<\/em>the Alternative Investment Market?<\/strong><\/h2>\n\n\n\nFirst off, let\u2019s define what the alternative investment market is <\/em>in the first place. This particular market is packed full of opportunities– and whether you see that as a pro or a con, you can\u2019t argue that diversity is nice. The alternative investment market\u2019s definition is that it\u2019s basically anything except the traditional, public investment, like stocks and bonds.<\/p>\n\n\n\nWhen someone talks about the alternative investment market, they\u2019ll probably mention obvious financial assets, such as hedge funds and private equity, but there is a lot more to it.<\/p>\n\n\n\n
So, the term \u201calternative assets\u201d covers nearly everything you can invest in, from startup companies to outlandish collectibles such as antiques or Pok\u00e9mon cards if you want.<\/p>\n\n\n\n
It\u2019s Less Regulated<\/strong><\/h2>\n\n\n\nThe second fact about the alternative investment market is that it lacks the usual regulation most are used to. These sorts of investments don\u2019t have to deal with the same level or intensity of regulatory scrutiny that a popular investment type goes through.<\/p>\n\n\n\n
So, keep in mind that there is less regulatory oversight, and thus, the potential for risk is infinitely higher.<\/p>\n\n\n\n
It\u2019s Illiquid<\/strong><\/h2>\n\n\n\nAnd then we have this next fact. A major downside to alternative assets is that they\u2019re illiquid, meaning that you won\u2019t find it particularly easy to sell them or turn them into cash.<\/p>\n\n\n\n
For example, something like private capital investments needs 7 to 10 commitments or so? And what about hedge funds? They often have restrictions that don\u2019t allow investors to redeem their money after the investment or at least provide redemption, but at a discounted price. In a nutshell, you\u2019re not likely to find a secondary market for these alternative investments.<\/p>\n\n\n\n
There is A Lot Less Transparency<\/strong><\/h2>\n\n\n\nLet\u2019s tackle one of the biggest disadvantages of alternative investments: the lack of transparency.<\/p>\n\n\n\n
Since these investments are not traded on a public market, there is a lot less transparency around pricing. For example, at any given point, you can hop online and see how a company– like Amazon, for example– is doing, stock-wise. The same doesn\u2019t apply to alternative investments; the fact that they usually aren\u2019t affected by traditional market values is a double-edged sword.<\/p>\n\n\n\n
But there is good news! While it may never be one hundred percent transparent, it\u2019s come a long way. Alternative investing is becoming more mainstream, and all that attention has shed light on the flaws of the system\u2019s lack of transparency. For now, you\u2019ll have to trust whoever you\u2019re investing with.<\/p>\n\n\n\n
You Have Options in Real Estate<\/strong><\/h2>\n\n\n\nIf flipping houses isn\u2019t your thing, that\u2019s okay! In fact, in the case of the alternative investment market, when there\u2019s a will, there\u2019s a way. One of the best ways to tackle a risky investment is to start with a low-key option.<\/p>\n\n\n\n
And one of the real estate market\u2019s lower-risk options is providing a private mortgage. This could potentially have incredible yields. What you\u2019re doing is basically giving a real estate owner a loan over a one to five year long contract. Whatever you do, the risk is relatively low; loans are no more than 60 to 70% of the market value of the property in question.<\/p>\n\n\n\n
You Can Invest in Farms<\/strong><\/h2>\n\n\n\nBefore you start exploring the market, it\u2019s important to know your options. If you\u2019re the patient type and are willing to wait to profit off a long-term project– five or more years– then consider looking into investing in a farm.<\/p>\n\n\n\n
This unique alternative investment has a lot of options inside it. If owning a farm on your own doesn\u2019t appeal to you, you can also just as easily lease or sharecrop the farmland. Of course, it goes without saying that you\u2019ll need a lot of patience in a project that takes so long to really get started. You\u2019ll also need to consult with an expert who specializes in farm and ranch properties.<\/p>\n\n\n\n
You May Already Be an Investor<\/strong><\/h2>\n\n\n\nHere is one of the more unconventional investments– collectibles. That Pok\u00e9mon joke earlier had some truth to it. All kinds of collectibles and artwork are incredible alternative assets that, while requiring knowledge and patience, are a satisfying investment. Why? Because their value may wildly increase over time.<\/p>\n\n\n\n
Collectibles are items like vintage cars, vintage baseball cards, and even rare wine bottles. You purchase the physical item and maintain it until its value doubles and triples over time.<\/p>\n\n\n\n
However, collectibles and artwork are on the riskier side of things. You can\u2019t tell what will happen to the item 20, 30, or 50 years from now. They can be destroyed or get damaged, and since they\u2019re very illiquid, they may easily lose their value.<\/p>\n\n\n\n
Is Private Equity Right For You?<\/strong><\/h2>\n\n\n\nThe term \u201cprivate equity\u201d can cover a lot of ground. It refers to capital investment made into companies that aren\u2019t listed on a public exchange or private companies. If you\u2019re on the fence about where to focus, here\u2019s a brief breakdown!<\/p>\n\n\n\n
The subsets of private equity include venture capital, which specializes in startups and very early-stage ventures. Then you have growth capital, which focuses on helping companies past the startup phase expand. Or you have buyout, which speaks for itself– it\u2019s when a company or a division is bought outright.<\/p>\n\n\n\n
A private equity company provides benefits like mentorship, talent sourcing assistance, and industry expertise to the firms it\u2019s invested in.<\/p>\n\n\n\n
You Can Invest in Commodities<\/strong><\/h2>\n\n\n\nIt\u2019s not all hedge funds and invaluable artwork. What\u2019s so great about the alternative investment market is how flexible it is in terms of choices. One of these choices is investing in natural resources, such as oil, precious metal, natural gas, and different types of agricultural products.<\/p>\n\n\n\n
Why are commodities considered such valuable assets? Because they aren\u2019t affected by the public equity markets, meaning that they\u2019re basically a hedge against inflation. And their value increases and decreases with supply and demand, also meaning that investors can profit off higher prices.<\/p>\n\n\n\n
You Avoid the Public Market\u2019s Volatility<\/strong><\/h2>\n\n\n\nAnother thing that\u2019s important to know about this market is that alternative investments are a lot more complex than traditional ones. While oftentimes, they have higher fees, higher returns, and higher risk, there is a unique advantage to them.<\/p>\n\n\n\n
The complex part is this: if we were talking about a traditional public investment, then it\u2019s known that the share price fluctuates depending on various factors. However, since a private investment\u2019s shares aren\u2019t publicly traded, that volatility doesn\u2019t affect you.<\/p>\n\n\n\n