Before we look at the types of alternative investment out there, we need to understand what it is. Alternative investments are unconventional opportunities, complex in their nature and limited in their regulations. Be warned that an investment adviser may steer you away from most types, as they are commonly held by high net worth individuals and institutional investors. However, that doesn’t mean that the general public can’t reap the rewards that this form of investment has to offer!
Why should I consider alternative investments?
The simple answer is that they provide you with more opportunities and thus present a way of diversifying your portfolio. The longer one involves a discussion on the complexity of the alternative investments, and how all these opportunities aren’t open to the general public. For more information on this subject, contact an investment adviser in Bournemouth.
Types of Alternative investment opportunities:
1) Private equity
This option is for private companies and it involves an entire spectrum of investment in the private capital market. Typically, private equity firms will gather funds from a range of investors and invest them in a private company. The investors make a profit after an exit event.
2) Venture capital
This is a form of private equity, which specialises in investments involving companies that are in between the early stage and the growth stage of their business. This form of capital is quite important to start up, and early stage, companies but it is risky for investors. Saying that, if the company is successful than the investment can yield outsized returns.
3) Direct investments
This form of investment is simpler. Investors directly invest in companies, an action which is called ‘angel investing’. There is a lot of risk involved in this option, as the startup companies they invest in could fail. This risk can be avoided though by investing in a mature company that seeks capital.
4) Real Assets
This refers to assets like oil, agricultural land, precious metals and real estate. They are known as ‘physical’ assets and have a lot of value. You can invest in them directly or through a fund that specializing in physical assets.
5) Fund of Funds
This represents the capital collected to trade in other alternative opportunities. It helps investors to diversify their portfolio, limiting the risk involved in investments.
6) Private placement debt
Believe it or not, people actually invest in debt. The ‘mezzanine debt’ is form of capital used to finance private companies while maintaining the investor’s cash flow. However, these bonds can’t be traded publicly.
These are just a few of the types of alternative investment opportunities out there. The one you consider depends on your position and the resources at your disposal. If you are in doubt about which one to choose, search investment adviser Bournemouth.
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