Alternative Investments In 2024: Opportunities and Challenges

Many of us are keen on making investments in ourpursuit of financial freedom. If that is you then you may want to take a look at what are called alternative investments. The subject of alternative investments is topical nowadays. In case you are wondering what an alternative investment is. It is a financial asset that is outside the conventional investment classes you typically know. Examples of conventional investment classes are cash, stocks, bonds, and so on. There is a rising interest in people considering making alternative investments. You probably could be one of them. This blog post will provide you with some useful insights into that. We shall be exploring some of the opportunities and challenges currently at play in the field of alternative investments. 

What Are Alternative Investments?

We have already defined them. The main thrust behind alternative investments is to diversify one’s investment portfolio. Moreover, alternative investments are typically extricated from the often volatile nature of conventional ones. For example, stocks are sensitive to market movements which are subject to almost anything. The value of alternative investments may remain unscathed even during say, a recession. 

Thus with a diversified portfolio, alternative investments can be a buffer or safety net for your other ‘volatile’ investments. Some of the common types of alternative investments are real estate, private equity, hedge funds, commodities, royalties, and digital assets, amongst others. It is even interesting to note that for instance,rare collectibles (a broad categorization) can fall under alternative investments. 

Top 3 Alternative Investment Opportunities For 2024 (& Beyond):

As of now and as we project into the future there is no single particular alternative investment that is the go-to. Context matters and also accompanying circumstances e.g. world events, policy shifts, political incidents, and so on. However, there are some alternative investments that are poised to excel now and hereafter. 

Real estate is one of them but you have to zone in on specific aspects. For example, there are great opportunities in investing in real estate aligned to technological developments. There are also good prospects in real estate crowdfunding. 

Digital assets are increasingly getting attention. Adoption rates keep growing. The buzz around regulation and the increasing interest in central bank digital currencies is also creating traction. Thus investing in digital assets can pay off right now moving forward. 

Private equity is also a great space to invest in right now. Especially with the growing application of AI and GenAI in this space, more value & opportunities are being created. Plus more and more business people or entrepreneurs now prefer private equity as a source of capital. 

NB: Those 3 are recurring as the top from most analyses or projections. This, however, is not cast in stone or a hard rule; context matters. There is a long list of alternative investments as we have already established. All of them offer great opportunities in varying degrees right now. It is smart to first do your homework and due diligence before settling for any. 

Here are some challenges surrounding alternative investments that you should know:

Often Too Sophisticated

Warren Buffet has always recommended people to only invest in what they understand. Alternative investments are alluring, no doubt. However, they tend to be very sophisticated to grasp especially for the average person. If one is not careful they may be prone to manipulation or they may realize later they should not have invested in a particular domain. Alternative investments generally play by a different and often complex set of rules. That is why people who are considering alternative investments are advised to take their time. First understand the tenets of what you are are considering investing in. 

May Only Be Open To A Select Few Sometimes

This may not apply always but it tends to be the case, especially for some types of alternative investments. Let us explore some possible reasons why. There are some alternative investments that are only accessible if you are licensed, certified, or accredited. This means not everyone can just choose to enter willy nilly. Then in some cases, the alternative investment in question may have lofty minimum requirements you may not afford. As in, it may require you to have income or net worth levels out of your reach. 

Returns May Not Be Quick & Easy To Access

Let us consider conventional investments for a moment. For illustration let us use cash or stocks. With these ones it is possible to realize returns in the short term. This would be preferable for those looking to make a relatively quick buck – often the majority of you. With alternative investments it is seldom the case. Alternative investments tend to bring in returns over the long term. It can literally take years to realize substantial returns. 

Thus if you are looking to get faster returns, alternative investments seldom give you that. The other issue pertains to liquidity which is more or less related to what we just discussed. With many alternative investments it is typical to have limited to no liquidity. This means in the event that you urgently want to sell or convert to cash from your alternative investment, it may take time. In some cases it may not even be possible during certain times of the year. 

The growing interest in alternative investments is here to stay. It is especially noteworthy that the young generation is leading this growing interest. A research recently conducted by the Bank of America found out that over 90 percent of young investors are considering alternative investments moving forward. The benefit of high returns, lesser risk, and favourable regulations are part of what is driving this growing interest. After all, investors shun volatility which is the biggest aspect alternative investments guard against.