When we think about the investment market, our minds often jump to the usual suspects: stocks, bonds, or the stock market. Yet, beyond these conventional choices lies a different possibility—yes, we’re talking about alternative investments.
According to the 2023 EY Global Wealth Research Report, despite the market’s ups and downs and the heat of inflation in 2022, most investors kept their cool regarding their alternative investments. In fact, over half of them, 56%, didn’t tweak their strategy. Meanwhile, 27% doubled and invested even more, while only 17% pulled back.
Interestingly, private equity claimed the spotlight among all the alternative investments by outperforming the well-known S&P 500, marking its territory as a front-runner.
What is all the buzz about, and why are investors prioritizing alternative investments? So, let’s dig in!
What is an Alternative Investment?
Alternative investments are financial assets that don’t fit the traditional categories of stocks, bonds, or cash. Instead, it includes (but not limited to) the following:
- Real Estate: From buying a piece of land to investing in residential or commercial properties, real estate is a tangible way to grow wealth.
- Private Equity: This is all about investing in companies not listed on the stock market, offering a chance to be part of something potentially groundbreaking.
- Commodities: Think gold, oil, or even wheat. Commodities let you invest in raw materials that the world needs and uses daily.
- Hedge Funds are like exclusive clubs where investors pool their money to invest in a wide range of assets, often using advanced investment strategies.
- Art and Collectibles: Ever thought a painting or a vintage wine collection could be an investment? Well, in the alternative world, they are.
Who Can Dive Into Alternative Investments?
Investing in alternative investments is reserved for those with deep pockets or insider market knowledge. But that’s not entirely true. While it’s accurate that some alternatives require a hefty initial investment, there’s a growing accessibility thanks to investment platforms and funds designed for the average investor.
Vandewater, a U.S.-based private equity firm, is a prime example of this shift towards inclusivity. Since 2008, Vandewater has been at the forefront of acquiring and operating private companies across diverse sectors, including heavy industry, clean energy, technology, financial services, and real estate.
Their global investment footprint underscores a commitment to diversify not only across industries but geographically as well.
| One of Vandewater’s notable endeavors is the JEA Credit Opportunities project. Here, the company took the initiative to acquire and manage around a thousand whole residential loans from national banks across all 50 states. This ambitious project was a financial investment and a lifeline to homeowners, offering nearly $50M in loan balance reductions. Such actions demonstrate how alternative investment firms can extend beyond mere profit-making, contributing to societal benefits by providing financial relief and stability to families nationwide. |
To cut a long story short, whether you’re saving up for retirement or looking to diversify your portfolio, there’s likely an alternative investment that fits your budget and risk appetite.
Why Alternative Investments Are So Popular?
As of now, you might have had a bit of an idea as to why these investments are catching everyone’s attention. However, if you are still skeptical or confused about it, here are a few reasons:
Diversification
As you may already know, putting all your eggs in one basket is never a good idea, especially regarding your money. Alternative investments offer a way to spread your risk by having a mix of assets that don’t move in the same direction as the stock market.
Potential for High Returns
Who doesn’t love the idea of making more money? While these investments come with risks, they also offer the allure of potentially higher returns than traditional investments.
Inflation Protection
With the rising cost of living, you must have investments to keep up. Many alternative investments, like real estate and commodities, tend to rise with inflation, which protects your buying power.
But of course, as with any investment, these can get complex or tricky. So, working with a reputed company and seeking their advice to tailor your investment strategy is wise.
Final Thoughts
Alternative investments offer great opportunities. However, first, you must do your homework and start small. Also, work with financial advisors as they can provide valuable insights and guidance tailored to your personal goals and risk tolerance. They can help you navigate the complexities of alternative investments and make informed decisions.
Remember, investing is a marathon, not a sprint. Understanding and carefully considering your investment choices can lead to a more robust and resilient financial future.