An Investor’s Guide to Alternative Asset Classes

Given that public markets are seeing huge swings and there are massive amounts of capital being injected into the economy, it’s a great time to consider expanding your investment portfolio to include alternative asset classes. These non-traditional assets have substantial benefits in times like this where economic uncertainty is at a record high and the decade-long bull-market gains of traditional investments are being wiped out.

What are alternative investments?

These alternative asset classes generally have an inverse relationship to traditional asset classes. That means that when the public markets are down, these assets either remain stable or in some cases increase in value.

Alternative assets function as hedges against stock market volatility and as part of a balanced portfolio help to alleviate financial risk. The wealthiest people and organizations in the world utilize alternative asset classes to enhance their portfolio – and you can too.

It is actually easier to define an alternative investment by stating what it is not. Traditional investments take the form of well-understood financial implements such as:

  • Cash and cash equivalents
  • Stocks
  • Bonds

Alternative investments come in many forms – but you can think of them as an investment that does not fit into one of the traditional asset categories above. Some popular examples include:

  • Starting your own business
  • Private equity
  • Venture capital
  • Hedge funds
  • Real estate
  • Commodities
  • Precious metals
  • Art
  • Loans

Alternatives versus traditional asset classes

Alternatives investments can be great to diversify your portfolio, but they aren’t the end-all-be-all of investing. You should think of them as a way to considerably improve your financial plan, but not necessarily to entirely replace your traditional asset investments. Check out the chart below to compare asset types.

INVESTMENT CONSIDERATIONALTERNATIVE ASSETSTRADITIONAL ASSETS
REGULATION– Not always regulated by the SEC to the same extent as public markets– Heavily regulated
VOLATILITY– Decrease and isolate volatility exposure with non-correlation to public markets– Susceptible to public market volatility
ACCESSIBILITY– Generally a higher capital requirement for entry*
– Tend to be more complex investments*
– A low capital barrier to entry
– Simple to get started investing in
LIQUIDITY– Tend to be illiquid and generally should be considered long-term assets
– Can provide great consistent cash flow depending on the type of investment
– Usually very liquid assets
– can provide cash flow depending on the type of investment
RETURN OF CAPITAL– Often has outsized returns with value-add strategies
– Can be tax-advantaged
– Tend to have tangibility and intrinsic value
– Steady averaged returns

* Upside Avenue helps fix this!

Of course, utilizing alternative investments as a natural hedge against economic shocks (along with their other benefits) versus investing in traditional asset classes is never a binary decision. Strong investment portfolios exhibit diversification across asset classes, and even within those asset classes. If your stock portfolio takes a hit, you have these other investments which will hopefully hold their value, not fall as much, or even increase in value.

Alternative investments are now more accessible than ever

Access to these powerful investments has historically been limited to high-net-worth individuals and entities. Upside Avenue provides a solution that allows investors to gain exposure to these investments starting at just $2,000.

Focused on investing in cash-flowing real estate, everyone can now passively participate in alternative asset investing without the need to be a landlord, manage deal complexity, all while retaining the ability to sell back your shares on an annual basis. Now with Upside Avenue, you can instantly get involved in private real estate ownership without the host of headaches and drain on time and capital.