8 Alternative Investing Strategies to Consider in 2022

Stocks and bonds are traditional investments that form the bulk of many people’s portfolios, and it’s generally recommended by financial advisors to have a significant portion of your savings in these asset classes. However, we believe designating some of your portfolio for alternative investments can complement stocks/bonds by adding diversification.

Here are eight alternative investment strategies that we think could add higher potential returns, risk reduction or inflation protection to your overall portfolio.

Structured Investment Products

Structured investment products typically offer more guaranteed returns. These returns might be lower than what other asset classes provide, but we think the trade-off greatly reduces the risk of loss.

One of the most common structured investment products is annuities, which might be purchased within or outside of a whole life insurance policy.

Who It’s For: We think the guaranteed return potential of structured investment products can be reassuring as you reach your senior years and will need to rely on savings. The potential of guaranteed returns also helps make future financial planning simpler.

Precious Metals

Precious metals are one of the most common alternative investments often cited as a hedge against inflation (whether or not that is still true today is another story).¹ Metals’ primary benefit is that they’re largely disconnected from the stock market, the bond market and the dollar.

Gold is the most popular precious metal, but silver, palladium, platinum and copper (semi-precious) can also be purchased.

Who It’s For: We believe non-speculative investors may benefit from diversifying their portfolios and placing a small allocation into precious metals.

Other Commodities

Precious metals are one of many different commodities that may have a role within an overall investment strategy. Commodities can serve as a high-risk investment that seeks to take advantage of a current geopolitical or economic situation. They also can be low-risk investments that strive to provide a hedge against stock market crashes and/or inflation.

Investors can purchase individual commodities or shares in ETFs that broadly invest in commodities. Many investors target specific sectors, such as oil, minerals, iron/steel, industrial chemicals or others.

Who It’s For: Commodities can provide diversification but sometimes are volatile.² We believe investors who want an alternative investment and can stomach significant swings may want to consider them.

Cryptocurrencies

Cryptocurrencies are a new alternative asset class that’s slowly gaining traction among small and large investors alike. There are many unknowns with crypto, and prices can be extremely volatile. It’s an investment strategy that’s truly different from any other.

Bitcoin is the most well-known cryptocurrency. Others include Etherium, Solara, Tether, Shiba Inu and hundreds (or thousands) of others.

Who It’s For: Some investors are still hesitant to purchase cryptocurrency, because there are lots of unknowns and extreme volatility. We believe a growing number of investors see a bright future for the speculative investment class, however, and are willing to risk high losses for high potential gains.

Collectibles

Collectibles are perhaps the most alternative investment to own. They are highly illiquid, so you can’t count on selling them quickly for cash. The collectibles market is also inefficient, which means that investors who have knowledge of a certain collectible might see opportunities for quick gains. Long term, these assets may appreciate at a decent rate.

You can invest in collectibles directly by purchasing rare books, wines, watches, art, coins, stamps or any other sought-after goods. A growing number of investment portfolios that focus on a specific collectible class are becoming available as well.

Who It’s For: Designating a small portion of any portfolio for collectibles can be fun. We think people who have in-depth knowledge of a particular collectible type can also potentially find great opportunities in the inefficient market.

Private Equity Funds/Venture Capital

Private equity and venture capital firms invest in startup and high-growth businesses that aren’t publicly traded on the stock market. These businesses often present more risk than publicly-listed companies, but through our research, we think there is potential for greater returns.

Private equity and venture capital firms generally only can allow accredited investors to invest with them. Accredited investors either have $1 million in assets or earn $200,000 ($300,000 with a spouse) annually.

Who It’s For: Private equity/venture capital can give high net worth investors access to businesses that have high potential returns. We believe investors who already have sizable stock positions may want to consider supplementing their portfolio with this investment strategy.

Hedge Funds

Hedge funds normally use leverage and short-term strategies to seek returns that outperform stock market benchmarks. These funds are professionally managed and can employ a variety of investment strategies, often pivoting asset classes and strategies according to current market conditions.

Like private equity/venture capital, hedge funds are usually available to only accredited investors.

Who It’s For: Hedge funds seek to provide high net worth investors access to potentially high returns. We believe this may complement a stock position or serve as a primary investment strategy for ultra-high net worth individuals.

Real Estate

Real estate is a broad class that encompasses virtually all property investments. Properties can offer cash flow, appreciation or returns in other forms, and investors can use leverage to increase potential returns. As a physical asset, the class has a significantly low correlation to stocks and bonds.

You can invest in real estate by purchasing individual single-family residential, multi-unit residential, commercial, industrial or undeveloped properties. Real estate investment trusts (REITs) invest in many large-scale properties by pooling investors’ capital.

Who It’s For: We believe any investor can benefit from the diversification and potential returns real estate offers. The asset class can be extremely hands-on if you actively manage properties as a landlord, or entirely hands-off if you contribute to a REIT.

Invest in Real Estate with EquityMultiple

If you’re interested in private real estate as an alternative to the stock and bond markets, look at the investment opportunities that EquityMultiple affords. You’ll find access to offerings across property types, markets and risk/return profiles available to accredited investors.

To learn more about EquityMultiple, please feel free to check out our Track Record, or contact Investor Relations for more information.

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¹Source: Investopedia (as of April 21, 2021). 

²Source: The Balance (as of February 27, 2022).

This document is for informational purposes only and is not an offer or solicitation to purchase or sell securities. Investing involves risks, including the potential for principal loss. There is no guarantee that the strategies and services will be successful or outperform other strategies and services. Certain assumptions may have been made in connection with the analysis presented herein, and changes to the assumptions may have a material impact on the analysis or results.

Past performance is no guarantee of future results. The investments discussed herein may be unsuitable for investors depending on their specific investment objectives and financial position. Investors should independently evaluate each investment discussed in the context of their own objectives, risk profile and circumstances.

All opinions expressed herein constitute the author’s judgement as of the date of this article and are subject to change without notice. Statements made are not facts, including statements regarding trends, market conditions and the experience or expertise of author are based on current expectations, estimates, opinions and/or beliefs. Such statements are not facts and involve known and unknown risks, uncertainties and other factors. Past events and trends do not predict or guarantee or indicate future events or results.