Five Alternative Investments to Diversify Your Portfolio
Hedge against risk with alternative asset classes.
Tried and true investment classes, like stocks and bonds, are a great way to build capital. What happens, however, when those markets fail to perform positively. A portfolio with a single investment class is a risk. For this reason, any investment advisor will tell you to diversify your portfolio. Alternative investments are the perfect way to protect a portfolio from the hit of failing markets.
When an investment does not fall into traditional asset classes, it is considered an alternative investment. Alternative investments are typically held by institutional investors and high net-worth individuals. Due to low liquidity, alternative investments are often difficult to handle. Many of these investments also have high minimum investments and fee structures compared to traditional investment types.
Hedging and diversification sit at the top of the list as reasons investors seek alternative asset classes since there is little correlation with standard investments. For this reason, pensions and other institutional funds will place a small portion of their portfolios in alternative investments.
The initial investment in alternative asset classes are often high but transaction fees remain low due to a lower rate of turnover. Investors often hold onto these kinds of investments longer than other types of investments, which can result in tax benefits. You will probably hold onto these investments for longer than other investments but it can result in tax benefits because investments held for over a year are subject to lower capital tax gains.
Below are five alternative investments to diversify your portfolio. Contact Goldbach Capital below to get matched with the best alternative investment for your portfolio today!
1. Classic Cars
One of the most enjoyable alternative investments is purchasing and collecting classic cars.
Prior to investing in cars, it is advised you should have a good idea of what you want in your collection. Automobiles must meet certain requirements to be considered a classic car. They generally date back at least 15 to 25 years with some unique qualities that make it interesting to collect. Unusual designs, limited production runs, condition, make and model, and rarity can determine a car’s value.
Age can signify value as well. An older version of a certain make and model is usually worth more, as long as the car is in good condition. Mileage, how much of the original car is intact, and any original documents can all influence the car’s value.
Rare cars are the creme of the crop. When choosing a classic automobile, you should know how many of the particular make, model, and year exist. Experts consider German and Italian makes, like Porsche and Ferrari, to be a great investment because the manufacturers didn’t make many cars. The less duplicates, the better.
Take a car’s history into consideration as well. The market is heavily affected by nostalgia. Buyers will often buy a car they once owned previously or have some kind of emotional attachment to.
2. Fine Art
Fine art is another kind of investment that not only can hold wealth but will also be something to enjoy in your home. Art collecting is a popular hobby for many to look at, enjoy, learn from, and preserve. Many collectors are not only finding the cultural and beauty of pieces, but are also using pieces as a means of investment.
Perks of placing your capital in art include physically owning your asset. Similar to investing in classic cars, you will be able to enjoy the art, allowing your full access in ensuring proper care, storage, and maintenance. Art can also appreciate as time goes by. The value can often rise just because a large amount of time has passed since the piece was created, though that’s not a guarantee.
Visiting public and private galleries allow you to become familiar with what is trending today and what is doing best in the market. It would also be how gather knowledge of what kind of art to place in your collection. Follow what is trending in the art world. You will learn which artists are creating the work that is selling the best. Keep in touch with known gallerists, art advisors, and be in tune with the media surrounding art.
Sculpture, glass blowing, photography, and more all hold importance in the art world and, consequently, hold value. All mediums can be great entry points for those looking to begin or build an art collection. Just do your due diligence as you would with any investment.
Investing in commodities means placing money into raw materials which are either consumed directly, like food, or used to create other products, like precious metals. Energy sources and natural resources are also considered commodities.
Individuals can invest in commodities in many different ways, such as physical raw form or using future contracts of ETPs that track a commodity index. Often times, mutual funds are used to invest in commodities. Some also buy shares in companies that profit from the value of a natural resource.
4. Foreign Currency
Through purchasing foreign currencies, individuals can hedge themselves against losing out from another investment or also gain from economic strength of offshore nations.
Foreign currency can protect an investor from a political, or other events, that could affect their current investments. Capital appreciation is also possible through investing in currencies. Similar to stocks and commodities, the value of a currency can increase, meaning the investor can profit, not just hedge.
Popular currencies includes the Swiss Franc, Chinese Yuan, and United States Dollar. Most currencies are purchased on the forex market or via ETFs.
5. International Real Estate
Not only can international real estate hedge against various investment risks, it can also open up other international investment options. Some investments in real estate can lead to residency in a new country which is advantageous for reasons ranging from a new retirement location to tax optimization. This is attractive for those looking to expatriate or those who want to earn a second passport in order to extend the amount of visa-free travel that is possible. If retiring abroad is on your retirement plan, this can play a major role in meeting this goal.
Diversify With Guidance
Are you unsure about which alternative investment would work best with your portfolio? The specialized team of Goldbach Capital can guide the way.
Goldbach Capital has the knowledge and resources to become the trusted partner of wealthy families, offering a comprehensive range of services, by combining proprietary expertise with an external pool of first-class advisors.
Each client can decide which modules he wants to engage Goldbach Capital on. Thanks to its efficient and cost-effective solutions, Goldbach Capital is a credible alternative to existing or projected in-house organizations.
We incorporate an approach of life simplification, cost cutting, and asset protection, growth, and monitoring, to integrate your family’s vision and core values to create the wealth management plan for you.