What's the deal with Alternative Investments?

April 8, 2021

What's the deal with Alternative Investments?

What are Alternative Investments?

A lot of people wonder what alternative investments are and why they should even be involved with them…..

Alternative investments are by definition anything that are not stocks, bonds and mutual funds - anything that is NOT the typical things that you invest in in Wall Street and the stock market.

According to Investopedia, "An alternative investment is a financial asset that does not fall into one of the conventional investment categories. Conventional categories include stocks, bonds, and cash."

Example of Alternative Investments

Based on that definition, an example of an alternative investment can be almost anything.

Some common examples are:

  • Real estate investments
  • Peer to peer lending
  • Mortgage notes
  • Tax liens
  • Commodities (Gold, Silver, Oil, etc.)

There is a stigma that alternative investments are dominated by the ultra wealthy who can afford to invest in other kinds of alternatives such as hedge funds, private equity, art and antiques and venture capital.

However, many of the alternative investment examples listed above are accessible to average people like you and me.

Why invest in Alternatives?

Why would anybody want to invest in alternatives to begin with?

Well, normally when you're investing in the conventional options such as the stock market, the purpose is investing for growth. You are hoping that someday in the future your investments will be worth more than what you put in.

With alternatives, you're typically investing for something different.  For instance, your investments might be producing monthly income. Imagine investing in real estate, your goal is usually to be bringing in that extra rent money each month. It is the same for other investments such as mortgage notes or peer to peer lending - you're investing in monthly income.

Alternative Investments might be right for people who are looking for consistent monthly income right now, instead of waiting for potential growth.

The rise of Alternative Investments

Alternative Investments used to be sort of taboo. They were seen as a risky investment, but that changed around the time of the stock market crash in 2008.

When the stock market crashed people were looking for something different. There was now a fear of the stock market, and people wanted out. A lot of people didn't have enough money to invest in real estate, so they looked for other options.

Around this time, a lot of companies started popping up that would enable you to invest with less capital. Things like real estate investment trusts or peer to peer lending really took off in 2008, 9 and 10. When that happened people with small amounts of money, as little as $500 to $1,000 were able to start investing, and it enabled them to start producing income right away.

So since this time several years ago, these types of investments have become very mainstream.  I don't even like to call them alternatives anymore because for a lot of people - that's their plan A! If you're looking for something that's going to give you some stability and provide predictable recurring monthly income you might want to look at alternatives as a better way for you to invest.

Need someone to guide you through the world of alternative investments, and teach you proven strategies of how to build wealth using these types of investments? Schedule a complimentary call with one of our expert wealth coaches today.

Do you prefer video to written posts? Check out our YouTube video on this same topic.

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