Not that investing in the stock market isn’t a great way to build wealth, but there are also other ways. Alternative investments can be a smart way to diversify your portfolio — some may hold steady returns, whereas some can even beat the market.
In case you don’t know, alternative investments are any securities aside from cash, stocks and bonds. In most cases, they’re not regulated by the U.S. Securities and Exchange Commission (SEC) but have the potential to earn high returns for the investor.
That’s not to say that any of the following alternative investments will beat the market. It’s important to do your own research to see what these investments may have helped investors earn in the past, what it takes to get started and the type of volatility you may experience. A common saying is don’t invest in what you don’t know — risking your hard-earned money without some insight is probably not your best bet.
Here are some alternative investments to consider.
If you have a lot of upfront money and time to do a lot of market research, purchasing raw land can be a great long-term investment.
Cody Bjugan, real estate developer and founder of Allied Development and VestRight, said there is a lot of potential in this space.
“Land with development potential is one of the most profitable and least understood strategies in real estate,” he said. “It’s not the easiest way to acquire wealth, but there’s so much opportunity for how you can grow it using land.”
For example, you can lease the land to developers, build properties ourself and rent it out, harvest it for timber or raw goods and even sell it for a profit eventually.
Hedge funds that pools funds from different investors together and invests in different assets like real estate or private companies. You need to be an accredited investor — have at least $200,000 in income for individuals or a net worth of at least $1 million, not including your primary residence.
The reason hedge funds may beat the market is because securities held inside these funds don’t track a market index like the S&P 500. These funds are generally not available to the public, which means you’ll need to have a good network of people who can introduce you to hedge fund managers.
Investing in collectibles are where you purchase items that are considered valuable and have the potential to appreciate in value over time. Some of these include rare coins, memorabilia, fine wine, vintage toys and comic books.
You do have to have a lot of upfront cash in order to purchase these types of collectibles and find a way to store them securely. Plus, doing your research is key so you can ensure that what you purchase is authentic.