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How to get started with alternative investments

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With all of the talk about the economy because of the pandemic, you’ve likely been paying closer attention to your personal finances as of late. After all, it’s only natural to want to know more about your future when so much about your present is uncertain and confusing. Up until this point, you may not have paid much attention to what sorts of things you invest in aside from your employer-provided 401k. However, making savvy investment decisions is critical if you want to set up enough of a nest egg to live off of later in life.

Alternative investments are one area that many people don’t always think about, even though they have the potential to provide an excellent source of passive income.  If you’re wondering to yourself, “What are alternative investments?” read on. The following overview should give you all the information you need to get started investing in alternative options to traditional investments.

What makes an investment alternative?

Put in its simplest terms, an alternative investment is an investment in something that’s not the usual asset class your 401k or other brokerage accounts are built on. This means that instead of investing in an asset class like stocks, bonds, or cash, you’re investing in something else which is understood to have monetary value but isn’t publicly traded in the same way as traditional investments. Because these assets aren’t traded publicly, there’s a bit less transparency surrounding the value and liquidity of an alternative asset than there is a traditional financial asset. That being said, you shouldn’t let that turn you off from cashing in, as there’s plenty of money to be made in alt investing, even if it might take you a longer time to unload your investment when you’re ready to sell.

Consider your alternative investment strategy.

Just like any other investment strategy, it’s important to think about your goals when you begin to dabble in alternative investments. Of course, one goal you likely have for branching out from traditional public markets is the decision to really diversify your portfolio. Beyond that, however, it’s crucial that you consider whether you’re looking to add income, growth, or balance to your portfolio. Passive income streams are easy to come by in the world of alternative investments, but that doesn’t mean that it’s not possible to find growth or balance options in the alternative sector, too. When you know what you’re looking to get out of an alternative asset, it helps focus your attention on the categories that can help you accomplish that goal.

Know about some of the most common alternative investments.

Unlike traditional markets, there’s a broad range of options to consider when you’re getting into alternative investing. Some of what you choose to invest in will come down to personal taste, while other assets make more sense depending on your strategy. These are some of the most common alternative assets people choose to buy.

  • Real estate is a common option for long-term growth or even balance if you plan to rent the home while it appreciates.
  • Art and collectibles are one of the most popular growth assets available but can fluctuate in value dramatically due to buyer demand on the secondary market.
  • Venture capitalis good for investors looking for a long option, you can also help a smaller business get on its feet by choosing this option.
  • Franchises that you pay to have someone else run can be a quick cash-based investment option for those looking to make an immediate return.

As you can see, each of the options listed above has its own pros and cons and fits into a specific strategy. Make sure to do your due diligence when researching your options and you might be surprised by how much your portfolio can earn investing in alternative assets.

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