Investing

All Investors Should Know About These 7 Common Alternative Investments

For many, investing implies putting money into stocks and waiting until you make a profit. However, that’s a very surface-level understanding of the process. Investing is a one-part art and one-part skill. It requires quite a bit of knowledge and the ability to see patterns and trends for what they truly are. If you know your business, you can make a bunch of money by just looking into the right avenues of investment. Being diligent in research is a big part of successful investing, which is why it’s important to get acquainted with the many different things that can become part of your own portfolio. Here are some of the most interesting alternative examples.

Peer-to-peer lending

The interconnectedness of today’s world has paved the way to some very creative new avenues of investment. Once upon a time, banks were the only way you could get a large loan with good interest rates. The only other alternative people could find were loan sharks, but they are considered predatory practices with extremely high interest.

Today, you don’t have to turn to large institutions in order to get your loans. You could find an individual or collective of investors and simply loan their money. More importantly, you could just as easily become the loaning party. By pooling your money with other like-minded investors, you can give out a significant amount of money to people and then collect on the interest and returns. In fact, some investors estimate that the returns from peer to peer lending are actually higher than a lot of standard saving investments.

The only risk involved with peer to peer lending is the fact that you’re not always going to lend your money to trustworthy individuals. A lot of people that loan money from P2P lending companies does it to avoid the hassle of dealing with banks and restrictions. However, there are also those who were simply rejected by banks for having low credit or unreliable funds, which is why they turned to peer to peer companies. This is something to keep in mind when you’re reviewing their financial records. You and the other investors are given the opportunity to pick and choose your clients so that every investment you make ends up profitable. Even in the event of the occasional default, you’ll find that it’s still a profitable venture.

Gold

Gold has gone in and out of fashion for hundreds of years now. Despite this, it has consistently proven itself to be a stable investment. It’s not without reason that there are entire groups dedicated to creating a gold standard for governments and investments. Gold is considered a very tangible inflation hedge which rivals even stocks. It’s a very liquid asset which isn’t all that difficult to cash in.

One of the many reasons gold is such a sought-after asset class is because of its longevity and stability. You’ll rarely hear about an event like a gold crash or huge market fluctuation. Even in times when the rest of the market is unstable, you will find that gold usually keeps its ground just fine. Because of this, it’s considered somewhat of a “rescue asset”. It has a very low correlation with any other classes of assets and investments, which means that their fluctuations don’t affect gold at all.

The best part of gold is that there are several ways to invest in it. You don’t have to actually go outside and purchase a certain weight of gold in order to get your asset. Having gold bars lining your home might make you feel like a million bucks, but there’s no reason you should turn your house into Fort Knox. Instead, most investors that are interested in the gold market will often invest in what is called a “gold exchange-traded fund”. These allow you to treat gold like many other investment funds and simply wait for it to grow in value without doing much else. It’s a sound investment for those with the funds to invest and wait.

If you’re investing on a much smaller scale, you might want to consider actually buying physical gold to keep with you. Coins, bars, and gold bullions are just some of the many forms of gold that are offered to investors that are looking to save this stable form of proto-currency. However, the golden rule of investing still applies, even when you’re buying something as stable as gold. Remember to diversify your investments. For a healthy and functional portfolio, investing fifteen percent of your funds in gold is considered a pretty good idea. The further allocation might not be necessary, as you can use those funds for some more dynamic investments in order to see some quick profits.

Starting your own business

If you want to invest in something concrete that can create a tangible product, taking things into your own hands might be a good idea. What better way to have control over your investment than actually being in control of the money-making machine?

Managing your own business is a massive undertaking. You have to take into consideration a bunch of different things. For starters, you have to have a realistic view of your own talents and abilities. Are you able to succeed in the line of work you want to dabble in?

Investing in your own business is pretty straightforward. If you’re looking to start a restaurant, you’re going to want to improve the location and quality of the food. On the other hand, something like a tech startup will require fresh minds for research and development of new ideas.

Running a company requires quite a bit of work and dedication on the part of the owner. You have to make sure everything is running like a well-oiled machine. Employees need to be recruited and you have to strive for improvement. Even then, if your idea isn’t profitable, you’re not going to see any cash flow. It requires a lot of foresight and meticulous planning in order to reach any semblance of success. However, once you’ve made it, the investment can pay off big time. Not only do you get a lot of money for your invested funds, but you also get the pride that goes with starting a successful company.

Equity in crowdfunding businesses

Running a business is fine and dandy, but why would you subject your funds to that kind of risk? Considering the fact that running a business also requires quite a bit of effort in part of the business owner, it would be much better if you could just invest, sit back, and wait for the money to pile up. Luckily, you can do a bit of both.

Those already familiar with investing will know that this is how stocks function. You buy a certain percentage of a company that you trust, and then you wait and hope that the stocks you purchased will continually rise in value. However, this kind of equity is a bit different.

You’re not investing in an already established company that has a following and a place in the market. Instead, you’re banking on the idea that a new startup company is eventually going to be successful enough for the investment to pay off. It seems like a pretty big risk on the part of crowdfunding investors, but there are tons of benefits that come from the investment.

For starters, you aren’t getting a tiny percentage of the company. The creators are often very enthusiastic about their work, which is why they will offer a huge percentage of their startup company to the initial investors, simply because they want their dream company to be realized.

The risks are high, but the rewards are potentially even higher. Famous companies like Cruise Automation have been crowdfunded into existence and their success is well documented. Investors see an extremely high potential in profit from these types of companies, but this potential is lost if the company fails to get out of the planning stage.

Real estate

Real estate isn’t exactly an alternative method of investing, but the way you use it can be pretty creative. The currents trends in real estate include flipping houses and renting them out to tenants. For house flipping, you need a creative touch to go along with your knowledge of investing. A lot of people simply don’t have the time to renovate the real estate properties they decide to purchase. On the other hand, the job of a landlord has quite a few responsibilities that go along with it. Things can break and require replacing and tenants aren’t always on time with their payments. It’s steady money, but it also requires a fair share of work. Some creative investors have made it their mission to turn real estate business into an even easier investment.

You can enter into a partnership with some like-minded investors in order to properly invest in real estate properties. When you’re on your own, you might ask for a loan from the bank in order to make down payments on a new property. The monthly mortgage payments are then compensated by the regular payments of your tenants and you can make money off of the appreciation of the home. With the help of other investors, you can turn this into an even more profitable venture. With additional funds and financial security, you can get much better deals from the bank for properties.

When you manage a property together as a collective, the workload is much easier to handle. You can pool your funds and also invest in a property management company. They would take on the responsibilities of taking care of the property while you and the other investors simply bankroll the process. In the end, the only thing you have to do in the whole process is to invest some funds into the project. The end result is the same. You have a bunch of profit from the properties that you jointly purchased, without actually having to put in any amount of additional work.

The only issue you might face is finding the right like-minded investors to join you in this business venture. If you’re figuring out the trend in modern investing, you might have predicted that there’s a shortcut for that as well. There are tons of online investment platforms that focus on real estate business. They allow you to crowdfund investments in residential properties without having to lift a finger. You don’t have to deal with being a landlord and you don’t even have to find the other people that might want to invest in the properties. The websites and their managers do it all for you. They will incur a small fee for their services, but that’s hardly a cost when you compare the benefits that you gain.

Diamonds

Using precious gems as an investment opportunity is a time-honoured tradition. They are very similar to gold in this regard. The main difference is that they aren’t usually cooped up in safes and under floorboards. You will usually see precious stones on display on various jewellery and in auction houses. This is because diamonds have proven themselves to be assets with very high liquidity. You purchase one and you’re already on your way to sell it in a different form the next day.

Knowing how diamond investing works is important before you dip your toes into the business. While gold might be measured by its worth alone, diamonds are a bit more complex. You have four attributes that determine their worth. Their weight, which is also known as a carat, is the most commonly recognized figure. Basically, it tells you how big the diamond is. Inexperienced investors look at this number and consider it more than enough to warrant interest. However, this is a mistake that you should avoid. The way the diamond is cut is way more important. A well-cut small diamond is worth tons more than a mediocre large diamond.

The colour and clarity of a diamond are the real sales pitch. People want to have brilliant and colourful gemstones on their jewellery and they’ll pay a hefty price for something that is well cut and inside a beautiful encasing.

A high-value diamonds investment could set you up for life if done properly. If you treat diamonds like any other liquid asset, it can make a great addition to your investment portfolio. The first thing you should look into are the various channels for selling diamonds and diamond jewellery. There is a variety that you can choose from.

Cryptocurrency

Why invest in something tangible when that can be manipulated by external factors? This is the question millions of people have been asking themselves for the last couple of years. Investors are looking into currencies that don’t fit the usual mould of what we consider a currency.

Cryptocurrencies like Bitcoin have grown exponentially popular since the early 2010s. You have hundreds of different coins that exist only in online wallets and their worth is measured by how many there are in circulation. The question on many investor’s minds is: how do they work?

Those who haven’t yet delved deeper into the world of crypto are probably wondering how people verify that these coins exist. After all, if they are just strings of binary code in someone’s computer, it’s possible that someone could produce them from thin air and create counterfeits. And yet, there has been no imaginary inflation of these coins from false sources. This is because cryptocurrency uses a revolutionary system called a blockchain. Every single transaction in the world is actually recorded onto a blockchain ledger. Everyone also has a copy of this ledger, so you can’t sell the same coin twice. On the other hand, this also lets you verify every single purchase you’ve had with your computer and wallet. This makes it effectively impossible to forge coins and transactions within the blockchain.

Bitcoin and its likes are considered a very controversial topic in today’s market. They have several different uses. They can be used as actual currency and as an investment. The issue many banks and governments have with crypto is that it circumvents banks. There might be a way to verify transactions between clients, but you have no idea where the transactions came from. It’s impossible to track and tax them accordingly. The coins themselves have a value that is constantly fluctuating, which is why some people treat them as an asset that can be invested in. If you purchase a couple of coins and wait for their price to rise before selling them, they effectively become a kind of stock.

Conclusion

Investing is a skill that needs to be carefully honed in order to produce results. You start off small and end up at the helm of a financial empire. It requires both patience and knowledge that isn’t easily acquired. Whatever path you take towards your investment goals, you can rest easy knowing that all it takes is a bit of dedication and a lot of diversification.

Contributed by Lucas H. Parker, member of the team at https://www.diamondportfolio.com.au/

A post by Lucas H. Parker (2 Posts)

Lucas H. Parker is author at LeraBlog. The author's views are entirely their own and may not reflect the views and opinions of LeraBlog staff.

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