There’s a wide range of unconventional approaches to financial planning referred to as “alternative investments.” They are considered outside the traditional methods of investing such as stocks, bonds, mutual funds, annuities, and money markets.
Security and stability play a major role in an investment portfolio. Investments such as certificates of deposit and fixed annuities offer a degree of safety, but pay very little in returns. While certain sectors rise or fall and markets can be volatile at times, diversifying as much as possible brings safety to a person’s investments.
All investments have a certain amount of risk, but alternative investments help to lessen the volatility and could provide a steady or even significantly increased cash flow in a diversified portfolio.
It’s wise to consult a professional financial adviser when trying something different with your money.
These are five alternative investments to consider:
1. Private equity — These investments aren’t publicly traded or listed on the stock market. Private equity or venture capital firms invest in venture capital, start-ups, company growth, or restructuring of a company.
2. Real estate — Investing in property may include housing, apartment complexes, and commercial real estate. The Wall Street Journal explained that some self-directed individual retirement accounts allow people to diversify their investments into real estate, among other options, but there are many rules and risks. You also can invest in property indirectly through real estate investment trust (REIT) funds, which are available on public exchanges.
3. Fine art — Buying paintings, sculptures, or photographic art may result in increased value for your investments. Although such collectibles may have price fluctuations throughout the years, buyers can at least enjoy the beauty of their purchases, HowStuffWorks points out.
4. Commodities — Commodity-related investments include crops, livestock, oil, and raw materials. However, they can be volatile depending on each market. Exchange traded funds (ETFs) offer the safest investment, advises HowStuffWorks. The funds are similar to mutual funds, purchasing several different commodities.
5. Gold — Often considered insurance in the investment world, gold provides stability during inflation or other economic downturns. While gold prices might slump or frequently fluctuate, it always has value and can bring profits during hard times. It can be bought in coins, jewelry, bars, or gold funds, reports Investopedia, which recommends having 5 or 10 percent of your portfolio in gold investments.
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