Learn how fine jewelry investing works with this beginner's guide.

Investors often use alternative investments, from collectibles to real estate, as a way to diversify their portfolios in case of market volatility. Getting started investing in these alternatives differs depending on the investment.

The financial assets typically fall outside the scope of traditional investments like stocks and bonds, and they’re often intended to diversify investor portfolios.

Alternative investments are also often less liquid than traditional investments; they carry unique risk, return, and tax considerations.

For instance, some alternative investments are only available to accredited investors or high-net-worth individuals. Others have relatively high fees compared to traditional investments.

Because alternatives often have little correlation with traditional investments like stocks and bonds, adding them to a traditional portfolio can reduce its overall risk exposure.

These categories include real estate, private equity, private debt, hedge funds, collectibles, and more.

The specifics depend on the type of alternative asset, as well as how long you hold it for, and your income.

This podcast episode starts with an explanation of what alternative investments are, then goes on to explain how people use them to diversify their financial portfolios and answer some common questions about alternative investments. Notably, the host interviews a certified financial planner about the topic.

When the traditional markets crashed during the 2008 financial crisis, many people saw the value of their traditional investments plummet and began to look into alternatives as a result.

From what’s known as the first leveraged buyout, when JPMorgan acquired the Carnegie Steel Company, to the creation of the first-ever hedge fund, alternative investments have a long history.

This article explains the value of silver as an investment opportunity—and explains the different ways you can invest in the asset. It also outlines the pros and cons of silver as an investment. To learn more about investing in silver, read this article.

Capital assets can be classified as property owned and used for personal or investment reasons. If a capital asset grows in value and the holder decides to sell it, their “capital gains” would be roughly the difference between the original purchase price and the amount of money they sold the asset for.

More specifically, as of 2024, the alternative investments industry was expected to grow to more than $24T in assets in 2028—up from roughly $15T in 2022.

These different types of private equity include venture capital, growth equity, and buyouts.

Value investing specifically focuses on fundamentals like earnings, assets, and price-to-earnings ratios. In contrast, growth investing targets companies with rapid future potential, often trading at higher valuations. Both strategies offer unique paths to returns.

Instead of purchasing individual stocks and bonds, new investors may want to start in funds that track an index—like the S&P 500—or that hold a group of themed stocks.

It's called the Diamond Standard Co, and it uses an algorithm to assign standard values to a variety off small diamonds, grouping them together into individual coins. Historically, diamonds haven't been able to be classified as commodities or standardized like gold because they aren't uniform—factors such as clarity, cut, color, and carat size significantly influence the value of a diamond.

Barbell investment strategies emphasize bypassing medium-risk investments in favor of combinations of high-risk and low-risk investments. The idea is that the stability on the low-risk side offsets the volatility on the high-risk side, and would look like a barbell with two large weights on either end of the bar.

Famed investor Warren Buffett is known for building his empire with this strategy, which he learned from his mentor Benjamin Graham.

Whether you’re leaping straight into the future and looking for stocks picked by AI, a sci-fi aficionado who wants to invest in space travel, or a drama enthusiast looking to make money on stock market volatility, the ETF market’s weird corners have something for you.

Investors are likely most familiar with ETFs that invest in an index or other grouping of stocks. However, BlackRock breaks down a wide variety of options, including commodity ETFs, currency ETFs, and bond ETFs.

Private equity firms focus on buying and improving private companies with the intent to sell them for profit or take them public. Venture capital is technically a form of private equity in which investors focus on startups and generally don't seek majority control of the company. Hedge funds are pooled investments for sophisticated investors that pursue a wide range of often complex strategies.

Invest in the boind market through a brokerage, mutual fund or ETF, or the US government. Each has different steps and terms to follow, from starting rates to opening specific accounts. Some bonds are relatively easy to purchase, but the process differs depending on the type of bond you want.

Given that there are more than 3,000 ETFs trading in the US, the list of options for individual investors may be overwhelming. VettaFi provides a database that allows potential investors to sort funds by sector, region, strategy, fund issuers, and more. It tracks nearly 100 funds focused on general technology but just one that focuses on copper mining.

Commodities traders look at all of these things as assets, placing short-, medium-, and long-term wagers on how much each is really worth. Commodities are valuable in part due to how essential they are in creating most of the world's marketable goods.

While more people invest in stocks than bonds, experts say owning both can make for a healthier portfolio. Stocks are considered a riskier investment than bonds, but tend to have higher returns. While bonds might be the safer option, they won’t grow your wealth as quickly.

The portion of pension funds' risky investments, including alternative investments such as private equity, increased from 14% in 2001 to 39% in 2021. Analysts say private equity investments have delivered higher returns than traditional assets like stocks and bonds. Increased investment in private equity has also given pensions a way to recover from the 2008 financial crisis without necessarily investing more money.

Other categories of real estate include raw land and “special use” real estate, which includes cemeteries. Technically speaking, real estate is considered an alternative investment.

Mutual funds function similarly to other types of investments. If you want to invest, you go through a brokerage firm. However, they have a few key differentiators. Most are actively managed by a broker instead of passively earning you returns. Plus, they can carry some hefty fees.

Beanie Baby stuffed animals were once a hot collector item with skyrocketing prices as people believed that the toys would significantly grow in value over time.

While retail investors likely won't go out and purchase a bushel of commodity wheat to trade, they can get exposure to the commodities market via commodity ETFs sold on traditional stock exchanges like the NYSE and Nasdaq and other financial vehicles. There are benefits to adding commodities to a retail investor portfolio (such as a hedge against inflation and a typically low correlation with more traditional asset prices), experts caution that commodities are usually volatile investments.

For example, as some US regulations have loosened in recent years, retail investors have begun to get exposure to the private credit market via ETFs that invest in publicly traded financial vehicles with private credit exposure, such as BDCs.

Each type has variations of its bond offerings with different interest rates, loan lengths, maturity dates, and terms. Each type also carries its own risks and rewards.

Although Costco's gold bars often sell out, experts caution that the Costco gold rush was more "mob mentality" than sound investment. The bullion program is one way for retail investors to get exposure to the commodities market.

An infographic that shows the most common types of investments used by financial advisors with their clients in 2023 also found that nine in 10 advisors used ETFs, and three-quarters invested in cash and cash equivalents.

Think: changes in interest rates that impact the bond’s value, or a bond issuer completely defaulting on a loan. There are steps investors can take to lower their initial and future risk when investing in the bond market, such as checking a company's bond rating before investing.

To diversify their portfolios and mitigate their risk, angels may invest in startups that are at earlier or later stages of development, as well as in various industries.

Hedge funds typically use a "long-short" investment strategy—where funds diversify by investing in a mix of long positions and short positions—to balance risk and maximize profits. Including short positions gives hedge funds some protection against downturns in the market, although the strategy can have uncapped losses for investors.

In the US, many retail investors lack the SEC-mandated status (a high enough net worth, income, and other factors) to directly invest in hedge funds. The regulator considers hedge funds too risky for the masses. Hedge fund-like strategies have emerged as a workaround, despite potential pitfalls.

It’s typically kept in the form of bars or ingots. Governments and central banks often keep bullion reserves on hand; they can use it as a hedge against inflation. One can invest in bullion via ETFs, among other financial vehicles.

While less than half of retail investors hold ETFs in their portfolio, this figure is up dramatically in recent years, and experts forecast continued adoption as more options hit the market and total ETF assets under management continue to grow.