Understand alternative investments
Diversifying investments is one of the main strategies to reduce risks and improve portfolio performance over time. And although stocks, fixed income, and traditional funds are still widely used, alternative investments have been gaining more and more space among investors seeking new opportunities for profitability and protection against traditional market fluctuations.
But after all, what are alternative investments? What are the main types? Is it worth it for every investor profile? Let’s understand better.
What are alternative investments?
Alternative investments are financial applications that differ from traditional classes, such as stocks and public or private bonds.
They usually have low correlation with the conventional financial market, which makes them particularly interesting during times of volatility.
Some of the main examples of alternative investments include:
- Real estate investment trusts (REITs);
- Private equity funds;
- Venture capital funds;
- Crypto assets (like Bitcoin);
- Commodities (gold, silver, oil, etc.);
- Art, wine, and collectibles;
- Real estate or business crowdfunding;
- Multimarket funds with alternative strategies.
Each of these options has its own characteristics, risks, and access methods. Therefore, it is important to understand them before investing.
Main types of alternative investments
1. Real Estate Investment Trusts (REITs)
REITs are a very accessible entry point into alternative investments. They pool funds from various investors to invest in commercial real estate, shopping centers, logistics warehouses, hospitals, and more.
Investors earn from the appreciation of shares and monthly income distribution, which is often tax-free for individuals in some countries.
2. Private equity and venture capital
These funds invest in companies that are not listed on the stock exchange. In the case of private equity, they focus on more mature companies with good growth potential.
Venture capital, on the other hand, targets startups with high appreciation potentia, but also higher risk. These investments are generally aimed at qualified or professional investors.
3. Crypto assets
Cryptocurrencies like Bitcoin and Ethereum have become popular as decentralized digital assets.
Although very volatile, they have attracted investors due to the possibility of rapid appreciation. Extra attention to risk and security is essential, but they can represent a small portion of a diversified portfolio.
4. Commodities
Investing in commodities like gold, silver, or oil is a traditional way of protecting wealth against inflation and instability. Gold, for example, is known as a “safe haven” in times of crisis. It’s possible to invest through ETFs, futures contracts, or specialized funds.
5. Investments in art, wine, and collectibles
For those who have the knowledge and interest, works of art, rare bottles of wine, or collectible items can increase in value over time.
These assets require expertise and patience, but they can be excellent diversification tools—while also offering personal satisfaction to the investor.
6. Investment crowdfunding
Crowdfunding platforms allow small investors to participate in the financing of companies or real estate projects in exchange for financial returns.
This model has gained popularity in several countries but requires careful selection of projects and platforms.
Why invest in alternatives?
The major advantage of alternative investments is diversification: since many of these assets don’t follow the same market logic as stocks or fixed income, they help balance the portfolio, reduce losses during crises, and, in some cases, enhance gains.
Moreover, they offer access to opportunities not available in the traditional market, such as investing in a promising startup or a high-end property with relatively little capital.
What precautions should you take?
Investing in alternative assets requires more attention and knowledge. Here are a few tips:
- Understand your investor profile: not all alternatives are suitable for beginners or those who need liquidity.
- Evaluate the investment’s liquidity: some assets are difficult to redeem or offer returns only in the long term.
- Research the specific risks of each asset: volatility, lack of regulation, default risk, and more.
- Diversify among alternatives as well: don’t concentrate everything in a single type of asset.
- Seek reliable platforms and managers: security and transparency are essential.
Conclusion
Alternative investments are becoming increasingly accessible, even for beginner investors.
They don’t replace traditional allocation, but they complement and strengthen a diversification strategy, helping to protect and grow your wealth over the long term.
If you want to go beyond the basics and explore new possibilities in the world of investing, it’s worth studying the available alternatives in more depth and seeing which ones fit your profile and goals.
Remember: knowledge and planning are the greatest allies of a successful investor.