8 Alternative Investment Options You Should Consider for 2020

When you mention “alternative investments” to people, the first thing that comes in mind is something unusual or unordinary such as wine, cars, cigars or other collectibles, however, it comes as a surprise to most people that alternative investments also contain more traditional or common investments such as real estate, venture capitals or even private equity. Although these more traditional investments are included in the alternative category, I would like to talk more about the “unusual” ones and share insights that you have to keep in mind if you are looking to invest funds in 2020.

Alternative Investments Specifications

First of all, alternative investments have a diverse range of opportunities to invest in and these can be any investments that are not stocks, bonds or cash. In today’s world, the return on alternative investments can be high, however, it is also quite risky, and it might be challenging to identify which investments would bring you returns and which might bring loss as the market is changing quite fast and the liquidity is rather low. For example, hedge funds are considered as sensible investments and at the same time investments in watches or other unusual assets are becoming riskier.

Moreover, the minimum investments required may be high compared to more traditional investments and you don’t get a very clear data or market prediction for the upcoming years. The duration of alternative investments is usually considered to be from 10 to 20 years.

---

5 Main Benefits that You Can Get

1st Benefit: Wide Range of Opportunities

Alternative investments bring diversification to your portfolio and are not correlated to the traditional asset classes, which helps you to be more stable with the investments as different assets have a different reaction to the economic events that are happening in the world and affecting markets. In other words, the more your portfolio is diversified the more your volatility risk of the market is controlled.

2nd Benefit: Inflationary Protection

In most cases, your investments will hedge from inflation and wouldn’t affect negatively the value of your investment; over the years the prices and value increase instead of dropping. For example, real estate is less likely to get affected by inflation pressure as most of the time the expenses and mortgages on real estate are fixed throughout the years no matter how the economy is doing.

3rd Benefit: Less Correlation to The Stock Market

Even if the stock market drops, it would not affect your alternative investment. Alternative investments in comparison to stocks are not dependent on the stock markets. Although economic events may affect the prices and demand of tangible assets, the price of your investment will most probably not crash overnight if the world, for instance, is facing political or social issue.

4th Benefit: Direct control

Once you buy a collectible car, watch or any other tangible asset, then you automatically retain full control of your asset as opposed to buying shares of a company you may have no full control over it (for example if you buy a tangible asset its value other than the market is held by you as opposed to owning stock in a major company and having your fate in the hand of that company).

5th Benefit: High ROI

A big majority of alternative investments expose you to high risks, but at the same time you may be rewarded with high returns on investments in comparison to traditional assets.

You may get a higher return on investment on a rare tangible asset that you may have invested in, such as collectible wines or cars, and many collectors may want to acquire the piece you have. Before investing, you have to study how many pieces there are and what are the predictions of the experts in the area. The best way to make money is to buy rare collectibles that are in the best conditions and are considered as authentic and offer a high demand as opposed to the offer.

---

Types of Alternative Investments

1.     Rare Coins

Demand on valuable and old coins has increased significantly in the past 5 years and are predicted to continue growing in the next 10 years. Currently, auctions selling rare coins are breaking records and people’s interest in collecting and learning history through rare pieces is increasing. Investors that are considering to invest in rare coins can study the  PCGS3000 index to track the value of rare coins and make estimations.

Most popular coins for investment nowadays are made of precious metals, for example: Ancient gold coin of Alexander the Great “starter”, Chinese Panda gold coin, Canadian Maple Leaf golf coin, 1908 Indian Head Cent.

2.     Start-ups

Most of the start-ups are seeking investors in their early stages. The direct investment into start-up is of high risks as 90% of new companies tend to fail. On the other hand, it can also lead to a high return on investment if the company will be growing and turning into a successful and expanding enterprise. Therefore, it is advised to invest in more than 1 or even 2 new companies and in a good case scenario the annual return should be from 20% of the initial investment.

3.     Gold

Gold is one of the most common investments that is performing strongly and is not being affected as much by inflation years after years. It can serve you as an insurance against economic crisis and crashes, it is seen to gain a long-term appreciation.

There is an increase in demand for physical gold bullion from central banks worldwide as well as in the Asian middle class and it is expected to keep growing as their purchasing power will continue increasing in the upcoming years.

Additionally, gold is a well-known precious metal and it has been on the market for centuries, so the increase in supply that might drop the prices will most probably not happen as the demand of physical gold surpasses the supply.

4.     Wine

Wine gains great value over time, because of the improving quality over years of maturation. It is considered to be one of the most profitable investments. To invest in wine with high returns you need to choose the right authentic vintage, it has to be from certain geographical locations and limited production. Authentic wine has reached enormous prices and China is being a number one enthusiastic consumer for rare wines, especially coming from French regions.

Only 0.2% of wines from overall production are increasing their value on a yearly basis and it is highly recommended to consult with experts before investing in them. Also, there is a lot of fraud happening in the wine industry and you need to correctly distinguish the genuine wine from a fake one. Moreover, once you invest in wine, you have to properly store it in the right conditions with the atmospheric pressure and temperature in order to guarantee the future buyer with quality control.

5.     Timepieces

Patek Philippe, Rolex and Audemars Piguet are considered to be some of the most precious and valuable watches for collectors. Investing in luxury pieces or watches specifically, is an entertaining hobby for collectors.

Currently, the watch market is dynamic, but more and more increasing demand and low supply as watch investors are constantly looking for classic and modern rare watches. Also, the price of watches tends to increase every year due to inflation and rising production costs.

Out of all watch types, timepieces in stainless steel, gold or platinum have popularity as the value of precious metals is also rising over time.

6.     Cars

Classic or limited-edition cars are one of the best asset classes and have been financially rewarding over the past decade. For example, a classic car can increase its value rapidly and due to its rarity and its collectability. Some classic cars can even be considered artworks rather than cars.

“Blue Chip” index for classic cars can help investors identify right opportunities with the potential of value growth. The market is slowly shifting towards modern supercars as the number of young millioners and population keeps growing. However, people have to keep in mind that as higher the value of the car (iconic design and high performance) as more the maintenance will cost them before the car can be resold. Also, if the investor is planning to sell it through an auction house it will cost 25% of the total value of the car.

7.     Art

The art market is extremely complex and requires a lot of expertise when buying a piece as an investment. A lot of artists may be over or undervalued based on the demand that appears for that specific artist. Also, there are two types of art that have to be taken into consideration and each one requires a different approach.

If we take the example of modern art and artists such as Alec Monopoly who’s art pieces value have increased in the past years, it is mostly a speculative market in which demand has risen due to the specific style of art that appeals to a younger generation mostly.

If on the other hand, we take of the example of great masters or masterpieces that have been painted by renaissance artists such as Michelangelo Rembrandt or Da Vinci these pieces retain and increase in value because of their rarity and historical value.

---

In conclusion, alternative investments carry high risks, but at the same time may be financially rewarding and increase in value over time. Additionally, they offer a broader variety of investment strategies and are advantageous for diversification of investors’ portfolios.

However, before investing in alternatives, the market needs to be studied and getting an expert opinion in the area is highly recommended, in order to have a correct estimate and make sure that tangible pieces and legal documents for potential investment are authentic and correct.

---

I hope you have enjoyed reading this blog and I am looking forward to further discussing this topic with you below in the comments.

---

Bilbiography

Alternative Investment Coach (n.d.). Classic car investments. Retrieved March 3, 2020, from http://alternativeinvestmentcoach.com/luxury-items/classic-car-investments

Alternative Investment Coach (n.d.). Invest in startups. Retrieved March 7, 2020, from http://alternativeinvestmentcoach.com/angel-investing/invest-in-startups/

Blackrock (n.d.). What are alternative investments? Retrieved March 7, 2020, from https://www.blackrock.com/us/individual/education/what-are-alternative-investments

Borad, S. (n.d.). Alternative investment – meaning, features and types. Retrieved March 11, 2020, from https://efinancemanagement.com/investment-decisions/alternative-investment

Chambers, C. (2012). Five alternative investments to protect your wealth from inflation.  Retrieved March 10 2020, from https://www.forbes.com/sites/investor/2012/04/09/five-alternative-investments-to-protect-your-wealth-from-inflation/#5b524e9a6c9e

Darc Matter (2014). Benefits of having alternative investments in your portfolio. Retrieved March 12, 2020, from https://blog.darcmatter.com/benefits-alternative-investments-portfolio/

FS Investments (n.d.). Designing a goal-based portfolio. Retrieved March 11, 2020, from https://www.fsinvestments.com/learn/benefits-of-alternatives

Gallagher, T. (2020). How alternative investing can improve your portfolio. Retrieved March 12, 2020, from https://www.forbes.com/sites/theyec/2020/01/31/how-alternative-investing-can-improve-your-portfolio/#7609fe4654aa

Gerner, M. (2016). How to invest in fine wine, rare stamps and coins. Retrieved March 3, 2020, from https://www.moneyobserver.com/our-analysis/how-to-invest-fine-wine-rare-stamps-and-coins

Goldman, E. (n.d.). Classic car investments. Retrieved March 3, 2020, from http://alternativeinvestmentcoach.com/most-valuable-coins/

Gomez, O. (2017). Alternative investments: getting into watches. Retrieved March 7, 2020, from https://www.theedgemarkets.com/article/alternative-investments-getting-watches

Intelligent Partnership (2020).Gold as an alternative investment product. Retrieved March 6, 2020, from https://intelligent-partnership.com/gold-as-an-alternative-investment-product/

Intelligent Partnership (2020). Wine as an alternative investment product. Retrieved March 6, 2020, from https://intelligent-partnership.com/wine-as-an-alternative-investment-product/

Johnston, K. (2019). 5 alternative investments for 2019. Retrieved March 7, 2020, from https://www.investopedia.com/investing/alternative-investments-stock-market/

Kleyn, R. (2019). The benefits of alternative investments. Retrieved March 7, 2020, from https://www.moneyweb.co.za/moneyweb-opinion/soapbox/the-benefits-of-alternative-investments/

Lee, S. (2015). 7 common alternative investments that all investors should know.  Retrieved March 4, 2020, from https://www.thestreet.com/opinion/7-common-alternative-investments-that-all-investors-should-know-13155301

Macroption (n.d.). Designing a goal-based portfolio. Retrieved March 12, 2020, from https://www.macroption.com/alternative-investments-benefits/

McHugh, P. (n.d.). The benefits of alternative investments. Retrieved March 7, 2020, from http://www.worcesterinvestments.com/the-benefits-of-alternative-investments.php

Mehta, H. (2018). What are alternative investments. Retrieved March 9, 2020, from https://medium.com/atominvest/what-are-alternative-investments-ed003cbb817d

Nason, D. (2015). How and whether to invest in rare stamps and coins. Retrieved March 6, 2020, from https://www.cnbc.com/2015/01/10/how-and-whether-to-invest-in-rare-stamps-and-coins.html

Sepanek, E. (2017). Gold as an alternative investment. Retrieved March 11, 2020, from https://www.sbcgold.com/blog/gold-alternative-investment/

Smith, S. (2017). Classic cars top alternative investment asset classes, with 192pc growth in 10 years. Retrieved March 7, 2020, from https://www.telegraph.co.uk/investing/news/classic-cars-top-alternative-investment-asset-classes-192pc/

Wang, J. (2020). Think the stock market is expensive? Here are 14 “alternative” investment ideas. Retrieved March 11, 2020, from https://www.forbes.com/sites/jimwang/2020/01/07/think-the-stock-market-is-expensive-here-are-14-alternative-investment-ideas/#68f44e541f6f