Don’t just rely on stocks and bonds.
As an experienced investor, you are familiar with stocks and bonds. These would be considered traditional investments and make up the bulk of a retail investor’s portfolio. These investments have proven successful in providing returns and keeping investor happy (for the most part).
For those who are ready for something new, there are alternative investments that don’t correlate with the market of stocks and bonds.
In this article, we lay out what alternative investments are and some great examples to explore. Also, at the end of this article, find out how Alpen Partners can help make your investment plans a reality.
What is an Alternative Investment?
An investment that does not fall into a traditional asset class, such as stocks and bonds, is considered an alternative investment. Institutional investors or high-net-worth individuals hold alternative investments.
Alternative investments are usually more difficult to handle and profit from due to low liquidity. Stocks of large companies are much easier to sell than pieces of art or classic cars. A lot of these investments also have high minimum investments and fee structures compared to traditional investment types.
Diversification and hedging are two perks of alternative investments since they have little correlation with standard asset classes, making alternative investments the perfect addition to your portfolio. This has led many institutional funds, like pensions, to place a small amount their portfolios to alternative investments such as gold.
While the initial investment price of an alternative investment may be high, transaction fees usually remain low because of the lower rate of turnover. You will probably hold onto these investments for longer than other investments but it can result in tax benefits because investments held for over a year are subject to lower capital tax gains.
Now that you know why you should be seeking alternative investments, let’s look at how you can invest.
Examples of Alternative Investments
A hedge fund is a pooled fund that utilizes various strategies to earn returns for investors. They can be carefully managed or use derivatives, using both domestic and international markets. The goal of a hedge fund is to generate high returns. The funds are built to take advantage of specific market opportunities.
Many hedge funds are only accessible to accredited investors since they require less SEC regulations than other types of funds.
Cryptocurrency is digital money that uses cryptography for security. Cryptography is writing and solving puzzles. With the cryptography step, it is difficult to counterfeit. The currency does not have a central authority and can be used for a variety of things such as buying goods and investing.
Cryptocurrency has the ability to make transferring funds easier between two parties. The transactions don’t cost much and allow users to avoid high fees experienced when using most banks and wire transfers.
One of the biggest uses for gold is for diversification. The trick to diversification is finding investments that are not correlated with one another. Historically, gold has always done the opposite of what stocks and other financial instruments have done. For example, the 1970s were not strong years for stocks, but gold was thriving. In the 1980s and 90s, stocks were up but gold was down. When the 2008 financial crash occurred, investors were leaving behind the dropping stock market and began buying gold again.
The world of art dates back farther than any recorded history and has played a significant role in shaping our lives in many aspects like design, architecture, fashion, and more. Because of this, collecting art has been a hobby for many to look at, enjoy, learn from, and preserve. Others, however, are not only finding the cultural and aesthetic beauty in art, but are also using pieces as a means of investment.
Perks of placing your capital in art include physically owning your asset. Similar to investing in classic cars, you will be able to enjoy the art, allowing your full access in ensuring proper care, storage, and maintenance. Art can also appreciate as time goes by. The value can often rise just because a large amount of time has passed since the piece was created, though that’s not a guarantee.
For most Americans, owning a vehicle is a necessary, yet costly, part of life. The costs that come with buying and maintaining a car can be a hassle, but there are some people who benefit financially from owning a car. Over the past decade, more and more people are finding the benefits of investing in classic cars, as well as art and other antiques. Like many things, classic and rare cars can hold their value, making for a valuable asset.
Investing in antique and classic cars can be a great option compared to traditional investments, largely due to the possibility of high profit.
Alpen Partners Wealth Management International AG, the sister company of Alpen Partners Wealth Management AG, is now a registered investment advisor at the U.S. Securities and Exchange Commission (SEC). Together with our partner Swiss private banks, our company can now offer the full Swiss private banking experience to American clients, both resident and non-resident.
Building on many years of experience in private banking in Switzerland, Alpen Partners Wealth Management International AG provides investment advisory services to U.S. clients. Swiss banking is highly regarded around the world, well known for being sophisticated and discreet. In 2017, it was reported that $7.5 trillion in assets are held in Swiss banks and almost 51% of that is generated from clients outside of the country. Choosing Switzerland as a banking destination is choosing years and years of financial stability and growth.
The advantages of having an account in Switzerland include currency and investment diversification, asset protection, and the possibility to deposit assets in some of the oldest and best-capitalized banks in the world.