Tech has been a game changer for finance. It’s making the sector more accessible to the average retail investor, with the experience of world-class institutions no more than a click or tap away. In particular, tech has broadened exposure to alternative assets, an investment class that in the past was almost exclusively reserved for the ultra-wealthy. So why should the layman care about alternative assets? Which ones present the most opportunity? And how can you go about adding them to your portfolio?
Read on to find out.
The benefits of alternative assets
“Alternative” is a broad term used to describe investments outside public equities, bonds, mutual funds, and cash. Because of their low correlation with standard equity and bond markets, alternative assets offer some powerful benefits, including higher overall return potential and acting as a hedge against inflation. They can also function effectively as part of an income investing portfolio, as well as help reduce volatility as part of a long-term diversification strategy.
Alternative investments to consider for 2023
While diversification is no guarantee of success, distributing your investments across a range of asset classes helps reduce risk overall. In terms of alternatives, there are so many flavors to choose from that investors may find they’re able to bolster their portfolio while also getting involved in areas of special interest, whether that be emerging technology or fine art.
Here are some of the best alternative investments to evaluate for 2023.
1. Venture Capital
Ever fancy yourself a shark? Diversifying your portfolio by investing in new or growing companies can be an exciting and rewarding means of building wealth.
Benefits
- Outsized return potential (think Uber or Amazon)
- Network building within the startup ecosystem
Challenges
- High volatility
- High initial capital outlay
2. Farmland
Much like residential or commercial real estate, there are a few different options open to investors who want to diversify with agricultural land, including direct ownership, farmland REITs, and/or hedge funds.
Benefits
- Equity appreciation
- Passive income generation
- Low volatility
Challenges
- Production is dependent on the weather/climate
- Limited liquidity
- Long holding periods
3. Real Estate
Traditionally a lucrative asset class, potential investors can choose to invest in real estate either directly by actively owning/managing properties, or indirectly through crowdfunding or real estate investment trusts (REITs).
Benefits
- Equity appreciation
- Generation of passive income
- Tax advantages
Challenges
- Interest rate fluctuations
- Saturated market
- High transaction costs
4. Franchising
What does it take to invest in a franchise? They have long been a favoured investment of the ultra-wealthy.
Benefits
- Recession- and inflation-resistant
- Low volatility with high-yield potential
- Equity appreciation
Challenges (of the traditional model)
- High upfront costs
- Operational expertise required
- Large time investment for franchisees
5. Wine & Whiskey
Who wouldn’t want to own a commodity that ages like … fine wine? This asset class shares many features with other collectibles as value is driven by the quality, provenance, and rarity of a given vintage.
Benefits
- Recession-resistant
- Direct ownership of a finite resource
- Consistent yield and attractive return on investment
Challenges
- Long time horizon
- High initial outlay
- Collection upkeep and insurance costs
6. Cryptocurrency
Crypto has been all over the news recently, and not for the greatest reasons. While there’s no question that the asset class is extraordinarily risky, it can still be a valuable addition to a well-balanced portfolio, especially for investors who are interested in a more aggressive strategy.
Benefits
- Outsized return potential
- Cutting-edge technology
Challenges
- Highly volatile
- Unregulated market
How to get started?
venturz.io is a one-stop shop for wealth management that offers investors exposure to hundreds of different alternative investments and private equity. If you’re an investor looking to incorporate alternative assets into your strategy, investing fractionally with venturz.io offers high earning potential and diversification in a completely passive model.