Alternative investments for seniors

Alternative investments for seniors

When it comes to making investments there are some standard ways of doing things, such as cash, bonds, mutual funds, and stocks. These work fairly well for many people, but a successful retirement savings plan requires an appropriate mix of assets, based on your personal goals. The key to maintaining a strong portfolio also depends on diversification. 

One of the problems with more traditional investment options is that they often fail to maximize the potential return on invested funds. However, there are plenty of other alternative investment options that could offer more return than the more traditional investments. 

Don’t be overly concerned about how alternative investments fare when it comes to the Arizona probate. They will be treated just the same as your other investments regardless of where you live. 

Alternative investments include:

  • Venture capital: These are investments in new or young companies that have the potential for high growth. It’s a risky option, but offers the chance of high rewards should a company be successful. 
  • Real estate investment trust: Real estate can be a good way to invest your money as there is potential for stability and growth. However, it’s another risky investment, and you should do your research before investing. 
  • Blue-chip art: This is a term used to describe well-established art and artists of high aesthetic quality. Long-term, fine art has been a reliable and lucrative investment but now more people than ever have the opportunity to make this type of investment thanks to art investment companies.
  • Fine wine: As a tangible asset, wine has a low correlation with global equities and less long-term market volatility than some other investments.  
  • Derivatives: Derivatives are complex financial contracts based on the value of an underlying asset, group of assets, or benchmark. Their value is determined by fluctuations in the underlying asset. Common underlying assets include bonds, stocks, currencies, commodities, market indexes, and interest rates.  
  • Arbitrage funds: These are a type of mutual fund and are a good choice for investors who want to profit from a volatile market without taking on too much risk. 
  • Hedge funds: These are investment vehicles that use various strategies to make a profit and include hedging against losses. The risks are quite high, but the rewards potential is massive. 
  • Commodity funds: These are investments in raw materials or primary agricultural products. Funds invest in energy resources, precious metals, and agricultural goods such as wheat. 
  • Cryptocurrencies: Cryptocurrencies tend to swing wildly up and down, although the overall trend is upward.  

Other examples of alternative investments include:

  • Master limited partnerships
  • Tax lien certificates
  • Stock or membership units in a privately held business
  • Timberland
  • Farmland
  • Mineral rights
  • Intellectual property such as trademarks, patents, and copyrights
  • Privately underwritten mortgages
  • Peer-to-peer lending

The benefits of alternative asset investments

Alternative investments, such as those mentioned above, are very attractive because they have the potential for significantly higher investment returns. However, there is a downside in that the risk and illiquidity are exponentially higher. They also tend to be long-term in nature, often “locked up” for up to five years or even longer.

Alternative investments have the advantage of reducing overall portfolio risk because they provide exposure to different asset classes and strategies. 

There is also an attractive amount of flexibility with alternative investments. You can use them to meet a variety of investment goals including the generation of income, hedging against market volatility, and long-term capital growth.  

However, there is a downside. Should you need to recover your capital or if something goes wrong, there are very few options. All of which can make alternative investments a lot more stressful.

Another disadvantage you should consider is that generally, alternative investments are less familiar to most investors. As a general rule, avoid investing in anything you don’t fully understand. It’s also key to take the time to conduct your research before moving forward with an alternative investment. 

Tips on reducing the level of stress often associated with alternative investments 

When it comes to choosing an alternative investment you should consider its liquidity, how they fit into your budget, investing time horizon, and your passions. 

There are also three easy rules to follow.

Know the person

How well do you know the person who’s trying to convince you to invest? Have you done business with them before, or did somebody recommend them? Are they risking their own money as well as getting you to risk yours? Is it a pre-packed deal or are they directly involved with the management of the deal? If the answers to these questions are “no”, your response to the deal should be the same.  

Understand the deal

Before committing to an investment you must be certain you understand the deal, the risks, and how any potential returns are going to be achieved. Don’t be fooled into thinking there’s some secret or magic way to be successful. If you don’t understand the deal, walk away. 

Don’t put all your eggs in one basket

Never be tempted to put all your money into a single investment because if you lose it all, it will change your lifestyle forever.

Final Thoughts

Think of your retirement plans as baking a cake. The traditional options will form the substance and layers of your cake. While the alternative investments you choose to make will be the frosting.   

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