The current market environment is the most volatile in decades. From election cycles to inflationary pressures, it’s no longer possible to expect reliable returns from traditional investment methods like residential real estate and stocks alone.
Diversification is necessary for stability and long-term growth. If you’re on the fence about alternative investing, here’s a case study to help you consider the next generation of investment trends (along with some suggestions to get started).
Examples of alternative investments
Traditional asset classes include bonds, cash, Treasury bills, the aforementioned stocks and physical residential real estate. These are classic investment forms that have historically provided solid and reliable returns.
However, modern markets are so turbulent that it is difficult to predict that a stable portfolio of traditional assets will be sufficient. Many experts believe that the classic 60/40 stock/bond portfolio cannot perform at the levels previously expected, creating both long-term stability and the potential for solid growth. We predict that a broader range of asset classifications will be needed.
This is where alternative investments come into play. These are assets that don’t conform to traditional formats. To be clear, that doesn’t automatically mean greater risk. On the contrary, technology has opened the door for the average investor to access a variety of safe investments that were previously inaccessible to the small, average investor.
Next generation investment trends
True wealth creation in the 21st century requires a more diverse portfolio. Here are some alternative investments that will pave the way for the next generation of wealth generation.
Mineral and royalty profits
In most parts of the world, governments own and control all mineral interests. This term refers to the underground real estate that begins approximately 100 meters below the earth’s surface and extends into the Earth’s core (including all the natural resources it contains). .
However, when natural resources, such as crude oil or natural gas, are discovered and extracted, the United States does not allow private individuals or corporations to own these interests and the large lease bonuses and royalty income that come with them. It is unique. From the property.
Although it is legal to own these interests, prospective investors in the mineral and royalty interests industry have historically faced very high barriers to entry.
capital requirements, complex title review processes, and other legal challenges. Tokenization technology allows companies like Mineral Vault to offer security tokens representing disaggregated interests in mineral properties, bringing this previously unaffordable asset class to national and international audiences. It has been opened.
This novel investment approach drives greater demand and higher potential returns.
energy industry. While the technology for accessing investments is innovative and new, this form of real estate is existing and established. Benefit from immediate and stable cash flow from wells already in production, with upside potential as new wells and leases come online in the future, and with extracted hydrocarbons sold monthly at spot prices. It has a built-in anti-inflation feature.
commercial real estate
Like mineral interests, commercial real estate was once a hot investment vehicle. However, digital technology is making this asset class more accessible to smaller investors.
One example is PropTech company RedSwan. Commercial real estate platforms tokenize large-scale real estate, allowing investors to invest with relatively low entry points.
The focus here is on supporting digital assets with physical backing. This gives the asset a more sustainable trajectory than something purely digital (and therefore more volatile) like cryptocurrencies or EFTs.
Similarly, platforms like Fundrise and RealtyMogul have made it easier for small investors to crowdfund commercial real estate projects. These platforms provide access to high-quality real estate such as office space, retail centers, and multifamily developments that have traditionally been available only to institutional investors. This democratization of commercial real estate investing allows individuals to diversify their portfolios with tangible return-producing asset classes without the usual barriers of high capital requirements or market expertise.
Investing in commercial real estate acts as a hedge against inflation. When inflation rises, rents typically follow, helping preserve the value of your investment over time. This stability, coupled with the accessibility of tokenization and crowdfunding platforms, makes commercial real estate an attractive option for diversifying beyond traditional assets.
private equity and venture capital
Private equity is developing similar tokenization platforms, allowing people with limited resources to crowdfund angel investments and venture capitalist ventures.
Both of these areas traditionally offer high returns. The only difference now is that technology has made them accessible to more people, and in more subtle ways.
For example, the platform Zoniqx leverages multiple digital currencies, including Ethereum for advanced smart contracts and Ripple for fast and low-cost transactions. These enable diverse investors to contribute to the private equity sector on their own terms.
These are just three of the many options in this evolving field. There are many other options to explore, including sustainable ESG investments and cultural assets such as art, collectibles and luxury goods. The key is to look for technology-enabled assets that give you access to historically stable investment vehicles.
Practical tips to get started
If you see the value in next-generation alternative investments, but aren’t sure how to shift your investment strategy, here are some tips to get you started.
Assess the risk and compare it to the time it takes to start investing. Consider your financial goals and make sure they are up to date. See how far you can get with your current investments and use data to assess how much you need to improve.
Use these steps to get a firm grasp on what you actually need to accomplish. This serves as a starting point for researching alternative investments and determining which fit your risk tolerance, schedule, and diversification needs.
Next-generation investing is the future. This reflects the willingness of investors to remain open-minded, resilient and ready to adapt to change. If you want to keep up with its ongoing evolution, take the time to consider these cutting-edge alternative investments and get an informed understanding of how to incorporate them into your long-term investment strategy for wealth creation. Please make a decision.
