For those wanting to build their investment portfolio, looking into a diverse area of investments provides the best chance of growing capital and earning a high yield.
Typically, alternative investments fall under categories such as: property, hedge funds, collectibles, and private equity.
Unfortunately, investors may disregard these high risk, high reward opportunities due to the higher fees associated with them. But it is important to realise the incredible benefits that follow suit with these ventures.
Compared to traditional investments such as stocks, alternative investments lack volatility and mostly correlate with the investor having direct ownership over an asset. Having ownership over the asset has a wealth of benefits attached, including potential direct tax benefits and a steadily rising passive income depending on the industry the investment falls in.
These benefits are important because they generally oppose traditional investments such as stocks, which can carry large losses due to the unpredictability which comes with investing into a liquid asset.
Alternative investment provides the opportunity for the investor to stay ahead of inflation.
As the prices of goods within the economy increase, the value of your cash will decrease. Investing into alternative assets is a great way to combat this inflation. For example, having a diverse portfolio of investments in the property market would be a great way to hedge against inflation and save you from losing out on the value of your cash year to year.
This is especially true as of late as the cost of living and inflation has consistently risen, causing investors to look for opportunities to both combat the rise and grow capital.
Average house prices in England have risen 13.1% over 2022 and show no signs of plummeting. When compared to the sharp decline of alternatives such as crypto, which have dropped around more than 58% from Nov 2021, it is important to choose the right investment and to invest in markets that have been consistently reliable throughout the last decade or more.
It is recommended that an investor exercises a high level of due diligence before investing. For example, in the property market, it is important to vet locations that may be of interest. Choosing the right city can come down to there generation that is taking place, the affordability of apartments or how well the schooling system is in that district. All these factors can help generate a higher yield and positively effect an investment.