6 alternative investments for 2022 – GOBankingRates | Candle Made Easy

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The central theses

  • Investors should get more creative as economic risk factors such as inflation, interest rate hikes, etc. accumulate.
  • With a low correlation to traditional markets, alternative investments can help diversify your portfolio and protect your investments.
  • The best types of alternative investments include peer-to-peer lending, REITs, art, and private equity.
  • Analyze your finances carefully so you can choose the alternative investment with the right combination of risk and reward based on your goals.

A quick look at our recommended alternative investment partners

While stocks and bonds are the most common forms of investment, modern investors are looking to alternative investments as a means of diversification. This is especially true as the economy grows more precarious from inflation, potential rate hikes and other emerging concerns. If these risk factors accumulate, you should try investing in other asset classes outside of traditional markets. Thanks to advances in the investing world, accessing these different classes is now easier than ever.

Alternative investments such as cryptocurrencies, real estate, peer-to-peer lending, contemporary art and wine can help diversify your portfolio and therefore provide some protection for your investments. Many types of alternative investments have low correlation to traditional markets, making them great for diversification.

Before you invest, be sure to think about these factors:

  • Goals: Are you trying to secure your retirement savings? Maybe you want to earn more to buy a holiday home? You should clearly define your goals at the beginning of the process to define everything that follows.
  • Your personal risk tolerance: Should you go for slow, steady growth, or a riskier option with the prospect of higher returns?
  • The timeline for your investment: Are you hoping to access your returns in a year, 30 years, or something in between?
  • investment knowledge: It is important to know and understand what you are investing in and the risks involved.

Considering these factors will help you make an informed decision about what type of alternative investment is best for you based on the potential risks and rewards.

1. Private Equity REITs

  • What is it: A real estate investment trust is a company that owns income-producing residential or commercial real estate, or both.
  • Why do you need it: REITs have historically been considered good investments due to consistent dividend income and long-term real estate appreciation.
  • Our recommended partner: crowd
Crowdstreet logo

crowd

Why it stands out: CrowdStreet offers investors access to growth-oriented private commercial real estate projects with average holding periods of 5-7 years.

Advantages:

  • Free registration for those who qualify
  • A variety of offerings to choose from including apartment buildings, self storage and data centers
  • Sponsors bringing commercial deals to CrowdStreet’s marketplace are carefully screened
  • Average IRR of 18.5%

Disadvantages:

  • Serves only accredited investors, which excludes those who do not have a specific income or assets
  • High minimum investment of $25,000

What you should know: With CrowdStreet you can choose how you want to invest. You can invest in a diversified fund, invest directly in a single business, or build your own portfolio.

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2. Fractions of rental properties

  • What is it: Buying fractional rental properties allows you to invest in rental properties without fully owning them or becoming a full-fledged landlord.
  • Why do you need it: You can spread the risk across multiple properties for much less than the cost of buying entire houses, no work required, and receive passive quarterly dividend payments.
  • Our recommended partner: Arrived houses
Arrived houses

Arrived houses

Why it stands out: There are very few restrictions when it comes to investing with Arrived. The platform is open to all US citizens or residents over the age of 18, and you do not need to be an accredited investor to participate. In fact, you can start investing with as little as $100.

Advantages:

  • Low minimum investment
  • Steady returns averaging 3.2% to 7.2% per year on historical average
  • Passive income without operational responsibility

Disadvantages:

  • Minimum holding period of 5-7 years
  • Small selection of available objects

What you should know: The platform is best suited for long-term investors who prefer steady returns over big profits. You must commit for at least five years, and your return may be lower than with stocks or other investment vehicles.

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3. Contemporary Art

  • What is it: The ability to purchase shares in iconic works of art allows investors to enter the art market at a much lower price than ever before.
  • Why do you need it: One of the main advantages of investing in art is that it doesn’t correlate with other types of investments. For example, the art market is unaffected by a stock market crash because it has its own supply and demand.
  • Our recommended partner: masterpieces
Masterworks logo

masterpieces

Why it stands out: Masterworks is the premier art investment platform. It allows everyday investors to own shares in iconic works of art by artists such as Pablo Picasso, Banksy, Andy Warhol, and others.

Advantages:

  • Gives you access to contemporary art appraised at an average annual rate of 14.1% from 1995 to 2021
  • Ability to hold your investment or sell shares on the secondary market

Disadvantages:

  • The sale of Shares depends on buyers in the secondary market
  • Usually a longer holding period (3-10 years)

What you should know: All of the artwork available on the Masterworks platform has been expertly reviewed and curated by their industry-leading research team, so much of the legwork that comes with traditional art investing is done for you.

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4. Wine

  • What is it: Buying wine can be an excellent source of diversification, as long as you have the knowledge or rely on experts to choose the right bottles.
  • Why do you need it: Collectibles like fine wine generally deliver stable returns rather than the boom and bust cycles of stocks and bonds.
  • Our recommended partner: Winovest
Winovest

Winovest

Why it stands out: Vinovest offers wine lovers the opportunity to invest in their favorite liquid assets. The company’s platform allows investors to buy bottles based on individual profiles and risk tolerance.

Advantages:

  • Low minimum investment
  • Proprietary algorithms to maximize returns
  • Master sommeliers advise on the selection of the best wines
  • Purchasing power that helps drive down individual bottle prices

Disadvantages:

  • Management Fees for Storage
  • 3% prepayment penalty for withdrawing funds within three years of initial purchase
  • May take a long time to see a return

What you should know: According to Vinovest, only 1% of wine sold in grocery stores is investment grade because most wines don’t have a built-to-age structure.

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5. Peer-to-Peer Lending

  • What is it: Peer-to-peer lending allows you to lend money directly to individuals or businesses, usually through an online platform.
  • Why do you need it: Investing in peer-to-peer lending gives you access to higher returns than certain other investments such as CDs and savings accounts. You can choose which loan to issue based on the level of risk associated with each loan and borrower profile.
  • Our recommended partner: mainvest
mainvest

mainvest

Why it stands out: Mainvest removes the barriers that have long prevented ordinary people from investing directly in startups and small businesses.

Advantages:

  • No investor fees and a low $100 minimum
  • Open to non-accredited investors
  • Companies are checked in advance

Disadvantages:

  • The IRR formula messes up profit analysis
  • Your money is tied up for years
  • Illiquid – there is no secondary market

What you should know: Mainvest is designed for investors willing to take big risks to reap big rewards — but there’s more to lure than just the ROI. In what has been a brutal year for equity investors, Mainvest offers the average investor a unique kind of portfolio diversity — not to mention a good hedge against inflation — and the chance to buy into companies worth less than billions.

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6. Pre-IPO Private Equity Securities

  • What is it: Pre-IPO private equity securities allow you to own shares in startups without joining an investment or venture capital firm.
  • Why do you need it: If you’re willing to accept more risk tolerance, the potential benefits of investing in companies at this stage are much higher.
  • Our recommended partner: Linqto
Linqto

Linqto

Why it stands out: Linqto aims to make it as easy as possible for wealthy investors to buy shares in private startups that could be future unicorns. The company’s platform allows users to invest for as little as $10,000.

Advantages:

  • The minimum investment of $10,000 is much lower than what you will find at many investment firms
  • No additional fees or hidden costs
  • Comprehensive information on public companies, including ratings, risks and financials

Disadvantages:

  • You must be an accredited investor to create an account
  • Limited number of companies to invest in

What you should know: In addition to investing as an individual, you also have the option to invest with Linqto as an LLC, trust, or other legal entity.

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