This is a guest post from Joel Ohman. And, as always, you are responsible for your own investing decisions, and should do your own research and/or consult with a professional before making investment decisions.
When you think of investing your money you likely think that your options are limited to either the stock market or a CD from your bank. Chances are that you also think of “alternative investments” as things like expensive paintings and collectibles that are only purchased by ultra rich investors with loads of cash whizzing around from one Swiss bank account to the next. My goal for this article is to show you some alternative asset classes that you may want to consider investing in no matter how big or small your bank account is. While certainly new investors should first concentrate on the basics like paying off their high interest credit cards, creating an emergency savings fund, and contributing to a 401k and/or IRA, etc. there are also some additional investment strategies that can be utilized as part of a balanced overall investment strategy. Here are 5 different alternative investments beyond the usual stocks, bonds, CD’s, and mutual funds that you typically hear about that you may find could fit into your comprehensive overall investment strategy.
Collectibles can be things like baseball cards, a piece of art, coins, or even a stamp collection. Of course, not everyone can afford to purchase a Rembrandt or a Honus Wagner rookie card but there are many other less expensive options to consider. All types of alternative asset classes require some level of specialized knowledge and investor sophistication to some degree (with the exception of maybe an ETF or mutual fund for art or other collectibles) so as with any other type of investment investing in collectibles is not something that should be rushed into.
Starting a business or just flat out buying a business have been the keys to wealth for many very wealthy people over the years. The newspaper headlines are quick to point out the multi-million and multi-billion dollar business sales but not much mention is ever made of the lower dollar value sales of small businesses that happen all the time. Even if you don’t have the big bucks then you can still certainly consider buying out a small business. Strategies range from buying out a successful business and holding it for the cash flow to buying a struggling business and revamping it to make it profitable.
With an increasing number of business moving to the Internet to conduct business then having a successful website is becoming more and more important. Buying a website can be much like buying a business. Think of a website as a miniature business in a box that if run properly can kick off cash flow for years to come. One of the gigantic advantages to buying a website is that the costs for maintaining an online business are typically much less than the costs of a traditional brick and mortar business.
While similar in principle to investing in a website, investing in domain names has some important differences. A website is a fully functional collection of files, databases, software, etc. while a domain name is simply the actual name or location on the Internet (i.e. “AllBusiness.com” is the domain name and the web page you are reading right now is part of the All Business website). Investing in domain names is a relatively new practice and is best likened to investing in online real estate.
Investing in physical goods like gold, silver, and other precious metals is the type of alternative asset class that has gotten the most attention in recent times because A) Gold is thought to be a great hedge against inflation and B) Gold is universally recognized by even beginning investors as having an element of safety to it (even if this perception of safety is purely psychological to some degree). For sure, gold prices can both rise and fall just like many other types of investments so investing in gold is far from a no loss investment but as far as consumer perception goes gold is king. There are a number of ways to invest in gold with the two most popular methods being buying physical gold coins / gold bullion and investing in a gold mutual fund / gold ETF.
What Should You Do?
No one investment strategy is right for everyone so be sure that you carefully weigh all of your options with a qualified professional who can look at the specifics of your situation and help you to make educated investment decisions. Alternative investment classes are an option for all investors regardless of the size of their bank account. Alternative investments can be used as a hedge, a focus of a sophisticated investor, or as a small part of a balanced investment strategy. Do your research and then decide if maybe one of the alternative asset classes might be a good fit into your overall investment plan.