Due to the current economic climate both in Europe and north America, and the stock markets relative instability, many investors are beginning to look further afield for “alternative investment” opportunities.
An alternative investment is an investment in anything other than one of the three traditional asset categories, stocks, bonds and cash. Haowaever, alternative investments are not supposed to take the place of the more conventional assets, indeed, experts agree that alternative investments are best when used to diversify financial portfolios. Reginald Green, from Emerald Knight Consultants, a leading alternative investment company, says that “whilst alternative investments can offer high profit margins and secure investment opportunities, it is usually best to cover all bases and pair more traditional investments with high profit alternative investments such as green energy or renewable forestry”.
In response to the increasing interest in alternative investments, here are five of the most popular alternative investments available today.
Fine art has historically been a very financially sound investment; generally the price fluctuations within the market do not reflect the global economic situation, making art investment practically recession proof. Whilst the value of many material goods tends to depreciate over time, art is unique in that generally, the older the piece is, the more it is worth, especially if it is by a renowned artist or one with a cult following.
Whilst the art market doesn’t usually follow the peak and fall patterns of the stock market, it still experiences its own shifts that can make investing slightly risky. For example, fine art sales witnessed a significant boom during the 1980’s helped by renewed interest from eastern investors, but between 1990 and 2000, the inflation rate was not as high as had previously been forecast, causing panic sales as people began to move away from art investment.
However, today, you can enter the market at one of the top galleries or auction houses and buy a well respected piece for around £5000, these sort of investments tend to be reasonably secure and you can expect to make a solid return. Another bonus of art investment is that you do not have to offload the pieces you invest in, if you choose to purchase something that you find visually stimulating, it is often much more rewarding to enjoy it’s beauty in the present and sell in the future when its value has increased significantly.
2. Renewable Energy
Renewable energy is one of the fastest growing sectors in the SRI (Socially responsible investment) and alternative investment markets, and one of the main areas that Reginald Green from Emerald Knight Consultants specialises in. He has this to say on the subject, “As both governments and corporations are racing to emphasise their social and green responsibilities, the need for reduced reliance on fossil fuels means that renewable energy investment is increasingly important for the future”.
He goes on to explain that “the market is still growing, and so are the opportunities for investment, whether it be onshore biofuel plants or offshore windfarms. Some of these investment opportunities are established technologies whereas others are still undergoing trials and testing before being released to an open market. One thing is for certain, and that is that there exists the potential for huge profit margins within this type of investment”
3. Sustainable Forestry
Another alternative investment that falls into the SRI category is sustainable forestry. Due to the huge increase in global demand for hardwood in the past 40 years, deforestation is currently a huge environmental problem. Sustainable forestry investments are a fantastic way of creating a positive carbon footprint, reducing deforestation and receiving a steady and predictable rate of return.
Bamboo is also currently in huge demand, and investing in bamboo plantations helps to reduce illegal logging, deforestation and also ensures a healthy return. Arguably being one of the most secure investments available, Bamboo is considered perhaps the most exciting alternative investment out there.
Green says that “sustainable forestry is a great way for investors to give something back whilst also making a steady return on their investments, this type of investment is really popular at the moment and demand is sure to increase”.
Whilst it may seem rather peculiar, investors in fine wine can expect to make a steady return of up to 15 per cent annually over an extended period of time. Prices of certain wines and vintages tend to fluctuate from year to year, but prices of wines from the most revered vineyards generally increase significantly as the supply becomes scarce.
Connoisseurs of wine tend to be famously picky and selective therefore investors need to make sure they are aware of which vintages will make good investments and which are certain to end with sour grapes.
Even with the more expensive wines, you’ll need to invest in significant quantities in order to secure a sizeable return, and you must make sure the wine is stored in a suitable environment to keep it in peak condition, or you could ruin your entire investment.
5. Real Estate
Real estate has historically been one of the most popular alternative investments available, but after the global crash of 2007/2008, many buyers have been put off. However, with prices still extremely low and beginning to rise, investors are returning to the real estate market as it can be a very profitable investment opportunity.
Whether it is buy to sell, buy to let, or new build; all types of property investment can ensure a good return if you know the ins and outs of the market. Real estate investment is not recommended without the guidance of a financial advisor, but with the right assistance, you can be on your way to making a significant return.
Brad Shore is an avid property and investment blogger, he has been writing for a number of years and enjoys helping people and informing people in his articles, he has a passion for helping as much as his passion for writing.