Gone are the days when investing was limited to numbers and charts alone. As the stock market has been unsettling for investors over the last year, some have become dissatisfied and want a change. They were eager to explore options that allowed them to be more creative, required less money, and involved untapped markets. That’s when alternative investments came into the picture.
Today’s investors are embracing this new era, one that combines financial potential with pleasure and creativity. In this era of limitless possibilities, alternative investments have emerged as a thrilling departure from the norm. No longer confined to the traditional income categories, these financial assets offer a refreshing departure from conventional markets. Plus, now anyone can access them through alternative funds and platforms, although these investments used to be available only to big investors. Think private equity, cryptocurrency, real estate, commodities, and even tangible collectibles – each of which offers a distinct possibility to construct your own route to financial success.
Exploring these alternative markets unveils a world of hidden potential, albeit with heightened risk, as they venture beyond conventional boundaries. Depending on your experience, accessibility or personal interest, these unconventional investments offer great room for growth and innovation.
Why to Invest in Alternative Markets
Investing brings a host of benefits to those who dare to explore. One major advantage is the potential for diversification. By adding alternative investments to their portfolios, individuals can reduce their exposure to traditional asset classes like stocks and bonds. Imagine investing in a combination of real estate, private equity, and renewable energy projects. These diverse assets have the potential to perform independently from the stock market, acting as a cushion against market volatility and providing stability to your overall investment strategy.
But that’s not all. Alternative investments often come with the allure of higher return potential. For example, you decide to allocate a portion of your portfolio to venture capital. By investing in innovative startups, you become part of the journey as they disrupt industries and capture market share. If one of these companies becomes the next big success story, your returns could skyrocket, far outperforming traditional investments. It’s like backing the next game-changing tech company or breakthrough medical innovation and reaping the rewards.
In addition, alternative markets can offer protection against inflation. Let’s say you invest in tangible assets like precious metals, real estate, or even farmland. As inflation creeps up, the value of these assets tends to rise as well. They act as a shield, preserving your purchasing power and providing a hedge against the eroding effects of inflation. So while others worry about rising prices, your alternative investments keep your wealth growing steadily.
Lastly, alternative investments often possess the advantage of being illiquid, meaning they are not easily bought or sold. This illiquidity can actually work in your favor. Let’s consider investing in a rare art collection or a private equity fund. Since these assets can’t be sold at the click of a button, they are less susceptible to panic selling during market downturns. This feature provides an extra layer of protection, preventing impulsive decisions based on short-term market fluctuations and promoting a more long-term and disciplined investment approach.
Best Alternative Markets to Invest
Real Estate
Real estate has been renowned as a reliable investment avenue, offering stability and the potential for significant appreciation. While residential properties have traditionally dominated the real estate market, there are intriguing opportunities beyond them. One such alternative investment gaining attention is farmland. In a noteworthy development earlier this year, headlines were ablaze when Bill Gates emerged as the largest private owner of U.S. farmland. With nearly 2,100 acres of fertile North Dakota land under his ownership, Gates’ strategic move has shed light on the immense potential of farmland as a unique investment opportunity.
This foray into farmland highlights the recognition of its value and taps into the vast agricultural industry. As global food demand continues to rise, the importance of arable land becomes increasingly apparent. Farmland investments not only offer the potential for long-term appreciation but also contribute to the essential production of food and resources.
NFTs
The world of cryptocurrencies has disrupted traditional financial systems, offering investors an innovative and decentralized approach to wealth accumulation. Within the crypto sphere, Non-Fungible Tokens (NFTs) have emerged as a fascinating investment opportunity. NFTs represent ownership of unique digital assets, such as art, music, or collectibles, providing a bridge between the digital and physical worlds. While the NFT market experienced some declines towards the end of 2022, its potential for growth remains significant. With the current market value of NFTs hovering around $12 billion, there is ample room for expansion as more individuals recognize the value and potential of these digital assets.
Let me throw a couple of examples your way. Have you heard of the Bored Ape Yacht Club (BAYC)? It’s a collection of digitally created apes, each with its own distinct characteristics. And then there are the CryptoPunks, a series of pixelated characters that are like the rock stars of the NFT world. So, if you’re looking for a unique and potentially lucrative investment journey, NFTs might just be the ticket. They offer a fascinating way to own and trade digital assets, bringing together technology and creativity in a whole new way.
Rare Watches
Investing in luxury watches has emerged as a viable investment option, no longer limited to the super-rich. In recent years, the luxury watch market has found its place in the investment environment, offering opportunities for individuals to invest in watches even as little as one dollar. Unlike traditional investment assets such as stocks, gold, and real estate, luxury watches have demonstrated remarkable performance, with only an 8% decline in 2022 compared to a 19% drop in stocks and a 65% decline in Bitcoin. Moreover, over the past decade, luxury watches have outperformed stocks, gold, and real estate, boasting an impressive return on investment (ROI) of over 200% from 2011 to 2021.
The appreciation in value of rare watches can be attributed to various factors. Renowned brands such as Rolex, Patek Philippe, and Audemars Piguet have garnered immense popularity and demand due to their exceptional craftsmanship, exclusivity, and historical significance. Timepieces that are part of limited editions, vintage collections, or unique collaborations often command premium prices in the market. For instance, a notable example is the Patek Philippe Nautilus, which has seen a remarkable ROI of 207% in just five years between 2017 and 2022.
Art and Collectibles
Investing in art and collectibles has transcended its cultural and aesthetic value to become a compelling alternative investment avenue. Fine art, in particular, has demonstrated the potential for long-term appreciation and diversification within an investment portfolio. Increasing global wealth and growing knowledge of collectible markets have led to a larger community of individuals interested in art investment. Art’s appeal lies in its ability to act as a store of value, generate positive real returns, and offer low correlation with traditional stocks and bonds. With initiatives such as art investment funds, tradable art structured products, and dedicated art trading exchanges, the art market is becoming more transparent, addressing prior concerns.
A remarkable example of the value potential in art investments is demonstrated by Jean-Michel Basquiat’s painting “Untitled.” In 1984, it was purchased for $19,000 by collectors Jerry and Emily Spiegel. Over three decades later, in 2017, the same painting fetched a staggering $110.5 million at a Sotheby’s auction, setting a record price for Basquiat and American artists alike. Such extraordinary price appreciation showcases the potential returns that can be achieved in the art market.
Luxury Bags
While high-fashion bags may not replace traditional investments like BlackRock exchange-traded funds, their exclusivity and prestige make them highly desirable. Prices for luxury bags can range from around $2,000 for an entry-level Balenciaga bag to over $50,000 for rare, exotic-skin Birkins made by Hermès.
Let’s take the example of Hermès Birkin bags. In Hermès boutiques, a standard calfskin Birkin bag starts at approximately €7,000. However, on the secondary market, the same bag can be resold for €15,000 and more, yielding a potential return of almost 114%. According to experts, investing in classic colors like Gold, Black, and Etoupe, or opting for precious exotic leathers, can increase the bag’s appeal and potential resale value. Proper leather care is essential to maintain the bag’s condition and maximize its longevity.
Fine Wine
Investing in the world of wine is a thrilling and highly lucrative endeavor that offers remarkable returns. Just take a look at the Sotheby’s Wine Index, consistently outshining the S&P 500 since 2005, with only a fleeting convergence in 2021.
Naturally, we’re not talking about your average bottles you’d pick up at your local wine shop. No, we’re setting our sights on invest-grade wine – the crème de la crème of the vinous world. Alfonso de Gaetano, the mastermind behind Crurated, an exclusive wine community, emphasizes that quality reigns supreme. A remarkable wine not only ensures a sensational experience, but its longevity guarantees that you can savor the thrill of selling it at your own leisure. And let’s not forget about rarity – a vital ingredient in this intoxicating equation. The scarcer the wine, the greater its allure and potential as an investment gem.
Final Words
Alternative investments have emerged as an exciting departure from traditional investment avenues. They offer the opportunity to combine financial potential with pleasure and creativity, allowing investors to explore untapped markets and express their passions. Whether it’s investing in farmland to tap into the agricultural industry, exploring the world of NFTs and unique digital assets, collecting rare watches with impressive returns, venturing into the art market for appreciation and diversification, indulging in luxury bags for their exclusivity, or delving into the world of fine wine for remarkable returns, alternative investments offer a host of advantages beyond the conventional. These investments provide diversification, higher return potential, protection against inflation, alignment with personal interests, and the chance to take a long-term investment approach.
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