Nine Original Alternative Assets to Consider When Investing
An alternative asset is an asset that isn’t cash, stocks, or bonds.
Gold or cryptocurrencies are among the most popular alternative assets today.
In this article, we have a look at nine other options investors can consider to diversify their portfolios.
1. Paintings and Art
Investing in art can make one significantly rich provided they invest in the right artists.
Indeed, the value of a piece of art mostly depends on the popularity of the creator. The more popular, the more expensive the art will be.
Art is part of these investment classes whose assigned value is mainly extrinsic.
When Van Gogh was alive, few cared about his paintings, so they weren’t worth much.
On the other hand, Picasso, because he was considered a great artist already, sold paintings for millions.
While it’s possible to become fabulously rich when investing in art, it demands an acute knowledge of art history and of the business of art to spot trends and artists that have great potential.
It also demands time, at least 10 years, before a certain piece of art can be sold for a profit.
Most investors that invest in art don’t primarily do so for financial reasons, but for entertainment.
2. Vending Machines
Vending machines is an original yet highly lucrative investment.
Vending machines can earn between €300 and €700 per month and cost a few thousand euros to buy.
Once the machine is placed, all there is to do is to fill it up regularly for customers.
While this type of asset does not demand as much attention as a full-fledge company, it’s also not entirely passive.
However, it carries very little risk and the original investment can be recouped in a few months.
3. Domain Names
Investing in domain names is an easy, low-risk investment that can end up being really rewarding.
A domain name is simply the address of a website on the internet.
Landex.ai is the domain name of LandEx, for example.
So, how does domain name investing work?
It’s all about buying great names before they become obvious trends.
For example, the domain name bitcoin.com was likely cheap to buy before the invention of bitcoin.
Likewise, Facebook is rumored to have spent more than $6 million to acquire fb.com.
If you see an up and coming trend, or find out that a new term, concept or name does not yet have a website, you can buy this domain and wait for someone to contact you to buy it at a more expensive price.
Many platforms today enable investors to loan their money to someone else and get up to 12% in interest rates.
These platforms operate consumer loans, real estate loans, invoice financing, farming assets, and many others.
The upside of P2P loans is the great returns. However, great returns also often mean great risks.
In case the borrower goes bankrupt, the lender loses the invested sum.
As a result, investors should be extra careful when investing in these companies.
5. Real Estate
The latest real estate trend is the construction of ADUs, or adjacent dwelling units. ADUs are small studios or apartments part of a bigger lot.
Depending on their size and architecture, ADUs can offer investors great returns and a recoup of their investment in a few years.
The downside is that it demands time and attention.
Like real estate in general, ADUs owners must find tenants to rent out their units to, collect rent, repair what’s broken, and maintain the property.
Real estate is generally low-risk, but it’s not completely passive and the initial investment is important.
Watches are, such as art, pure “buy and hold” assets.
So, what makes a watch valuable? The first characteristic is its rarity. Rare watches, for the sake of being rare, are more expensive.
Your investment is more likely to go up if you buy a watch that is sold in a limited edition, than not.
The state of the watch is the second factor to pay attention to. Damaged watches will be worth less than watches that seem brand new.
The brand is the third factor. Established brands such as Rolex, Patek Philippe, or Omega almost always increase in value over time.
Most of the time, you will be better off buying a watch used than new. Watches are like cars. The value decreases as soon as you’ve bought them.
This is why many watch investors buy second-hand watches and then wait for them to appreciate.
This trend is visible in the watch market.
The six most expensive watches on Farfetch have all already been worn.
Finally, the supply and demand for a watch is the last factor that will influence its value.
The most expensive watch ever sold cost €29.47 million.
Wine isn’t an obvious asset to invest in.
But the fact that some wines literally improve over time makes it a good contender in the realm of alternative assets.
The value of wine depends on three criteria.
The first one is its nature. Some low-quality wines will not be great investments; other types of wine that can age from 10 to 20 years are much more interesting.
Not all wines are equal. This is why investors that wish to diversify by investing in wine should know exactly which types of wine are worth waiting for.
The second criterion is the brand. Some brands, old and with a good reputation, will be worth more than the most recent players on the market.
The third criterion is supply and demand.
Looking at historical data, we can see that wine has been appreciating by 10.6% yearly over the last 30 years.
Another advantage is that its performances are uncorrelated to the stock market.
8. Camping Cars
Camping car, motorhome, or camper van are all words describing the same thing: a big car in which you can live.
Camping cars can earn investors money by being rented out.
Very much like an Airbnb, a camping car can net its owners €500–€3000 per month. The investment can be recouped in less than a year.
The problem with camping cars is that they need to be maintained and at times, repaired.
Much like vending machines, they need to be taken care of.
The returns are high, the owner directly controls the asset, but it’s not exactly passive.
The last asset on our list is farmland.
If you are a regular reader of this blog, you know that farmland is a great asset because:
- It exists in finite quantity, so its price keeps on increasing.
- The demand for farmland is growing due to a growing population.
- It’s uncorrelated to the stock market.
- It increases in value with inflation
- It is not volatile
Farmland also provides investors with a dividend, and are taken care of by a farmer which makes it rather passive.
One of the main advantages of alternative assets is that they are uncorrelated to the stock market and are not as volatile.
These characteristics make alternative assets an excellent option for investors that want to decrease risks by diversifying, especially in dangerous times of overvaluation like the ones we’re in now.