Alternative Investments
What Is an Alternative Investment?
Alternative investments are the non-traditional opportunities for growing your net worth. Unlike cash, stocks, or bonds, these investment options aren’t readily available to the public. They can include private investment opportunities, such as backing a small business, or purchasing tangible assets like gold. Here are some examples of alternative investments:
- Private equity
- Venture capital
- Hedge funds
- Real property
- Commodities
- Tangible assets
The regulatory requirements for alternative investments differ from traditional investments. Their securities do not have to be registered by the SEC, which can make alternative investments riskier. On the positive side, there is often a potential for greater rewards for investors.
How Alternative Investments Work
Non-traditional investments usually require a high minimum investment. While the transaction costs are lower since there is no continuous trading or selling involved, it’s sometimes difficult to sell an alternative investment. The illiquidity and high acquisition costs are significant barriers to entry. Alternative investments are also not publicly available.
In fact, some alternative investments are only available to accredited investors. An accredited investor must have a net worth exceeding $1 million (not including their home) or an annual income exceeding $200,000. These restrictions for investing in alternative investments are in place to protect the public.
It’s difficult to assess the value of alternative investments, especially when they’re unique investment opportunities. This high-risk setting comes with high potential rewards, but there are fewer regulations to protect a novice investor. Avella Private Wealth can help you access some of these alternative investments and help you better understand the risks.
Why Invest in Alternative Investments?
If alternative investments are hard to find and risky, why would you consider them? The main reason investors look for alternative investments is that they are not dependent on what the market is doing. For example, the price of gold or the worth of a small business is not tied to the stock market. Alternative investments allow you to diversify your portfolio in the truest sense.
Non-traditional investments can also serve as an inflation hedge. You can invest your money and reap immense potential rewards if you invest wisely. At Avella Private Wealth, we’re here to help you make the right investment decision for your situation and identify the alternative investments that match your investment objectives and timelines.