If you’ve been investing for any amount of time, you’ve probably realized that every institutional investor, financial advisor, wealth manager, and individual DIY investor has slightly different investment strategies.
Yet, there’s still a single approach upon which they all agree: diversification is key.
But if it feels like you’ve pretty much maxed out all the different kinds of assets in which you can invest, today we’re going to help you find a new perspective and identify fresh investment opportunities you might not have thought of.
Digital art? Shares of actual, physical gold? Wine?
Yes, you can invest in these and more out-of-the-box asset types.
In this article, we’ll show you the best alternative investment platforms for diversification as well as one overarching platform which you can track all of your funky new assets right alongside your traditional stocks and bonds.
What We Mean by Alternative Investments
The definition of alternative assets is admittedly kinda loose.
As of right now, it’s safe to say that alternative assets are those that fall outside of the traditional stock, bond, or cash cash categories. Some alternative assets are widely recognized — like hedge funds and real estate — while others are still more unexpected — cryptocurrency and NFTs are pretty new to the scene, all things considered.
The range of alternative investments is truly wide, but here are just some of the more common types:
- Real estate
- Commodities: precious metals, agriculture products, etc.
- Cryptocurrencies: Bitcoin, Ethereum, etc.
- Insurance products: life insurance and annuities
- Venture capital for startups and small businesses
- Collectibles: baseball cards, antiques, etc.
- Private equity
- Digital properties: social media accounts, websites, etc.
Why You Should be Thinking About Alternative Investments
Despite the feeling the name can instill, alternative investments aren’t some kind of risky move.
The modern idea of diversification has been around since economist John Maynard Keynes wrote about the importance of holdings having “opposed risks” in the early 1900s. For a long while after, real estate and gold were the primary assets investors used to supplement a portfolio full of stocks and bonds.
Today, of course, there are many more types of assets on the market to help you diversify your portfolio.
Which begs the question: what is it about alternative assets that makes them a great hedge against potential losses?
Simply put, alternative assets have low correlation with the stock market, so their value doesn’t fluctuate up or down with the stock market. In most cases their value does fluctuate — some, like cryptocurrencies, are highly volatile! — but just not in lock step with traditional assets.
This leads us to why diversification matters: if a big swing rocks the stock market, a diverse portfolio with a mix of alternative and traditional investments won’t bottom out and experience permanent capital losses. Portfolio diversification has been found to generate higher returns, lower losses, and provide a buffer against risk.
In addition, returns on portfolios exercising the traditional 60% stock/40% bond mix are expected to drop a whopping 80% in the near future. Diversification is the only way modern investors can expect to create profitable portfolios in a changing and uncertain future.
A Few Things to Consider Before Diving Into Alternative Investments
Like we said, the various types of alternative investments aren’t inherently more risky — but all investment choices have some element of risk to them. Here are some things to keep in mind and help you do your due diligence before making an investment of any kind, alternative or otherwise.
- Can you afford to lose your investment? Simply put, you should never invest more into an open marketplace than you can afford to lose. The value of traded assets changes all the time. Don’t find yourself in a tough spot if that value hits zero and doesn’t bounce back for a while.
- Are you prepared to hold? Typically, the longer you spend in the market the more likely you are to make a profit from your investment. This can be even more true for volatile and young alternative assets. If you aren’t in it for the long hall, the more rare alternative assets might not be for you.
- Do you need liquid cash? Some asset types are more liquid, or spendable, than others. Cash is of course the most liquid. Gold is pretty liquid because there’s usually someone willing to take it off your hands. NFTs on the other hand may be harder to move for the price you want, as someone has to see the same value in the asset that you did when you purchased it.
- What are your investment goals? Looking for more of a passive income stream? You want to make investments that you can set and forget. Building toward a far-off goal, like retirement or sending someone to higher education? You may want to consider lower-risk asset types and lots of diversification to protect your portfolio.
- Is this investment in line with your risk tolerance? Speaking of risk, we all have an amount we’re willing to take. The farther out you are from an investment end goal (such as retirement) the more risky you can afford to be. That said, there’s no need to invest beyond your risk tolerance, even to take advantage of a juicy alternative asset.
7 Best Alternative Investment Platforms In 2022
Considering the volatility of the stock market, partially thanks to all the unprecedented world events that have happened since 2019, more investors than ever are turning toward alternative assets to balance their portfolios.
Allow us to introduce you to seven different alternative investment platforms that will empower you to get into new asset classes, where you can take advantage of fresh growth all while hedging against losses.
And it’s important to note before we get started that you don’t have to be an accredited investor or even an especially high-net-worth individual (HNWI) to use any of the follow tools.
1. DiversyFund Brings Real Estate Investing to the Masses
Alternative Asset Type: Real Estate
First up we have DiversyFund, a real estate investment trust (REIT). REITs are crowdfunding organizations that create funds which in turn purchase or build real estate. People who invest in these funds start generating returns once the real estate paid for by the fund starts producing value.
For DiversyFund in particular, one of their main goals is to put wealth-building tools into the hands of everyday investors. One way they do that is by requiring a minimum investment of $500. While that’s no paltry sum, most REIT minimums start at $1,000 and can go as high as $25,000.
DiversyFund primarily purchases apartment complexes, upgrades them, and then uses rental income increases to generate value for investors. The REIT investment platform aims for returns in the 10% to 20% range. This is a promising outlook, but it will require patience! Right now, DiversyFund doesn’t expect to reach these kinds of returns for about five years.
2. Masterworks Lets Investors Behind the Curtain of Art Collecting
Alternative Asset Type: Art
Always wanted to get into fine art but don’t have a cool million or ten laying around to buy your very own Basquiat?
With the Masterworks platform, you don’t have to purchase expensive artwork outright, instead you can buy a share of a piece from your favorite artist.
And not only buy, but also sell! Masterworks has a secondary market where users can sell their shares. Plus, investors receive proceeds if any assets in which they’ve invested sell.
Masterworks’ research has found that since 1995, contemporary art prices have appreciated yearly at over 14%. Compared to a 9.9% annual return from the S&P 500 and less than 5% from the U.S. housing market, this certainly positions art as an attractive asset for increasing portfolio gains while also ensuring diversification.
In order to start buying shares on Masterworks’ platform, interested parties must request an invitation and have a discussion with their membership team before they’re fully signed up.
3. Vinovest Caters to Both Wine and Investment Enthusiasts
Alternative Asset Type: Wine
Vinovest is a platform for, you guessed it, investing in wine!
Vinovest is the sommelier of the investing world, using a questionnaire to assess risk tolerance and investment preferences before professionals plus AI algorithms work together to select the best high-appreciating fine wines with which to fill your portfolio.
The fun thing about Vinovest is that you actually own the wines in which you invest! You can always sell them — or enjoy them yourself for a 3% early withdrawal fee.
Vinovest also has advisors on staff to help investors not only with their strategies but also with any wine-related questions.
Right now it takes $1,000 to get started on the platform, but CEO and co-founder Anthony Zhang says they’re working on a tier with no no account minimums and no minimum hold times.
4. OpenSea is the Most Popular NFT Marketplace
Alternative Asset Type: NFT
OpenSea has made a name for itself as the first and now the largest NFT marketplace.
NFTs — non-fungible tokens — represent unique digital assets, which take the form of illustrations, photos, audio clips, video clips, and plenty more. If it can exist in the digital sphere, an NFT can be created to represent it, and that NFT can be bought and sold.
On OpenSea, users can create, sell, and buy NFTs using cryptocurrency. The platform contains NFTs in tons of different categories, from art to sports, collectibles, music, photography, and more.
To use OpenSea to purchase NFTs and diversify your portfolio with digital assets, investors need to acquire digital currency, choose a wallet in which to hold this currency, connect their wallet to OpenSea, then hit the explore page to start shopping!
5. Vaulted Enables Gold Investment Without All the Weight
Alternative Asset Type: Gold
In your research about alternative investments, you may have come across gold exchange-traded funds (ETFs). Gold ETFs are commodity funds that are traded much like stocks are. They provide an opportunity to invest in gold-related assets, but not the real thing.
While there’s certainly nothing wrong with gold ETFs, they’re a dime a dozen — so we wanted to introduce you to an alternative investment platform you can use to buy shares of actual, physical gold.
Using Vaulted, investors can purchase a piece of a real gold bar. These bars are manufactured, marked with a unique serial number, and stored all at the Royal Canadian Mint. And because you own the real thing, you can also have the gold you purchased delivered to you from the mint within one week of requesting it. And of course you can also sell and buy more gold using Valted’s app.
Vaulted provides a unique way to invest in a valuable and stable alternative asset that’s fallen by the wayside somewhat in our digital world.
6. Use Mainvest to Invest in Small Businesses on the Digital “Main Street”
Alternative Asset Type: Businesses
If you don’t have the time or the resources to start your own small business, you can still invest in someone who does — and reap a return for your investment.
Mainvest is a platform where investors can access investment opportunities with 10-25% annual return targets, no investment fees, and just $100 down. These investment opportunities are small startup businesses including donut shops, diners, breweries, farms, restaurants, and more.
Each small business on Mainvest is vetted to prevent fraud and weed out bad actors. Potential investors can view tons of data including financial forecasts and the intended use of the funding. Discussion and updates tabs provide an area for investors and potential inventors to ask questions, check on funding progress, and more.
With Mainvest, the rate of return for investors is guided by the business’s gross revenue and the percentage of revenue shared every quarter. So the more you invest, the higher percentage of revenue you’ll receive.
7. Coinbase is the Go-To Crypto Platform for Alternative Investment Newbs
Alternative Asset Type: Cryptocurrency
Of course, we can’t talk about alternative assets without discussing cryptocurrency.
Coinbase is an ideal alternative investment platform for those who are newer to the crypto game. Aside from the very user-friendly interface that welcomes newbies, Coinbase takes a unique approach by rewarding investors (with crypto, of course) when they complete educational programs on the platform.
Using Coinbase, investors can manage their crypto coins in the portfolio function, store and spend their coins via the wallet, and of course buy and sell coins in the exchange. Users can even open a Coinbase Card to crypto coins or USD and borrow cash using their Bitcoin as collateral.
If you haven’t taken the dive into DIY crypto investing just yet, Coinbase is a great place to start. For more details on how to get started with crypto, read our guide Investing In Cryptocurrency: The Beginner’s Guide for Late Adopters.
How to Keep Track of Your Alternative Investment Platforms and Assets
It’s pretty easy to see how a diverse investment portfolio can get pretty complex, pretty fast.
For individual investors, there’s a strong case for using a singular platform that can help you track and understand all of your traditional and alternative assets, side by side.
Welcome to Kubera.
Kubera is the best personal balance sheet software for modern investors with modern portfolios.
What makes it so? It all starts with the custom architecture that we built to enable Kubera to integrate with hundreds of brokerage, banking, crypto, NFT, and other types of financial accounts (see a robust living list here). Account-based assets like these update in real time so you can always see and compare the value of your holdings.
And for those assets without accounts — think antiques, trading card collections, physical artwork, bottles of fine wine, and so on — or with accounts that simply don’t play nice with Kubera, you can still use our incredibly easy interface to add them to your portfolio.
Integrations with stock market and cryptocurrency tickers as well as asset experts like Zillow and EstiBot enrich your Kubera dashboard with the real-time value of alternative assets including real estate, web domains, and beyond.
Looking for a deeper understanding of the returns on all these assets — and how their performance measures up in the grand scheme of things?
Lucky for you Kubera automatically calculates IRR (internal rate of return is a more detailed version of return on investment). All you have to do is make sure current value, original cost, and cash flow are all up to date. Kubera will then automatically add in holding time for that asset and display your IRR — in your preference currency!
This is really important for investors who hold digital assets like NFTs that were purchased using cryptocurrency. When IRR is served in the same currency in which you measure the rest of your portfolio, it’s easier to understand how the value of an asset has changed and how it holds up against the rest of your portfolio and other similar assets.
To further help you keep your portfolio clean and optimized, Kubera also provides information from common indices and tickers (the S&P 500, Tesla, etc.) to give you even more context around how your portfolio is performing.
Visit our help center article to see Kubera’s IRR feature in action in an investment property scenario.
Then there’s Kubera’s recap capability, which automatically crunches all of your data to provide a really clear overview of asset and overall portfolio performance, anytime you want it.
From top to bottom, we’ve built our entire personal balance sheet platform to help you understand, organize, and optimize a modern portfolio full of traditional and alternative assets.
Want to see all of the above features and more in action? Don’t skip our how Kubera works page.
And, you can share our white-label solution with your financial advisor or wealth manager to work with Kubera alongside your favorite financial professional.