HomeAlternative InvestmentsDiversify Your Portfolio with Alternative Investments

Diversify Your Portfolio with Alternative Investments

As financial markets evolve and investors seek to broaden their portfolios, alternative investments have emerged as an enticing landscape filled with opportunities. From corporate bonds providing stability and fixed income to commercial properties offering income generation and appreciation, and from asset leasing providing cash flow to inventory finance fueling business growth – these alternative investments promise to unlock new avenues of wealth creation.

With recent regulatory developments, access to the non traditional category of assets has been much more widely available, and the advantages are far greater than you may anticipate. Earlier, only the top 1% could access investment options other than the usual ones like mutual funds, bonds and stock because alternative assets such as leasing, startup equity, commercial property, venture capital, hedge funds, and real estate etc. had a high minimum investment amount.

But with the advent of new technology and start-ups aiming to democratize access, alternative investments have trickled down to the masses.

alternative investments

What Are Alternative Investments?

More investors are turning to alternative investments as a potentially profitable investment option as market volatility, increasing interest rates, uncertainty, and a lack of confidence in publicly traded assets and markets persist.

Alternative investments are often domestic or international, privately held investment funds that are set up as a company, trust, limited liability partnership, or firm. In essence, they stand for investments in asset types that go above and beyond the typical stock, mutual funds, or cash.

Different Types Of Alternative Investments

Smart investors are increasingly looking for alternative investments that go beyond the traditional options as the investing landscape changes. For those prepared to look outside the norm, these investments—which include real estate, precious metals, private equity, venture capital—offer an intriguing and wide spectrum of options.

Corporate Bonds

Corporate bonds are debt securities issued by corporations to raise capital. When an investor purchases a corporate bond, they are essentially lending money to the issuing company. In return, the investor receives periodic interest payments and the principal amount upon maturity. Corporate bonds are typically considered less risky than stocks, making them an appealing alternative investment for individuals seeking income and capital preservation

Asset Leasing

Asset leasing involves leasing tangible assets such as machinery, equipment, or vehicles to individuals or businesses in exchange for regular lease payments. As an alternative investment, asset leasing can provide steady cash flow and potential tax benefits. Investors can participate in asset leasing through alternative investment platforms like Grip. Leasing companies benefit from the income generated by leasing assets without the need for direct ownership.

Hedge Funds

These funds utilise a variety of advanced investment strategies, such as leverage, derivatives, short selling, and global macro, with the aim of generating maximum returns for their clients. Access to these funds is typically limited to certified investors who can meet high minimum investment requirements and pay substantial fees.

Private Equity

Private equity encompasses a broad range of private investments, from real estate to infrastructure and oil & gas. These investments can range from several million dollars to multiple billions, and fund managers may take controlling interests in operating businesses as well.

Inventory Finance

Inventory finance involves providing short-term loans or credit facilities to businesses to help them manage their inventory. This type of financing is particularly relevant for retailers and wholesalers who need to purchase inventory but may face cash flow constraints. Investing in inventory finance provides opportunities for earning interest income and establishing relationships with businesses in need of working capital. The loans are typically secured by the inventory itself, reducing the risk of default.

Commercial Property

Investing in commercial property involves purchasing properties such as office buildings, retail spaces, warehouses, or hotels for income generation and capital appreciation. Commercial real estate offers the potential for long-term returns through rental income and property value appreciation. Investors can generate income from commercial properties by leasing the space to businesses. The stability of cash flows can be enhanced through long-term lease agreements with reputable tenants.

Why Should One Invest In Alternatives?

Alternative investments provide diversity to the portfolio and higher returns than traditional investments, whether it be purchasing a work of great art or investing in a potential company. Investors may broaden their investing views and discover new avenues for financial success by thinking about alternative investments.

Advantages of Alternatives Investments:

  • Higher returns:. Alternative investments offer the potential for higher returns compared to traditional investments like FDs. This make it a lucrative investment avenue for investors looking for earning inflation beating returns.
  • Lower volatility: Alternative investments can also reduce the volatility of your portfolio by having a low or negative correlation with traditional assets because they are not dependent or linked to the market. For instance, J.P. Morgan’s research found that increasing a 20% allocation to alternatives over the course of a 20-year period may lower the volatility of a 60/40 portfolio by 12%.
  • Diversification: Alternative investments can also enhance the diversification of your portfolio by exposing you to different sources of risk and return than traditional assets. This can help reduce your portfolio’s exposure to any single market factor or event that may affect traditional assets negatively.

Alternative Investment Platforms You Can Consider in India

Investing in alternative investment platforms has been gaining popularity in India in recent years. Here are four alternative investment platforms you can consider in India:

#1 Grip

Grip helps you #GoBeyond inflation, low returns & volatility through a discovery platform that offers non-market linked & regulated investment opportunities!

With Grip, retail investors can now explore options across different risk-reward levels at accessible minimums. From their flagship product Asset Leasing or LeaseX to Corporate Bonds, Commercial Property & Startup Equity, they have something for every investment goal all under one roof.  You can discover non-market linked opportunities giving monthly/quarterly payout options from renowned & creditworthy high-growth companies.

#2 Strata

Strata is India’s premier prop-tech platform that enables fractional ownership in Grade-A commercial real estate. It allows investors to co-own pre-leased commercial properties like office spaces, warehouses etc. for as low as ₹25 Lakhs and earn returns.

#3 Lendbox

Lendbox is an RBI-licensed NBFC-P2P lending platform that connects borrowers with investors eager to lend them money via an Internet platform. Recently, Lendbox has been redesigned, and many innovative services have been added for customers.

#4 Tradecred

Tradecred is an investment platform that operates solely on one investment option, invoice discounting. Companies use invoice discounting as a form of fundraising strategy. They obtain small sums of money from regular investors in the short term. Tradecred uses its platform to make such investment options available to retail investors.

Shitanshu Kapadia
Shitanshu Kapadiahttp://moneyexcel.com/
Hi, I am Shitanshu founder of moneyexcel.com. I am engaged in blogging & Digital Marketing for 10 years. The purpose of this blog is to share my experience, knowledge and help people in managing money. Please note that the views expressed on this Blog are clarifications meant for reference and guidance of the readers to explore further on the topics. These should not be construed as investment advice or legal opinion. We do not offer any stock tips, investment, insurance or finance product related advice. Please consult a qualified financial planner and do your own due diligence before making any investment decision.
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