Is Alternative Investing Right For You?

Diversify your investments with real estate, art and wine

Updated 07/03/18

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For many of us, financial planning is a completely overwhelming endeavor. Even something as simple as getting an emergency fund together can feel like a huge undertaking—and that’s before we even get into the idea of retirement planning and long-term investments. But more and more, modern financial services are getting in line with the needs of modern investors. We not only have slick banking apps, but user-friendly investment apps that take care of the work for you. And there’s another twist on investing that you might want to consider that falls outside of the normal modes. It’s called, fittingly, alternative investing and it’s actually far more straightforward than you might imagine.

Alternative investing is just, in short, alternatives to traditional investment strategies. “Broadly speaking, alternatives are investments in assets other than stocks, bonds and cash (commodities, for example) or investments using strategies that go beyond traditional ways of investing, such as long/short or arbitrage strategies,” the global investment management company BlackRock explains. “Because alternatives tend to behave differently than typical stock and bond investments, adding them to a portfolio may provide broader diversification, reduce risk, and enhance returns.”

There’s a lot of jargon, but alternative investing can actually cover a whole range of things. Hedge funds and real estate would fall in the alternative investment category, but so would investing in art, in certain companies, even in wine. Sound interesting? Here’s what you need to know.

Alternative Investing Isn’t Just For The Super Rich

As soon as you hear the words “hedge fund” you probably have images of Billions and Wolf of Wall Street flashing before your eyes—I definitely did. We often associate alternative investing with the super wealthy and assume that it’s totally out of reach for any of us mere financial mortals. But that’s not the case. CNBC reports that advisors are starting to use alternative investing for average customers. So if you’re interested, don’t be afraid to do some research or ask a professional to look into it for you.

But You Should Walk Before You Run

Hearing that you can invest in wine, art, or even a nice Chanel bag might sound tempting, but it’s important to be realistic—a good Merlot is not a retirement plan. A basic investment strategy should include an emergency fund—many experts recommend that this includes six full months of expenses set aside before you do anything else. You should also look into retirement options offered by your company, basic IRAs, and other traditional methods. The point of alternative investing is that it’s a chance to further diversify your accounts, to protect you against risks. So make sure you’re covering the basic firsts—and no, a closet full of handbags doesn’t count.

You Need To Understand The Risks Of. Any. Investment

Alternative investment seems glossy and exciting—and there is the potential for huge rewards. But there are also a lot of potential risks. Because traditional investments can sometimes be frustratingly slow to grow, it can be tempting to jump into something flashier. But all investments have risks and understanding alternative investment risks is so important. Many of them are illiquid, so it’s difficult to retrieve your money and they’re not always researched and protected in the same way as traditional investments. Do your research, talk to a professional, and remember if something sounds too good to be true...well, you know the drill.

There Are Investments Available That Reflect Your Values

One of the benefits of alternative investing is the opportunity to find investments that reflect your values and find companies that you genuinely feel like you want to support. Investing can be an anonymous and sterile process, but more and more investors—especially women—want to buck the trend of investing in a huge system with a competitive ethos they don’t agree with. Finding alternative opportunities can feel like a more ethical way to invest, at least for some people. Even if alternative investing isn’t for you, it’s a good reminder that you can look outside of traditional means—and try to find ways to invest that sit better with your moral compass.

Investing can be a very confusing process—so try to wade through the jargon and the promises and make sure that you’re approaching it with a clear head. Make sure that your emergency fund is taken care of, make sure you're maximizing your company’s retirement options or your self-employed options. Take care of the basics. Then, do your research and you might want to consider alternative investing. Just make sure that you understand the risks—because there are always risks.

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