Why Are Investors Opting For Alternative Investments?

#AD

A wise man on Wall Street stated, “Don’t put all your eggs in one basket.” 

After facing a global pandemic, an impending economic recession, tumultuous stock changes, and an almost world war, we’ve realised that diversification is the key to efficient wealth management.

But in the past few years, the returns on stock and bond markets have reduced significantly.

According to Charles Schwab Corporation, returns on large-cap stocks would fall to 7.1% from April 2020 through March 2030, compared to historical returns of 10.1%.

Well, today, we have a ton of alternatives to traditional investments. You can pretty much invest in everything you use, you watch, you think, or you drink.

To better understand the possible investment options, let’s start with the basics.

What are alternative investments?

Alternative investments are all investments that go beyond traditional stocks, bonds, and mutual funds. These investments have the primary objective of diversifying the investor’s portfolios. They have the potential for higher returns than investing in traditional assets.

The variety of alternative investments is truly wide, but here are a few of the more common types:

• Real estate/commercial property
• Commodities such as precious metals, agriculture products, etc.
• Cryptocurrencies like Bitcoin, Ethereum, etc.
• Hedge Funds
• Private Equity
• Venture capital for startups and small businesses
• NFTs
• Collectibles: baseball cards, antiques, etc.
• Digital properties: social media accounts, websites, etc.
• Artwork
• Asset Leasing
• Inventory Financing
• Peer to Peer Lending
• Wine

These investment options can be easily tailored to meet an individual’s investment objectives, risk tolerance, financial objectives, and personal priorities.

Earlier alternative investments attracted only a pool of investors such as HNI, wealthy families, and some affluent retirees who were willing to take on additional risks in exchange for potentially higher returns.

But today, any investor can diversify their portfolio with alternative investments through new, upcoming platforms such as Grip.

Alternative Investments can provide an annualised return of 14-22% easily, which is quite appealing when compared to traditional stock and debt products.

However, it’s important to carefully research and evaluate any alternative investment option before deciding.

Advantages Of Alternative Investments

There are various advantages that investors can derive from delving into alternative investments. These include:

• Potential for higher returns: Alternative investments have the potential for high returns when compared to traditional investments like FDs.

• Diversification: Economist John Maynard Keynes spoke on the necessity of assets with “opposed risks” in the early 1900s. Investors recognise the value of diversifying their portfolios across asset classes and sectors. Alternative investments provide an opportunity to diversify beyond standard stocks and bonds, which can help minimise total portfolio risk. Investing in a private equity fund specialising in renewable energy projects, for example, might provide exposure to a different economic sector than a standard stock or FD investment.

• Unique characteristics of certain alternative investments: Investors may be attracted by certain unique characteristics which are found only in alternative investments that make them stand out when compared to traditional ones – which can attract certain investors. One example is cryptocurrencies – providing a digital & decentralised form of currency without being governed by any central authority or government body. This appeals particularly to those who want to take part in the development & potential growth of blockchain technology.

• Low-interest rate environment: In the past few years, the 60/40 rule of investing hasn’t performed as efficiently as in the early 1990s. To give context, the 60/40 rule states that 60% of your portfolio should contain high-risk investments like equities and the other 40% should be allocated to bonds. Therefore, investors turned their tables to alternative investments that offer potentially higher returns and great portfolio diversification opportunities.

• Potential for inflation protection: Alternative investments such as asset leasing, real estate, commodities, and infrastructure projects may offer some protection against inflation. Unlike traditional fixed-income investments, which may lose value in an inflationary environment, these alternative investments may be able to maintain or even appreciate in value.

• Low correlation with traditional investments: Alternative investments often have a low correlation with any changes in traditional investments. This provides a source of diversification that can help reduce the overall portfolio risk of an investor. For example, during a market downturn, alternative investments such as asset leasing and real estate may retain their value more effectively than any other traditional market instruments.

Examples Of Alternative Investments

Alternative investments provide a diverse variety of asset classes that are not commonly seen in regular investing portfolios. Alternative investment options include the following:

• Real Estate: This includes investing in direct real estate such as commercial property, or real estate investment trusts. With Grip Invest, you can even buy a particular share of a commercial property. Real estate investment can attract investors seeking long-term capital appreciation and short-term rental cash flow.

• Private Equity/Startup Equity: These investments involve investing in companies that are not publicly traded on the stock market. These companies are mostly high-growth potential startups or companies with long-term value. This provides a high-risk, high-return potential to investors who are looking to invest in equity. However, conducting due diligence on the company before investing or prefer investing through a registered retail platform is strongly recommended.

• Hedge Funds: Hedge Funds are investment funds that use multiple investment strategies to generate higher returns than the market standards. These funds are highly rewarding with the benefit of diversification, but they can also be risky due to investment strategies and lack of regulation.

• Commodities: Investing in commodities, such as gold or oil, can be a way to diversify a portfolio and hedge against inflation. Investors can also invest in commodities through futures contracts or ETFs.

• Art and Collectibles: These investments can provide a stable high-value appreciation over time. But the value of the instruments is subjective to personal opinions and is highly likely to be illiquid after any change in current trends.

• Asset Leasing: Asset leasing is a financial arrangement where a pool of investors chip in to purchase assets (equipment, movable, or immovable assets) that are further leased to businesses or individuals for rent. It provides a stable return with the security of the underlying assets to the investors.

• Inventory Financing: An average business spends 20-30% on inventory holding costs as a part of its supply chain to ensure a seamless production cycle. Inventory finance allows these businesses to raise capital against their inventories. This provides a great opportunity for investors to directly invest in the working of a business with the security of the inventory.

• P2P Lending: P2P lending, or peer-to-peer lending, is lending money to individuals through online platforms. It can provide a high return in a short period of time.

Top Alternative Investment Platform

Investing in alternative investments can be a bit confusing with the hundreds of platforms out there. Let’s make this easier!

Here is one such investment discovery platform that can be worth considering if you are looking to explore exciting alternative investment options.

Grip 

If you’re looking to go beyond the traditional investments for your portfolio, Grip can be a great platform for you. Grip is a multi-asset alternative investment discovery platform where you can access multiple alternative investment opportunities together. Unlike other investment platforms, this unique platform has options across the entire risk-reward spectrum.

Grip stands out as a unique and reliable alternative investment platform, offering investors more control over their investments with a focus on risk-adjusted returns.

It Offers Investment Products Such As:

• Corporate Bonds
• Asset Leasing
• Startup Equity
• Commercial Property

Why You Should Invest With Grip: 

• Rated and listed product options
• Transparency in decision making
• Monthly/quarterly payout options
• Opportunities from renowned and creditworthy partners
• Data-driven due diligence

You can start investing via Grip with a minimum amount of ₹10,000. One of the most fascinating aspects of Grip is its investor network. It has a whopping 2.5 Lakh+ investors and a 0% default rate.

To start investing with Grip, visit their website today!

Conclusion

Alternative investment may seem like a new age, fancy, rich-class concept to traditional investors. But if you own any property in real estate or invested in asset leasing, you have already made an alternative investment. With a minimum investment of just ₹10,000, you can diversify your investment or even start your investment journey.

Remember to do your own personal due diligence and consider the pros and cons of every platform before investing. Weigh out the optimal solution and start investing!