Alternative investments are phenomena of changes in the mentality of investors, and alternative investment is a financial asset that does not fall within the traditional investment categories.
Traditional categories usually include stocks, bonds, and cash, while alternative investments include private equity or venture capital, hedge funds, futures, commodities, and derivative contracts.
Real estate is often classified as an alternative investment.
The "Planadviser" economic website published a report - written by Beth Braverman - in which he emphasized that business owners' understanding of alternative investment categories is of double importance, as it helps determine whether you can attract more investments on attractive terms, and it also provides you with other investment opportunities. Your personal or corporate money.
The most important alternative investment sectors
Although it is useful - as the author believes - that the investment portfolio be diversified, he always recommends that the proportion of alternative investments be between 30% to 70% of the portfolio, reviewing a number of the most important trends in alternative investment that are gaining strength in his opinion, which are as follows:
1. Direct investment in startups and private companies
Investors can invest directly in startups or private companies instead of investing in private equity funds. Seed funding for startups is often referred to as "angel investing".
This strategy is characterized by high returns and high risks, as many startups often fail in the end.
Investors differ in the way they evaluate these opportunities, some of them focus more on the legal aspect, while others are more interested in the management team or the size of the market and the competitive situation.
One of the most famous examples is the case of the Instagram platform, when early investors in the company managed to multiply their initial investment 312 times in less than 18 months after the company went public.
Real estate is the most common type of alternative investment (Getty Images)
2. Real estate
Real estate is the most common type of alternative investment, and it's an interesting class because it has similar characteristics to bonds, because property owners receive current cash flow from tenants who pay rent, and is similar to equity, because the goal is to increase the long-term value of the asset, which is called "appreciation." capital".
3. Collectibles
Collectibles include a wide range of items, from vintage cars to old postcards and precious watches.
Collectibles investing means buying and preserving physical items, with the hope of increasing the value of the assets over time.
As exciting and fun as investing in collectibles is, it can also be risky, due to high acquisition costs, lack of dividends or other income until they are sold, and the potential for damage to assets if not properly stored or cared for.
On the other hand, writer Amir Baloch, founder of Baluch Capital, advised - in an article on the Forbes website - some other areas for alternative investments, the most important of which are the following:
4. Artificial intelligence
The writer said that artificial intelligence investments are still in their infancy, indicating that it is possible to invest in funds that operate with artificial intelligence, analyze the market and invest for you, as these investments help get rid of headaches and invest more accurately based on the accuracy of the data, which is more accurate than any other human team evaluated.
He warned that if the investor does not understand in these technologies, it may be difficult for him to judge which of them will work.
5. Investments in healthcare
The writer indicated that investments in the field of health care are witnessing an exponential increase, especially in the wake of Covid-19, as there are a variety of ways to get involved in this asset class through pre-IPO funds or venture capital and private equity companies.
The writer warned that investing in new medical technology takes a long time to prove successful, advising investors to compensate for this through a diversified portfolio of these companies, especially those that have greater growth potential and lower risks.
The writer concluded by saying that alternative investments continue to gain momentum, noting that when it comes to investing in alternatives, it is very important to choose those that are not related to shares (publicly traded shares) and maintain a balance in your portfolio for growth, income and asset protection.