Business Finance, Personal Finance

Introduction To Alternate Investing

Investing isn’t just stocks, bonds and mutual funds. If the same mundane list of investments bores you, you’re not alone. It can almost seem as if investing hasn’t evolved in sync with other industries. But that’s not entirely true. In fact, the reality is actually quite the opposite. Today, there are alternative investments that will diversify your portfolio and return profits. Alternative investments are all about going beyond conventions. They can be weird, crazy, and fun as well. In this post, we’ll explore them in detail.

Defining Alternate Investment

An alternate investment is an act of putting financial capital into little-known assets with an expectation of capital appreciation and returns. Little-known assets are ones that do not belong to regular investment categories like cash, funds, and stocks. Popularly, it’s the moneyed class that are believed to do alternate investing. It is true to an extent because of high capital requirements, the unperceivable value of assets, and low liquidity. However, with due planning, your alternate investments can deliver significant returns.

Types of Alternative Investments

Many alternative investments offer high rewards. Some of them are:

1. Luxury Goods

Luxury goods can function as one of the most recognisable and accessible alternate assets to invest in the coming years. They even have the potential to compete with real estate and stock markets. Luxury goods represent brands, legends, supreme craftsmanship, rarity, exclusivity, timeless designs, attractiveness, pride and prestige, and whatnot.

Globally, here are considerable buyers who collect high-end goods like watches, apparel, cosmetics, and leather. Rolex watches from the 1980s are sold at over $30000. And if you haven’t heard of that  before, you’ve certainly heard of another product that’s gone through a similar life cycle.

There are a lot of reasons you should invest in luxury products. The perceived value of most luxury goods will appreciate or at least remain stable over time. Moreover, luxury goods are not likely to deteriorate amidst recessions or crises. It is because the buyers are from the elite class who have a high tolerance. Now, this is all the more reason why emerging countries should also see luxury goods as a potential asset class. 

For instance, the value of INR depreciated against US dollars by almost 50 percent over the last ten years. But the luxury goods could have had the same value, if not more in terms of rupees. The myth and excessive prejudice against luxury goods is worth reconsideration, especially amongst the middle-class.

2. Wine 

The saying “ageing like a fine wine”, has more to do with just taste and quality. Yes, wine is indeed a great alternative investment that would yield profits and be a less volatile asset in your portfolio.

Would you believe that fine wine has outpaced global equity markets? It’s true. Moreover, in the last fifteen years, wine yielded over 13% annualised returns.

Investment-grade wines do require a lot of research, proper storage in wine cellars, reputation, and pedigree of winemakers. Wines from first-grade wine growing regions like Ronde Valley, Burgundy, Tuscany acclaim more value over time.

Wine as an alternative investment has become easier with wine investment companies. They offer facilities, professional storage cellars, and management for a nominal annual fee.

3. Vacation properties

Vacation properties are another less explored asset class. A surprising number of people interested in real estate end up not consider vacation properties as investments. This, hopefully, will change once we realise their advantages:

  • Vacation houses are long-term, consistent, and come with a good deal of financial benefits too. 
  • You can also optimise on tax breaks. 
  • Besides, owning a vacation house means you have a perfect place to get away from the chaos of your office or monotonic environments.

However, owning a vacation property is not all peaches and cream. You need to shell out for its ambience and maintenance, pay for staff, invest in decor & garden, and dutifully promote it. On top of that, it also involves a slew of regulatory procedures from the government.

4.Music Royalties

Intellectual property has become a serious business. Musicians reap the benefits of royalties for their songs even if they had composed them decades ago. Not only musicians, but even investors can also enjoy the benefits of royalties by buying the rights for songs. There are many places where musicians showcase their work and buyers can bid for the music. 

Alternate investing in music royalties comes with perks like recurring income, no correlation to the stock market, and perpetual rights.

Future of alternate funds

The future of alternate investment as an asset class is bright and breezy. According to Preqin, alternative assets under management will rise to $17.2 trillion in 2025.

Alternate funds are too steep and do involve high risks, need a certain level of expertise and sophistication, along with the ability to pay heavy upfront costs and cover maintenance expenses. But, with adequate understanding and sustained efforts, alternate investing can provide higher benefits than conventional investments. They can be attractive as sources for raising deep pockets. At Salt, we’re excited to be seeing this a wave of adoption for this new investment strategy!

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