5 best alternative investments in 2020

Alternative investments offer small and institutional investors the opportunity to diversify their portfolio. Check out everything you need to know about the best investment opportunities in this complete guide.

The main alternative investments are those investments that offer investors the opportunity to diversify their portfolio. Accordingly, anyone who hopes for the prospect of growth in their money should seriously consider each of them.

What is an alternative investment?

Investments other than these three traditional assets: cash, bonds and stocks, are known as alternative investments. These investments promise huge returns, but they are risky. The risky nature of these assets may be due to the fact that they are unregulated, in contrast to traditional asset classes.

Alternatively, alternative investments can be classified as tangible and intangible investments. Some examples of real alternative investments:

Wine
Visual Arts
Antiques
Real estate
Precious metals
Goods and natural resources

Some examples of intangible alternative investments:

Hedge funds
Private equity
Venture capital
Cryptocurrency
Derivative Contracts

Pros of Alternative Investments

Advantages of alternative investments:

Risk redistribution

Alternative investments help diversify the investor's portfolio by redistributing risk. In this case, the return on investment is not tied to stock market indicators. Thus, neither a fall in the stock market nor economic uncertainty have a significant impact on earnings.

Higher yield

There is no guarantee that profits will always be made when investing in alternative investments. However, there is a likelihood that the return on these investments will be higher than the returns on traditional investments.

Cons of Alternative Investments

The disadvantages of alternative investments are:

High cost of investment

Alternative investments can be compared with the game only for the rich, since the investor needs high capital. These assets are often sold only to accredited institutional investors. For this reason, the average investor may not be able to afford the minimum necessary amount of investment, and the same applies to the commission.

Complexity

There is also a difficulty in understanding how the system works. For starters, specific knowledge may be required when evaluating alternative investments or when determining their fair market prices. The demand structure for these assets can also be unpredictable, which complicates their valuation.

Here is a list of alternative investments to watch in 2020. They include:

1. Precious metals

Gold and silver are precious metals, and any of these assets serves as a means of accumulating value. This is because they do not rise and fall due to inflation, as is often the case with the decree. In addition, the value of gold is not tied to stocks or other assets, which allows it to maintain its value when sales occur in these markets. Thus, investors often use gold as a hedge against economic uncertainty.

How to invest in gold

Potential investors who are interested in earning income from owning gold can do this by investing in an asset directly or indirectly. Here's how:

Gold bars or coins

You can directly invest in gold by buying gold bars, such as bars, coins, etc. Gold bars or coins can be stored for a certain period of time before they are sold for profit. In addition, gold bars often have a serial number on them for security reasons. Thus, if you lose it, it is easy to track it. It also makes it easy to identify a fake. Another advantage of choosing physical gold is that investors will avoid the fees that might be incurred when investing in this asset through an ETF.

However, large gold bars are expensive to buy and sell. In the latter case, investors cannot easily sell a certain percentage of what they own. For example, if they decide to sell 20% of the ingot, part cannot be cut. Needless to say, it is easier to buy and sell small bars or coins.

Gold ETFs

Instead of looking for where to buy gold offline, you can choose exchange-traded funds (ETFs). This is another way to invest in gold, and it is a simpler process than buying physical gold. In this case, each stock purchased represents a fixed amount of gold.

Small investors can choose gold ETFs, as investment capital is lower compared to buying large gold bars or coins. Allocating 5-10% of your portfolio is often recommended to individuals who wish to invest in gold. On the other hand, the disadvantage is that fees will be charged for the purchase and sale of gold on these exchanges.

Stocks, Futures and Options

Another way to invest in gold without buying it physically is to invest indirectly through stocks, futures or options. For example, let's take futures, which would include contracts to buy a certain amount of gold at a certain date in the future and at a certain price. However, this investment method is more suitable for professional investors. For more information, see the How to Invest in Gold guide.

 

2. Cryptocurrencies

Cryptocurrencies are one of the best alternative investments. Like gold, they are also a good repository of value and serve as a means of protection from financial crises. In the same vein, the value of digital currencies is not related to the performance of stocks and bonds, so when any of these reservoirs, cryptocurrencies can grow.

In addition, the adoption of this asset class is increasing every day thanks to the efforts of institutional and small investors. And despite the recent downturn in the cryptocurrency market, there are still high assumptions that cryptocurrencies such as bitcoin will work exceptionally well in 2020 and beyond due to growing demand and reduced supply.

How to invest in cryptocurrencies

Some ways to invest in cryptocurrencies:

Cryptocurrency Trading

There are cryptocurrency exchanges where you can trade digital currencies, such as bitcoins, for profit. The investor can choose a scalper, daily trader, swing trader, position trader or trend trader. However, the level of risk is high when it comes to trading this class of assets, given that their price is very volatile.

Accordingly, knowledge, focus and patience are necessary for exchanging cryptocurrency for profit. Emotions such as fear, anger, anxiety, etc. Must be delayed so as not to make rash decisions. The advantage of trading cryptocurrencies is that they quickly make a profit. However, the speed at which profits are generated is the same at which losses can be incurred, and these losses can be even faster.

Long term holding

You can also buy an asset for long-term storage. Compared to active cryptocurrency trading, the level of risk here is lower. Therefore, investors should look for good buying opportunities in order to steadily increase their portfolio. And after months or several years, they can sell off these assets, which can lead to exponential growth.

To store cryptocurrencies, secure wallets must be used to ensure that funds are not susceptible to attack. Accordingly, cold or standalone wallets that are not connected to the Internet are often recommended. Some companies offer custody wallets that are insured for millions of dollars in case of theft or hacking of funds.

Futures contracts

Futures contracts are an indirect way of investing in cryptocurrencies. Several companies allow investors to purchase cryptocurrency contracts as their underlying asset. However, institutional investors are often the main investors in these funds. This is because the minimum investment capital is high.

 

3. Real estate

Real estate is a reliable investment that can bring huge returns to its investors. This investment vehicle works well whether the economy is in an uptrend or in a downtrend. Notably, market corrections do not occur often. And it is worth noting that only 7% of market corrections could cause a decrease in real prices by up to 20%.

Accordingly, the low risk associated with real estate investments makes it attractive. However, it is worth noting that in order to make good profit, a lot of skills and patience are required. And compared to some alternative investments, it may take longer to see meaningful results.

How to invest in real estate

Real estate investments can be made in the following ways:

Buying Property

Buying real estate, such as a house, apartment, etc., is one way of investing in real estate. For example, you can buy an apartment and rent its rooms to tenants. Here you can make an advance payment, while the bank provides the remaining necessary funds. On the other hand, the landlord has advantages, since you will receive a steady income monthly or annually.

However, being a landlord can be just as stressful as tenants can break things in the building or not pay the bill. However, you can contact the management company, which will take over the supervision of the building in terms of repairs, rent collection and much more.

Online Investment Platform

Online investment platforms such as PeerStreet, Prosper, Fundrise, etc., offer investors the opportunity to finance real estate projects, such as home renovations. Even without a good knowledge of properties, investors can make a profit. This is because these projects are often managed by professional developers.

Despite this, online investment in real estate is fraught with its own level of risk, so you should conduct thorough research, more sinking into your feet. There are also fees that you will need to pay to the company that links you to these projects. Moreover, only accredited people can invest.

Real estate or resale

Real estate trading, also known as a coup, involves buying houses and redeveloping them only for sale at a price higher than the price they purchased, along with the cost of repairs. The investor is looking for houses with a lower price, which could potentially be sold more expensive if they are reconstructed. However, there is still a level of risk when it comes to a coup. For example, repair costs must be accurately estimated in order to have the right budget.

There is also the risk of a larger mortgage being returned when the house is not yet resold. Thus, the costs of improving the building were spent, and much more is being done to cover the mortgage, while the income was not received. Accordingly, you can work with other investors to reduce risk. This is due to the fact that the purchase and management of property is carried out as part of a group, and losses are equally covered in case of failure of the project.

 

4. Peer-to-peer lending

Peer-to-peer (P2P) lending, although new, is gaining popularity. Here, P2P services offer borrowers secured and unsecured loans for various purposes. A loan can be for personal use or to finance a business. Some P2P services include Prosper, Lending Club, and PeerForm.

On the other hand, loans provided by these services were obtained from a network of investors. These investors receive fixed payments and interest every month. In this case, it is possible that the income from P2P lending will be greater than that of traditional vehicles.

As with most investments, the level of P2P lending is still at a risk level. For example, borrowers may default on their payment. These may be borrowers who found it difficult to obtain loans from other sources due to their low credit rating.

Likewise, it may not be possible to verify the data of the potential borrower before the funds are transferred to him. Some websites distribute the money that should be borrowed between several borrowers, while others allow the investor to find out whom they would like to lend.

However, investors can set criteria for lending to a borrower before their funds are released. They can also choose the most reputable P2P lending services that require extra time to evaluate a person, to find out his ability to repay even before he is financed.

Borrowers, on the other hand, benefit from P2P lending because they provide faster loans. This is due to the fact that banks do not work with P2P credit platforms, which excludes mediation. Moreover, competition between PSP lending platforms offers lower interest rates and extradition fees.

How to join a peer-to-peer lending platform

Here's how to join a peer-to-peer lending platform:

• Look for a reputable and reliable P2P lender online.
  Open an account on the platform
  Use your debit or credit card to fund your account.
  Set an interest rate or agree to a pre-set rate
  Set a fixed period of time to provide

5. Crowdfunding

Enterprises have adopted a strategy that allows interested members of the public to own shares in their company. These firms sell their stocks on crowdfunding platforms, including SeedInvest and AngelList. Thus, this gives investors the opportunity to own part of the business without creating them.

On the other hand, investors who acquire these shares automatically own part of the company. Consequently, they will have a share in the profits earned by the company. For example, General Motors acquired Cruise Automation in 2016, and the latter is a technology company created through crowdfunding. Consequently, early investors in the company benefited from the purchase.

Another example is the acquisition of Oculus Rift, a headset maker for virtual reality video games. While the company raised its $ 2,4 million in donations from 9500 people, Facebook acquired $ 2 billion. However, donors did not benefit from this investment because they donated and did not invest in the Oculus Rift.

In addition, there are benefits to crowdfunding, but investors will also risk their money if the company incurs losses. It can be said that the huge gains that must be made are synonymous with the losses that can be incurred. For example, investing in joint-stock crowdfunding enterprises has often been profitable for years. And some may be longer due to the deviation of the company from its original plan or failures that prevented the scaling of the business.

How to invest in equity crowdfunding

Equity crowdfunding investments can be made in the following ways:

Company Valuation

It is important for investors to understand what percentage they will have in the company when they invest their money. A good knowledge of their share can be obtained from terms such as evaluation before and after evaluation. A preliminary valuation describes the value of a company before an investment is made. On the other hand, the subsequent valuation is the value of the company after receiving the investment.

For example, a company may cost $ 200 before its crowdfunding event. Therefore, this is an estimate of money. After the event, a company can cost $ 000 million, and this is an estimate after payment. The future valuation of the company can be determined taking into account factors such as:

• Services
  Management team
  Comparable companies
  Market size and competition

Diversification

Given the risks of crowdfunding, it is necessary to diversify your investments. You can choose several companies with good potential for investment, and not select only one.

Hack and predictor Aviator

Alternative investments offer small and institutional investors the opportunity to diversify their portfolio. Instead of relying solely on cash, stocks, bonds, and investments that rely on brokers, investors can also make good money using these other asset classes. However, each of these investments has its own level of risk, which investors should be wary of.