Alternative investments are all the rage these days. Rather than sticking to the usual stocks and bonds, everyday investors are venturing into non-traditional assets. What exactly are alternative investments?
Alternative investments are assets outside of public markets. They include real estate, precious metals (gold, silver), cryptocurrency, private equity, hedge funds, and more. These provide opportunities for portfolio diversification and potentially higher returns.
The benefits of alternative investments are plentiful. They can generate strong cash flow, hedge against inflation, and diversify your portfolio. Their value often moves independently of the stock market. Cryptocurrency and real estate, for example, have the potential for high returns. Precious metals like gold tend to hold their value during market volatility.
While alternative investments come with risks, the rewards can be worth it for savvy investors willing to step off the beaten path. The key is doing your homework, understanding each investment fully, and only allocating money you can afford to lose. Read on to learn more about the best alternative investment options.
Top Alternative Investment Options
When it comes to alternative investments, you have options. Here are some of the top platforms to consider:
Masterworks
Best overall, especially for art enthusiasts looking for fractional ownership in famous paintings. You can invest in shares of masterpiece artworks. While risky, the potential returns are huge if the artwork substantially appreciates value.
Yieldstreet
Ideal for investors wanting access to alternative asset classes like litigation finance, real estate, and marine finance. You can invest in pools of asset-backed loans with the potential for solid returns. They have a low minimum investment; you can start with as little as $500.
FarmTogether
Perfect for those interested in agricultural land investments. You can invest in shares of U.S. farmland, which has historically been a strong hedge against inflation. FarmTogether focuses on sustainable and organic farms, so you’re supporting socially responsible agriculture. Returns typically range from 6-10% annually.
Vinovest
Perfect for wine enthusiasts seeking attractive returns. They purchase investment-grade wine on your behalf and store it in professional storage facilities. Historically, fine wine has appreciated in value and delivered 6-15% annualized returns. And the best part is you can eventually drink some of your investments!
iTrustCapital
Best for digital currency fans wanting an IRA with crypto trading. iTrustCapital allows you to invest in and trade cryptocurrencies tax-advantaged through your IRA. They have low fees and over 20 cryptocurrencies to choose from, like Bitcoin, Ethereum, and Litecoin. Volatile but an exciting new asset class.
Mainvest
Mainvest allows you to invest in local businesses. You can browse investment opportunities in your area and choose to fund businesses that spark your interest. This can be a great way to support your local community and economy.
Alto IRA
An Alto IRA allows you to invest your IRA funds in alternative assets like real estate, private companies, and cryptocurrency. If the idea of tax-advantaged alternative investments appeals to you, an Alto IRA is worth considering.
Masterworks
Masterworks is an innovative company making fine art investment accessible to everyone. Their expert team sources and acquires museum-quality artworks with strong investment potential. They then offer ownership shares in each piece to investors on their platform.
As a shareholder, you’ll get your cut of the profits when the artwork is sold. Masterworks distributes all proceeds to investors calculated based on the number of shares you own minus their percentage of the profit. While the secondary market is only open to U.S. citizens with a U.S. bank account, Masterworks aims to expand globally.
Masterworks does charge fees, including:
- A 1.5% annual fee on your account value will be deducted by diluting your shares. There’s no option to pay in cash.
- 20% of the profits when a piece is sold. These fees cover managing and storing the artwork, appraisals, insurance, and regulatory costs.
Masterworks make art investment accessible and help diversify your portfolio. You get exposure to an exciting new asset class without needing millions to start. If you’ve ever wanted to own a piece of art history, this innovative platform is worth checking out.
Yieldstreet
Yieldstreet is an alternative investment platform allowing you to invest in things beyond traditional stocks and bonds. Yieldstreet requires accredited investors and charges annual platform fees. Deals often need $60,000 minimums to participate. Fees drop in subsequent years, but initial costs remain steep.
Yieldstreet funds commercial real estate, marine vessels, litigation finance, and art. It’s ideal if you seek diversification beyond Wall Street. However, the deals and risks involved differ substantially from traditional public markets. Do thorough due diligence on the companies and assets before investing.
It aims to generate 8-12% annual returns, higher than regular stocks. However, the assets are often illiquid, and your principal investment can be lost. Weigh the pros and cons based on your financial situation and risk tolerance.
While Yieldstreet has a low $10,000 minimum to open an account, most deals require “accredited investor” status, with $200,000 in income ($300,000 jointly) or a net worth over $1 million. If you meet the criteria, Yieldstreet provides an interesting way to diversify your portfolio. But go in with realistic expectations about the risks and your ability to access funds if needed.
FarmTogether
FarmTogether is an intriguing platform for new investors looking to diversify into alternative assets. Their crowdfunded farmland investments start at just $15,000, opening the door to assets previously only available to large institutional investors.
FarmTogether offers three main products:
- Crowdfunded Farmland investments start at $15,000. You gain exposure to U.S. farmland by co-owning a specific farm property.
- The Sustainable Farmland Fund starts at $5,000. This fund invests in a diversified portfolio of sustainable farmland.
- Sole Ownership Bespoke investments of $1 million provide full ownership of individual farm property.
They focus on high-quality farms growing permanent crops like nuts and citrus, located in prime agricultural regions of the West Coast with access to water and FarmTogether’s preferred farm operators.
FarmTogether’s fees vary depending on the investment. They charge a 1-2% one-time admin fee, an annual 1-2% management fee, and a 5% net operating income. Be sure to understand the fees for your specific investment before contributing funds.
iTrustCapital
iTrustCapital allows you to invest in alternative assets like gold, silver, and cryptocurrency through your retirement account.
They charge low fees – $0/month for personal accounts and only 1% for crypto transactions, and $50/oz for gold. You can buy physical gold and silver bars, as well as Bitcoin and other digital coins.
Using iTrustCapital, you can put non-traditional investments into tax-advantaged accounts like IRAs. This means you can invest in gold, silver, or crypto, and the gains can grow tax-deferred or tax-free until you withdraw in retirement.
If you want to diversify your retirement portfolio beyond stocks and bonds, iTrustCapital gives you access to alternative assets that can help hedge against market volatility and inflation. Their platform makes investing in precious metals and digital currency simple, even if you’ve never done so before.
Vinovest
Vinovest offers an exciting way to invest in fine and vintage wines. They source, authenticate, and store investment-grade wines on your behalf.
Vinovest’s pricing tiers range from $1,000 to $250,000 minimums. The Starter tier requires $1,000 to get started. You get a dedicated account manager and access to Vinovest’s secondary wine market to buy and sell wines.
Higher tiers like Plus, Premium, and Grand Cru provide additional benefits like discounted fees, a personalized selection of rare wines, and invite-only tasting events. Fees range from 2.25% to 2.85% annually, depending on the tier.
Vinovest takes care of the entire investment process for you. They leverage their network to source wines at a discount, authenticate and appraise the wines, and provide secure long-term storage in professional warehouses. When ready to sell, Vinovest will handle the transaction and settlement on your behalf.
While expensive, Vinovest makes wine investment accessible. They handle the complexity while you reap the benefits of diversifying your portfolio and gaining exposure to an alternative asset with the potential for solid long-term returns. If you’re looking for an easy, hands-free way to invest in fine wine, Vinovest is worth considering.
Mainvest
Mainvest allows everyday investors to put money into local brick-and-mortar businesses for as little as $100. This innovative platform provides a new way to invest and diversify your portfolio.
Mainvest makes money by charging the businesses themselves a percentage of the total funds raised through their campaigns. Companies that successfully meet their funding goals through Mainvest pay 6% of the total amount invested.
As an investor, you can choose between debt or equity investments in businesses for just $100 minimum. All you need is a U.S. bank account and proof of citizenship. Mainvest offers two options:
- Debt: You lend money to a business and earn interest. Debt terms are typically 1-5 years.
- Equity: You buy shares of a business and earn a portion of the profits. Equity investments often have longer timelines of 3-10 years.
Remember that Mainvest doesn’t offer a secondary market, meaning you can’t sell or transfer your debt investments to someone else. Do your due diligence to determine if the businesses you’re interested in seem viable and their financials make sense based on their funding goals.
While alternative investing does come with risks, Mainvest aims to democratize access to private market investments that were once only available to wealthy accredited investors. You can support the local economy for small sums and potentially earn solid returns.
Alto IRA
Alto IRA offers investors an innovative way to invest in alternative assets through your retirement account. With Alto IRA, you’re no longer limited to traditional stocks, bonds, and mutual funds in your IRA. Now you can invest in real estate, cryptocurrency, private equity, and more.
Alto IRA partners with platforms like AcreTrader, AngelList, Capital Engine, FarmTogether, Republic, and Masterworks. You can even invest in fine art through Masterworks.
The Alto CryptoIRA allows you to hold cryptocurrencies like Bitcoin, Ethereum, and Litecoin in your tax-advantaged IRA. Integrated with Coinbase, the Alto CryptoIRA gives you access to over 200 cryptocurrencies to trade directly. Tax-free or tax-deferred gains, depending on your IRA type, let your crypto investments grow faster.
Overview of The Best Alternative Investments
In summary, the top alternative investments to consider include:
- Real estate: Property investments have the potential for solid returns over time through rental income and appreciation. Crowdfunding platforms now make real estate more accessible to smaller investors.
- Private equity: Investing in startups or small private companies offers the possibility of high returns, though risks are also higher. Venture capital funds pool money from many investors to invest in private companies.
- Hedge funds: These private investment partnerships aim for positive returns through various investment strategies. Fees are often high, so hedge funds usually require large minimum investments and are for sophisticated investors.
- Commodities: Investing in gold, silver, oil, grains, and other commodities may provide a hedge against inflation and market volatility. You can invest in commodities through mutual funds, ETFs, futures, or even directly owning physical assets.
- Cryptocurrencies: Digital currencies like Bitcoin are extremely volatile but also offer the potential for huge gains. Only invest money you can afford to lose in this risky asset class.
While alternative investments are complex and often illiquid, a small allocation to alternatives could enhance your portfolio’s diversification and returns over the long run. But make sure you understand what you’re investing in before diving in.