7 Best Alternative Investments: Trends and Popular Options

In today's dynamic financial landscape, investors are increasingly looking beyond traditional stocks and bonds to diversify their portfolios. Alternative investments are emerging as an attractive option. They offer some unique growth opportunities and low volatility due to a lack of correlation with the stock markets.

This article explores seven of the best alternative investments, highlighting both emerging trends and popular options that have gained traction in recent years.

From peer-to-peer lending to fractional ownership of high-value assets and from farmland investing to backing the next big startup, these alternative investment options could be the new pathway to achieving your future goals and plans.

These investment trends are becoming even more crucial for investors as the investment landscape is constantly evolving. Whether you're a seasoned investor looking to expand your portfolio or a newcomer wondering where you should invest your money, this guide will provide valuable insights into the world of alternative investments. By exploring these diverse options, you'll be better equipped to make informed decisions and potentially uncover new avenues for financial growth in an ever-changing market.

Why Choose Alternative Investments Over Traditional Ones?

Alternative investments offer some compelling benefits compared to traditional investments, such as portfolio diversification, the potential for higher returns, and hedging against market volatility and inflation. The investment landscape is always evolving, which often results in market volatility, making alternative investments a popular option among young investors. After the 2008 market crash, many retail investors sought diversification beyond traditional stocks and bonds. Additionally, these investments can align with personal interests, making the investment journey more engaging.

These emerging investments often leverage technology and innovative business models to provide unique opportunities. These options offer higher returns with the same amount of risk as traditional investment options. Some options generate cash-flowing monthly returns of around 8-10% annually or even more, making them attractive passive income investment ideas. These options are less regulated than traditional investment options, making them accessible to all classes of investors at a low cost. Having alternative investments could prove to be beneficial as it would diversify your portfolio and create a balance of risk and reward, providing you with overall gains even at times of market downturn. Let's analyse some of these best alternative investment options based on the current market trend.

Best Alternative Investment Options

1. Peer-to-Peer lending

Peer-to-peer (P2P) lending is a new approach to investing that generates profits by lending money to others via online platforms. You can provide borrowers personal loans as an investor and get paid interest on the money you lend. Although there are some risks associated with this kind of investment, it can be reduced by using reliable P2P platforms that carefully assess the borrower's trustworthiness. Rather than lending a sizable amount of money to one borrower, you can spread your investment among a diverse portfolio of borrowers to further minimise risk.

P2P lending offers potentially higher returns compared to traditional savings accounts or bonds. The P2P lending market has a lot of potential, with an estimated worth of around $134.35 billion globally in 2022. P2P lending is also regulated by the Reserve Bank of India, which bolsters more confidence in this sector.

2. Fractional Real Estate Investing

Real estate has always been a profitable investment option, but the high cost of investing often discourages individual investors. Fractional Real Estate investing provides you with the opportunity to own a portion of a property without incurring the full financial burden. This type of investment is offered by a Special Purpose Vehicle.

You can invest in a fractional share of a residential or commercial property. This means you own a small part of the property, which can give you returns from rental income and any increase in the property’s value over time. The initial investment is much lower than buying an entire property, making it more accessible. Plus, it helps diversify your investment portfolio. Being regulated by SEBI makes it a much safer and more liquid option than any traditional form of investment.

3. Farmland Investing

Farmland investing offers a unique opportunity to diversify your portfolio by owning shares in agricultural land. Unlike traditional stocks or bonds, this investment allows you to benefit from crop yields and land appreciation without the hands-on work of farming.

This alternative investment strategy provides stability, as it's less affected by stock market fluctuations. It also serves as a great counter to inflation, given the constant demand for food. Historically, farmland has shown consistent returns, making it an attractive option for investors seeking to spread their portfolio. According to reports, the Indian agricultural sector has seen a major rise in investments, with a total FDI inflow of $ 2708 million by 2022, showcasing its growth potential. While offering potential benefits, investors should be aware of risks such as weather conditions and crop price fluctuations. It's typically considered a longer-term investment strategy, requiring patience and careful consideration.

4. Crowd Funding Startup Investing

Crowdfunding startup investing allows individuals to become early owners of promising new businesses. Through online platforms, investors can buy small ownership stakes in startups that were once only accessible to venture capitalists and angel investors.

This form of investment offers the potential for high returns if a startup succeeds, but it comes with some risks. Many new businesses fail, and investments are typically illiquid, meaning you can't easily sell your shares. However, it provides an exciting opportunity to support innovative ideas and potentially benefit from a very high return from a company's growth from its early stages.

5. Cryptocurrency Investing

Cryptocurrency investing has gained significant attraction in recent years. Digital currencies like Bitcoin and Ethereum offer a high return on investment potential if invested at the right time. There are some risks associated with crypto investments, such as those in the stock market. However, the cryptocurrency market has seen rapid growth, and many investors are diversifying their portfolios with digital assets. Crypto markets are unlike traditional investment markets that are governed by banking or sovereign authorities, giving them their own performance cycle. This makes them highly profitable in the event of a financial setback and reduces their risk as compared to stock markets. According to reports, Indian investors already hold around $ 5.37 billion in crypto, making it an attractive option for those looking to invest in innovative and potentially high-reward assets.

6. Arts & Collectables

Investing in art and collectables is a unique way to diversify your portfolio while indulging in personal interests. This category includes a wide range of items, from paintings and sculptures to rare coins, vintage cars, carpets and memorabilia.

The value of these assets often increases over time, especially for rare or limited edition pieces. Unlike traditional investments, art and collectables can provide aesthetic enjoyment alongside potential financial returns.

However, this market requires specialised knowledge and can be subjective, so finding the right buyer can take some time. Authenticity, condition, and changing tastes all play crucial roles in determining value.

7. Gold ETFs

Gold is a very reliable investment option. It has a very low volatility and can shield the value of your portfolio in times of financial emergencies. In modern times, individual investors can consider investing in gold ETFs. This type of investment is stored and traded on stock exchanges; hence, there is no storage or making charges like traditional gold investments. It is a highly secured form of investment. The price of the ETFs is tracked on the basis of actual physical gold, providing you with a significant return on investment in 2-3 years. Popular gold ETFs in India include SBI Gold ETF, Axis Gold ETF, etc., offering a lucrative annual return of around 20%.

Conclusion

Alternative investments offer exciting opportunities for portfolio diversification and potential high returns. From P2P lending to fractional real estate, farmland investing to cryptocurrency, these options cater to all kinds of investors with different risk appetites and investment goals. They provide a unique way to balance your portfolio and outperform traditional investments.

However, it's crucial to approach these alternatives with caution and thorough research. Understanding the risks and rewards associated with each option is important. Remember, diversification is the key.

As the investment landscape continues to evolve, staying informed about these emerging investment trends can give you a competitive edge. Whether you're a seasoned investor or just starting out, considering these alternative options could pave the way for a more robust and potentially lucrative investment strategy. Explore these best alternative investments wisely and uncover new opportunities in the ever-changing financial landscape.