Alternative investments, simply defined, are assets that do not fall into one of the conventional investment categories, such as stocks, bonds, mutual funds or several others. These investments are often held by institutional investors or individuals who are accredited and have high-net-worth due to the complex nature, lack of regulation and degree of risk associated with these types of investment.
Alternative types of investment you can consider
- Private equity
Equities are not always listed on a stock exchange. There are funds, such as private equities, which are directly placed in private companies by institutional or high-net-worth investors. These investors also place private equities in the process of the buyout of public companies.
- Hedge funds
While mutual funds are a more common investment, hedge funds are part of a lesser- known territory. This investment vehicle caters only to investors who have substantial amounts of capital and those who are accredited investors who have a net-wort of more than $1m.
- Venture capital
This is an alternative asset class that involves investment of equity capital in private start-ups that show exceptional potential for growth. Whereas private equity invests equity into mature companies, venture capital is predominantly intended for start-ups.
- Real estate/commodities
Some investments are directed at actual assets such as metals, natural resources, real estate and several others. Such assets are notorious for their hedge abilities against market movements and currency fluctuations, as a result of their relationship with the US dollar.
Cryptocurrencies, especially Bitcoin, have shown exceptionally high potential returns. Investment in cryptocurrencies is a growing market, but it also involves a substantial amount more price risk and volatility than any other assets or markets.