Alternative investments are investments opportunities that are different from stocks, bonds, cash, or mutual funds, which yields a greater return. These types of investments have different characteristics and qualities than traditional investments. Some of these investments need a high amount of capital. However, some investments can be profitable within a short amount of time. If you are looking for things to invest in, here are seven different types of alternative investments:
A buy-to-let property
Before you can even consider a buy-to-let home, you'll need at least 25% of the property's valuation as a deposit for a buy-to-let mortgage, as well as a fund to cover any necessary renovations, legal fees, and emergencies (such as unexpected repairs or so-called 'void' times when you can't find a tenant). If you have at least a quarter of the property's value, this may become high return alternative investments if you choose the right property. This is important because you want a property that you can comfortably rent out for enough money to cover your mortgage payments.
As long as there are stamp collectors, rare stamps will have value. This is an example of high return alternative investments because rare stamp collections can be sold for six or even seven figures. Some companies dominate the market for collectable stamps and offer private investors ready-made portfolios of rare stamps starting at about £10,000. These companies claim that the value of rare stamps keeps on going up. However, investors should beware. Always research the dominant source of information about the value of stamps.
Land banking companies take a piece of land, parcel it up and sell it off to investors. This type of alternative investments will yield profits if the lands have been marked for future development. However, there is no development and investors are left holding a useless piece of land either in the UK or overseas. Therefore, some land banking schemes have been shut down in the past few years.
Alternative investments like gold and silver and other precious metals in your portfolio may significantly offset other assets' performance in the categories since valuable commodities like gold do not move in a cycle with standard investments. Gold is commonly regarded as a hedge against currency fluctuations and inflations. As a result, when inflations affect a particular currency's buying power – say the euro weakens against the dollar – gold prices tend to rise. Therefore, precious metals are the best alternative investments you can invest in, especially if it is a bear market.
Typical examples of commodities include grains, gold, beef, oil, and natural gas. Commodities can be an important way for investors to diversify their portfolio. This is because the price of commodities tends to move in opposition to that of stocks. Some investors also rely on commodities during periods of market volatility. One reason why the price of commodities change is because of the supply and demand factor. The scarcity of supply can impact the demand and lead to higher prices.
One of the best alternative investments is trading pairs of foreign currencies. Forex trading is one of the favourite market traders engage in. Since currencies rise and fall in value against each other, you can make money by profiting from these fluctuations as an investor. Besides trading with currencies' pairs, you can also trade with CDFs. These are interesting instruments in Forex. They allow you to speculate on the currencies' potential future values without you having to buy them.
Peer to peer lending
This rather new type of investment also comes with risks. This investment works by linking to parties; one needs money, and one has money to lend. These financial matchmakers cut out the banking intermediary. As a lender, you can get much higher interest rates than you would with a savings account. Borrowers usually pay less than with a traditional loan. The peer-to-peer platforms or websites also take a fee. In an ideal world, this system works for all parties involved. The risk lies with the borrowers. If they could not access a traditional loan and use peer-to-peer lending opportunities, they have a poor credit history or are not eligible for conventional loans.
Alternative investments are excellent options if you want other kinds of investments that can yield higher returns. You are not limited to those traditional investments. However, before you make any investments, ensure that you understand the investments' concepts and only invest the extra money.