Consider this: You have at last under control your investments. Stocks—check. Bonds? Look at me. And now, everywhere you turn, there is conversation about something different—things like whiskey casks, eccentric apartment complexes in strange locations, and treasures you haven’t looked at since you were a child. Welcome to Diversify Guy with it’s alternative investing, where the oddities and possibilities show up by truckload.
Basically, alternative investments are everything that deviates from your standard 401(k) portfolio. Private companies, acreage of timberlands, vintage comic books, digital playing cards—the list is as wild as a game of Mad Libs. It sounds fascinating. Nobody would want to flaunt possessing a 1974 action figure or a chunk of a fancy hotel in Iceland. Still, let us not lose our heads. These choices can be like ordering the chef’s surprise special: occasionally you find something amazing, other times you find yourself left hungry for bread.
Stories get around. There is always that faraway friend who lavished money on a vineyard and now emails from “Wine Baron Dan.” The reality is There is another story of someone trying to sell an investment in crowdfunded parking garages with every toast to success. Parking garages hardly ever get wealthy quick speculators.
Alternatives sometimes appeal since they are not directly related to the fluctuations in the stock market. They say, variety is the spice of life; none loves all of their eggs in one basket. Though the risk may seem to be dispersed, the hazards are right front view. Some investments run in a regulatory no man’s land, which makes red flags difficult to find. To be honest, a corporation providing “fractional yacht ownership” most likely isn’t as uncomplicated as your neighbourhood savings bank.
One of the main things is liquidity—or lack thereof. Selling your shares of a sock-puppet production company, you were looking for quick money. On roller skates, that road may be slower than a turtle. Although some platforms aim to establish resale marketplaces, you should not suppose you might simply click a button and cash out whenever you choose.
Fees also find their way in. While some sites charge only to get your foot in the door, others silently leech a percentage from your earnings. And certain configurations allow for both. It allows one to compare locations, grill friends for their experiences, or even ask questions of those happy customer service agents online.
Even with all the restrictions, there is a certain excitement. Alternatives offer a narrative worth sharing—after all, “I own a chunk of old-growth forest” is not small chat for a dinner party. These kinds of investments are a tempting nook in a bigger portfolio since they can also protect you from volatility in the more general market.
Above all, it pays to have your eyes wide, sense of humor close at hand, and skepticism sharp. The unusual hazards and vivid possibilities offer an adventure. Just be sure you look before you leap and avoid betting the rent for this month on the next beanie baby comeback. Ultimately, advice you do not have to decode is that alternative investments are best as a twist of taste—not the complete dish.