When you think about investing, most people immediately think of stocks, bonds, and cash. These are, by far, the most common, most accessible, and most liquid investments. And they’re open to everyone, regardless of how much money you have available to invest.
However, according to the CEO of Moss Point Financial in Baton Rouge, J.D. Perry, there are many other investment vehicles that aren’t linked to stock or bond performance that can make excellent counterpoints to standard investments, helping people diversify their portfolios in a bid to either increase returns or minimize risks. Some of these, like hedge funds, private equity, and venture capital require very large initial investments, anywhere from $250,000 into the multiple millions. As a result, these are generally reserved for high-net-worth individuals and institutional investors.
But there are others that are accessible to everyone, and they might deserve a place in your investment portfolio. Below, J.D. Perry of Baton Rouge reviews the top alternative investments that investors can immediately take advantage of to boost and diversify their portfolio.
There are a number of ways to invest in real estate. The most direct is to purchase rental properties. These are fairly hands-on investments, but with the right property, and good tenants, investors can generate a good monthly return.
Alternately, investors can join a real estate investment group, which pools money and then works with a management company to purchase a property. The company manages for a fee and each investor gets a portion of the total rent.
The lowest-risk path to real estate investment is a real estate investment trust. These are essentially mutual funds that use their assets to invest in real estate. Investments in the trust gain or lose value depending on how well the fund fairs in the market.
Plenty of things can fall into this category, like baseball cards, memorabilia, and other collectible items, but when it comes to investing, we’re talking about higher dollar collectibles, like art, wine, and coins.
All of these investments derive their value from the rarity of the objects collected. Fine art requires the highest investment amounts, generally $10,000 or more, but investors can enter the market for less if they’re willing to buy work from lesser-known artists.
The difficulty with investing in collectible items is that you need to know quite a bit about the industry in order to invest wisely. You don’t want to buy wine at random. You need to know the vintners, the sorts of wine they produce, and their relative popularity. In order to do well, you need to do extensive research, which may not interest some people.
Instead of investing in collectible coins, you can instead invest in gold bullion, which are gold coins, minted by sovereign governments, that derive their value from their gold content, not their relative rarity. These trade at around the price of gold, and can be bought and sold using reputable gold dealers.
During bull markets in gold, bullion can be a lucrative investment. Gold bullion can be a good long-term store of value.
Speaking of gold, commodities can be a good investment. Commodities are raw materials used for a variety of purposes, like wheat, pork bellies, copper and gold. The downside to commodity trading is the market tends to be highly volatile, so this sort of investing isn’t for the faint of heart.
Commodities are most commonly traded using futures contracts and options, which allow the purchase of a given commodity at some point in the future. The hope is that when a contract comes due, the investor will be able to buy the commodity for less than it’s worth on the open market.
The safest way to invest in commodities, however, is to purchase shares in exchange-traded funds. These are mutual funds that invest in commodities and commodity-producing companies.
Invest With Care
Any of these vehicles can help investors diversify their portfolios. However, be sure to talk with a financial advisor prior to investing to make sure they’re appropriate for your investment goals.
About J.D. Perry:
J.D. Perry of Baton Rouge, LA has the reputation of a tenacious and enthusiastic executive in the financial services industry. He is the former Chief Executive Officer of JP Global Capital Management, and the founder and President of ViaCap Partners, the parent company of Moss Point Financial and affiliated Moss Point companies. Mr. Perry brings over 20 years of experience in top management positions, with a proven track record of administering billions of dollars in investable assets.