Alternative investing allows institutional and regular investors to create wealth and not rely on traditional assets such as stocks and bonds.

Most people associate real estate with alternative investments. There are many other investments that you can make to increase your portfolio, such as fine wine.

Let’s look at the best alternative investments to make to your portfolio. This includes fine wine, real property, and gold.

Fine wine

Fine wine can be an excellent investment option to help you generate passive income as an alternative asset class.

Fine wine is an excellent investment alternative because of its limited supply and high demand.

Only 1% are investment-worthy wines, making it extremely difficult to find them and start investing. As wine is consumed, bought, and lost each year, the supply of wine decreases.

Additionally, exceptional wines are in high demand and have a low demand elasticity. This is an indicator of price changes that can affect demand.

Even if good wine prices rise, the demand doesn’t change.

But What will your returns look like?

Fine wine has produced steady and positive returns of 13.6% in the past 15 years. The market grew by 23% in 2021!

The global stock market also correlates poorly with fine wine. The S&P 500 has had an 8.58% annualized return over the past 15 years, compared with fine wine’s 13.6%.

How do you invest in wine?

There are many ways to start investing in wine:

  • You can buy and store your bottles.
  • Bid at Wine Auctions.
  • Broker – Purchase wine
  • Invest in Wine-Stocks.

It can be not easy to know which vintages you like and find a reliable broker. Furthermore, finding a temperature-controlled storage facility can be costly.

Real Estate

Real estate investment also makes a high passive income. But, buying property isn’t cheap.

These are just a few ways to get started on your real estate investment journey.

  • Commercial real estate that generates income
  • Lease out a property you already own
  • Flipping real property (developing and selling real estate properties).
  • Putting money into Real Estate Investment Trusts
  • Real estate investment via a mutual fund
  • Accredited investors only can invest in farmland real property

Crowdfunding

Crowdfunding provides investors with a great investment opportunity by helping them fund businesses for a stake in the company, usually via an online alternative investment platform.

A crowdfunding campaign can be launched by a startup not yet listed on the stock exchange. Individual investors can invest money in the business to receive a share of the equity.

Crowdfunding real estate assets can also be done, but only accredited investors may be eligible.

Crowdfunding is a complex process that requires the investor to put in a lot of work to ensure their money is going to the right places and they will reap the benefits. Private equity crowdfunding is generally reserved for accredited investors.

Gold

Gold is an alternative investment that holds or increases its value over time. People have considered gold an alternative currency for centuries.

Because gold has a low correlation to other traditional assets, such as stocks and other traditional assets, gold is resilient when other asset classes are impacted by market turmoil.

There are many ways to start investing in gold, including:

  • Buy gold bullion and coins
  • Investing in gold-focused mutual funds or Exchange Traded Funds (Gold ETFs).
  • Buy stocks in gold mining companies.

However, you should be aware that gold bullion and coins do not yield any interest rate yields so they won’t provide passive income.

Commodities

Commodities are tangible assets like goods that can be bought and sold. Things like oil, grain, and orange juice are all examples of commodities.

Commodities are a great alternative asset class because they are low in correlation to the stock market. They are also a traditional hedge against inflation.

Inflation increases the cost of goods and services. This causes the prices of commodities to rise as well.

But, commodities are not guaranteed to make a profit. They are subject to market volatility and technological advancement.

The price of orange juice will fall if there are more oranges available. The price of orange juice will drop if the technology allows for more efficient juicing.