If you’re longing for some outside-of-the-box investing options, you might want to read up on the following alternative investing ideas. Often much more exciting than an index fund or the classic mutual fund, alternative investing ideas that are profitable require that the investor to have a serious knowledge of the investment option they’re considering. These five alternative investment ideas will give those curious about alternative investments a good handle on the basics of 5 alternative investment options.
Foreign exchange trading, known as Forex or FX trading, is a type of investing which involves buying one type of foreign currency, say, the Euro, while simultaneously selling another, such as the USD (U.S. Dollar). While stock trading involves a centralized exchange commission, Forex trading does not. All Forex trading transactions occur either over the phone with a Forex broker or via electronic network such as the Internet. Forex trading boasts an average daily turnover of nearly 4 trillion USD per day, making it the most traded financial market in the world. Profit in a Forex trading
atmosphere is based on accurately predicting whether a certain country’s currency is going to rise or drop in value in the future.
One of the most active newer alternative investing types is called peer-to-peer lending (P2PL). Peer-to-peer lending involves borrowing money, usually via a P2PL company, to unrelated individuals and subsequently earning interest as they repay on the loan. P2PL loans are usually unsecured, and the interest rate for the loan is most often determined by the borrower’s credit. A peer-to-peer investor will often lower the risk of their investment by splitting their investment amount between several different borrowers, hoping that all will repay their loans, but diversifying their risk in case some don’t. The investments in a P2PL scenario are usually mediated by a P2PL company that assesses the credit applications from borrowers and handles the distribution of payments and profits. The P2PL market is growing rapidly; in 2013 the two biggest P2PL lending companies issued 2.4 billion dollars’ worth of loans.
Investing in Hedge Funds
A hedge fund is an alternative investment vehicle that pools resources from several different investors and invests in securities and other investment vehicles, usually focusing on relatively liquid assets. Hedge funds are not offered to the general public; only accredited investors can take advantage of the benefits and profits a hedge fund can offer. Hedge funds have existed for several decades, but only in recent years has their popularity skyrocketed, as educated and respected investors, realizing their value, have made the hedge fund one of world’s major investment vehicles and sources of capital for business owners. Hedge funds boast a Hedge Fund Manager who is responsible for analyzing risk and maximizing the potential to profit within a specific hedge fund. As of June of 2013, the global hedge fund industry was estimated at 2.4 trillion U.S. dollars. New companies such as Sliced Investing are giving investors opportunities to invest in hedge funds at lower minimums and costs than once thought possible.
Art and Collectibles
Investing in art and other collectibles can be a viable way to invest while protecting oneself against inflation. Collectibles’ values rise and fall based more on fads than on the current state of inflation, so they are considered a great investment in that regard, however, fads come and go quickly (think: Beanie Babies) so what is considered a high-value collectible one month may be worthless the next. Investing in collectibles can be high-risk, depending on the type of collectible you choose to invest in. Rare coins and high-end art tend to have more staying power, while collectibles in the areas of toys or sports trading cards are a bit more volatile. Dabbling in art and collectibles as an alternative investment can be fun and lucrative as well, however, because of the volatility of the market, it might be wise to use collectibles investing more for entertainment than for a solid retirement investing option.
Another alternative investing idea, that’s quite popular right now is investing in precious metals. Investors purchase gold, silver, platinum and other precious metals, hoping that their value rises faster than the stock market or has more staying power for the long-term. Investing in gold, for instance, can consist of investing in rare gold coins, or in buying gold bullion, which is often stored by the investing company, although some gold investors prefer keeping their gold at home. Values of gold and other precious metals rise and fall primarily based on world security more than on market values. War crises, inflation or systemic financial concerns can drive the price of precious metals up as people long for more concrete, I-can-hold-it-in-my-hand types of investments.
If you’re considering investing in these or other alternative investment options, it’s important to educate yourself thoroughly on the investment option you’re pondering before handing over your hard-earned cash. A well-educated investor does have the potential of gaining big returns on alternative investment ideas.
Disclosure: This blog post was written for Sliced Investing pursuant to a paid content arrangement I have with the company’s representatives as part of an effort to raise awareness about alternative investment options.