As the people are becoming more responsible financially, the charm of retail investments has increased a lot in the past 5-10 years. Although most people invest their money in traditional assets such as stocks and bonds, there are benefits to investing in alternative assets too. In this blog, we will discuss these benefits and how they stack against those of traditional assets.
What are Alternative Assets?
Alternative assets are assets for alternative investments which don’t usually correlate to the stock market and otherwise help in portfolio diversification. They can also offer tax benefits that aren’t available in traditional investments.
The following are some of the biggest advantages of alternative assets:
- They can add a diversification element that can help with high returns when bond or stock prices fall as they aren’t affected by these markets.
- Some alternative assets are able to perform during increased market volatility which helps in reducing risk.
Alternative assets come with their share of risks too. These are:
- They can be volatile compared to traditional investments like mutual funds and bonds.
- They can be complicated to work with for some investors especially since the traditional risk measurement methods don’t apply to them.
What are the Best Alternative Assets?
The following are some of the most popular alternative assets that you can get started with:
Gold
Gold is one of the oldest alternative investments in India mainly because it’s an integral part of Indian culture. However, from an investor’s perspective too, it’s a really good option. One big reason behind that it’s a hedge against inflation. So, even when stock markets crash, gold tends to perform well. Gold is also easy to convert into cash and can be used for taking small personal loans on the go too.
One thing that you want to keep in mind if you plan to invest in gold is that it’s essentially an investment in a commodity, and your overall investment in commodities should be around 3% in your portfolio.
Rare Old Coins
India, of course, is one of the oldest countries in the world and has been home to a number of civilizations. Thus, it’s seen its share of old and rare coins from the Mughal Empire, Gupta Empire, etc. and you can invest in these rare coins including the Suvarna Mohur, Anna, etc. Just bear in mind that you won’t get good returns on these anytime soon. The numismatics market is still gaining traction in India, but it’s started to grow faster in the past few years, and within the next 5-10 years it’s expected to be big enough to fetch you good returns. In other words, you can invest in rare coins if you are looking for long-term gains.
Real Estate
If you have massive savings, then real estate is a good option to consider as an alternative investment. If you are able to find a good property in a metropolitan city like Pune, Bangalore, or Delhi, then you can fetch massive returns if you wait for a decade or so as the Indian realty market is projected to touch $1 trillion by 2030 (source: economic times). Another benefit of investing in real estate is that you can earn passive income by renting the place out.
Venture Capitalism
Since we live in an age of new and innovative startups, it’s a good time to consider becoming a venture capitalist for long-term gains. In this, you basically fund startups that you think have a lot of potential and may become large profitable businesses down the road. However, in most cases, these are high risk-high reward investments. You have to be careful where you put your money at as a large number of startups do fail within the first two years only.
Bottom Line
Most finance experts recommend maintaining a good balance between traditional investments like fixed deposits, stocks, etc. and alternative investments like gold and rare coins like Suvarna Mohur. However, if you are new to the latter, then it’s best to take things slow. Don’t invest in any asset until you do your research first. You also want to cover the majority of your portfolio with traditional investments that you have a good understanding of, at least initially. Good luck!
I heard about structured products, what are these, and in which asset class these structured products Manager invest?