with a tool like Lending Club. However, we have to warn you, if you invest a small percentage of your portfolio in them, the returns probably won’t be so great. Although some people had luck with 1% of their portfolio invested in the past.
In any case, you need to know what are you getting yourself into, which means you need to check the ROI of your investment, its long-term performance, and of course, its standard fees. 2% is typically a fee for these million dollar funds. However, if you acquire an ETF the fee probably won’t be that high – it will probably be less than 1%.
The bottom line is this, you have to be sure that your portfolio is balanced in something other than bonds and stocks. Everybody wants a return, and in some cases, it means taking more risks. But that’s the beauty of a well-balanced portfolio – if one area of your portfolio fails by any chance, another area will be there to have your back…