7 Alternative Investments You Can Invest in Today

When most people think about types of investments, they typically think of different types of traditional investments  – stocks, bonds, savings accounts, retirement accounts, and more. But traditional investments are only part of the story; there’s another category of investments that you should also consider – alternative investments. 

Alternative investments are financial assets that don’t fit into conventional categories. These types of investments generally have fewer regulations from the U.S. Securities and Exchange Commission (SEC)  and tend to be somewhat illiquid. Because of the lack of stringent regulations, alternative investments are often subject to a less clear legal structure than traditional investments and may be prone to investment scams and fraud. 

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When it comes to alternative investments, here are 7 products to explore:

  1. Cryptocurrency
  2. Non-Fungible Tokens
  3. Real Estate
  4. Commodities
  5. Collectibles
  6. Peer-to-Peer Lending
  7. Crowd Funding 

1. Cryptocurrency

Cryptocurrency, often referred to simply as crypto, is known as any form of currency that exists either digitally or virtually and uses cryptography to ensure secure transactions. Unlike traditional currencies that have a central issuing or regulating authority (like the government), cryptocurrencies circulate without a central monetary authority. Instead, crypto uses a decentralized system to record transactions and issue new units. 

Crypto is digital meaning that is it only generated and traded in a digital or virtual format. Additionally, because it is a digital currency, the value of most cryptocurrencies is not pegged to a fiat currency like the United States Dollar or Japanese Yen, nor is it determined by precious metals like gold or platinum. Cryptocurrencies can be mined or purchased from cryptocurrency exchanges. 

Types of Cryptocurrencies

Here are some of the most popular types of cryptocurrencies:

2. Non-Fungible Tokens

A non-fungible token (NFT) is a digital asset that represents real-world objects like art, music, in-game items, and videos. NFTs are bought and sold electronically online, often with cryptocurrency, and they are generally encoded with the same underlying software as many cryptocurrencies. Although they have been around since roughly 2014, NFTs are starting to gain notoriety now because they are becoming an increasingly popular way to buy and sell digital artwork. The market for NFTs was worth $41 billion in 2021 alone – this amount is approaching the total value of the entire global fine art market! 

NFTs are one of a kind, or at least one of a very limited run, and have unique identifying codes. They exist on a blockchain, similar to cryptocurrency. Specifically, NFTs are most popularly held on the Ethereum blockchain (although other blockchains support them as well). An NFT is created, or “minted” from digital objects that represent both tangible and intangible items, including:

Essentially, NFTs are like physical collector’s items, only digital. So instead of getting a physical painting, the investor gets a digital file and exclusive ownership rights instead. NFTs by themselves are not investments, so make sure you understand the value of the underlying asset that you are buying before you purchase the NFT. 

3. Real Estate

Real estate is considered an alternative investment when the property is an income generator. And although buying property is not cheap, investing in real estate can create a reliable cash flow stream. To turn a property into an investment, you can either rent the property to tenants or flip the property for a profit. In many real estate investment cases, you make a down payment on the property and a financial institution finances the rest. If you are looking for a financial institution to finance your investment property, we recommend finding a credit union near you. Credit unions, in many cases, have better rates on mortgage loans

There are a few ways to turn real estate into an investment property:

4. Commodities

Commodities are raw materials that are either used directly or indirectly (think precious metals, oil, agriculture products, and more) and are often overlooked as an investment product used to help diversify your portfolio. However, some experts argue that investing in commodities can help reduce risk and smoothen out returns. Commodities move based on their own highly specific market conditions. That can make them attractive trades when you’re looking to diversify your portfolio. 

Common commodities include:

There are several ways to invest in commodities, including by purchasing physical goods (like gold) or by purchasing exchange-traded funds (ETFs) that track specific commodity indexes. You can also purchase stocks of commodity-related businesses such as oil and gas producers or miners of precious metals. Commodities can be quite volatile, so it’s important to understand the risks you’re taking before making an investment. 

5. Collectibles

Collectibles are any items that are worth more now than when they were originally sold. Investing in collectibles means purchasing and maintaining physical items with the hope that the value of the assets appreciates over time. On the surface, these investments sound interesting and exciting; however, they can be riskier than other types of investments due to the high cost of acquisition, a lack of dividends or other income until they’re sold, and the potential destruction of assets if not stored or cared for properly. To get a true return on your investment in collectibles, it’s important to have the skill and experience necessary to maintain the items. 

Collectibles include a wide range of physical items, like:

When investing in collectibles, it’s important to understand how to vet dealers and discern between genuine and fake items. This is because the world of collectibles has a dark side rife with scams, con artists, and fraudsters. However, when purchased intentionally with thoughtful research, collectibles have the potential to appreciate and deliver exceptional returns. 

6. Peer-to-Peer Lending

Peer-to-peer lending (P2P), also known as “social lending” or “crowd lending” is a relatively new investing strategy. P2P lending enables individuals to obtain loans directly from other individuals, cutting out financial institutions as the middlemen. For many investors, this can be a great way to earn a passive income while also helping other people reach their own financial goals. P2P lending also offers a low barrier to entry, so investors don’t need to be millionaires to get involved. In fact, one of the most attractive aspects is that almost anyone can participate, with options available to fund loan notes in increments as small as $25. 

However, as with any other alternative investment product, there are some distinct drawbacks to P2P lending. Loans fulfilled through P2P lending are unsecured, so investors risk losing everything if the borrower is unable to make payments. Additionally, P2P loans are not insured by the federal government, which means that investors will be left empty-handed in the event that a platform fails, or a borrower can’t fulfill their payment obligations. 

7. Equity Crowdfunding

Equity crowdfunding allows startups and private businesses to raise capital from the public. In exchange for relatively small amounts of cash (sometimes as low as $100), public investors get a proportionate slice of equity in the business venture. Startups that need funding can offer shares of their company on crowdfunding sites like AngelList, CircleUp, and SeedInvest. If you invest in a company through a crowdfunding site, you own part of the company and will be rewarded if the company succeeds. 

However, there are some major risks with investing in a company through crowdfunding. For starters, if the company fails, you lose part of all your money. A business that has been capitalized through equity crowdfunding runs a greater risk of failure than one that has been funded through venture capital or other traditional means that offer seasoned professionals to help steer a start-up through early development challenges. Additionally, investing in equity crowdfunding puts you at a greater risk of fraud. Never skip the step of doing due diligence on any investment you’re considering. 

Further Resources on Alternative Investments

Here are some further resources on alternative investments.

The Bottom Line

Alternative investments offer you greater portfolio diversification and help to hedge against inflation. However, because of the lack of stringent regulations and oversight, it’s important to do your own due diligence before diving headfirst into the world of alternative investments. 

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Did You Know?

While credit unions are primarily known for providing traditional banking services, some also offer alternative investment options such as real estate investment trusts (REITs), private equity, and hedge funds. These investment options are typically not available at traditional banks, making credit unions a unique choice for those interested in diversifying their portfolios. However, it's important to note that these investments often come with higher risks and fees, so it's important to do your research and understand the potential downsides before investing.

Find the right Credit Union for you

There are more than 5000 credit unions to choose from across the U.S.