Alternative investments include real estate, hedge funds, private equity, commodities and any other investments that don’t fit into the category of stocks, bonds, or cash and aren’t priced or valued in a way that is directly correlated with any of those. They are becoming increasingly popular among investors as a way to boost returns, generate income, and provide diversification from traditional investments. Here are some other reasons why some people choose alternative investments.
1. Seeking better returns than the traditional stock market
While many alternative investments sometimes carry higher risk profiles, they also tend to offer generous potential returns. At Nest Capital, our historical and targeted return has been 10% annually, paid monthly since inception. In a recent investor survey, our investors have stated that their returns have been “reliable” and “consistent”, as well as having a “significant positive impact financially”.
Consumers are tired of the “same old, same old” choices of stocks, bonds and traditional funds. The idea of new, innovative places to invest has caught the interest of people of all walks of life. To break out of the mould and discover fresh ways to earn solid returns on invested capital is the general goal. It can be quite lucrative too.
2. Looking for something different but understandable
Like many commercials we see now many people are feeling that the returns they have been getting (if any) have not been that great. There is an underlying current many people are feeling that there must be something else. Something proven and easily understood to diversify in. There are many other ways. Many are even passive, not involving lots of time and energy. Along with gold and other precious metals, some of the preferred diversification options include multiple versions of real estate investing, art, wine, toys, comics, books and rare coins.
3. You want higher protection against market gyrations and inflation
Many alternative investments offer direct exposure to categories like precious metals and art, both of which has a long track record of gains during inflationary periods. Many of the hard asset classes do well and are often less volatile.
4. Not as liquid advantage
Strangely enough illiquid returns have been known to generate a return premium compared to their liquid counterparts of more than 3% annually.
5. You have an interest or special knowledge
For investors who have special knowledge in areas like real estate or a strong belief system based on that or coins, precious metals or art, it makes sense to put at least a portion of one’s total portfolio stake into a sector where the investor has strong interest, specialized or expert-level knowledge.
At Nest Capital, we had a special interest in real estate. After being real estate investors for several years accumulating 10+ properties, we started investing in private mortgages and then started our own Mortgage Investment Corporation, Nest Capital.