What Are Alternative Investments? A Beginner’s Guide

When most people think about investing, they picture stocks, bonds, or mutual funds. But there’s a whole world of investments that don’t fit neatly into these traditional categories — and they’re growing in popularity. These are called alternative investments, and they can offer unique benefits, including diversification, inflation protection, and the potential for outsized returns.

In this beginner’s guide, we’ll walk you through what alternative investments are, the different types available, and how to start exploring them for your own portfolio.

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What Are Alternative Investments?

Alternative investments are assets that fall outside of the traditional trio: stocks, bonds, and cash. They can range from tangible assets like real estate and art, to more modern digital opportunities like cryptocurrencies and peer-to-peer lending.

Because they tend to behave differently than public markets, alternative investments can help reduce risk and increase returns over the long term — but they also come with unique risks, fees, and liquidity concerns.

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Why Are They Becoming So Popular?

Investors are increasingly looking beyond the stock market for ways to:

• Diversify their portfolios

• Protect against inflation

• Access private markets previously reserved for institutions

• Reduce correlation with volatile public markets

With the rise of fintech platforms and self-directed retirement accounts, retail investors now have more access than ever to opportunities that were once out of reach.

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Common Types of Alternative Investments

Here’s a quick overview of popular alternative asset classes:

1. Real Estate

   1. Residential, commercial, farmland, and REITs

   2. Often provides income and long-term appreciation

2. Private Equity & Venture Capital

   1. Investing in startups or private businesses

   2. High risk, but potentially high reward

3. Hedge Funds

   1. Pooled investment funds with flexible strategies

   2. Often have high minimums and are less liquid

4. Commodities

   1. Gold, oil, agricultural products

   2. Hedge against inflation and geopolitical risk

5. Collectibles

   1. Art, wine, watches, trading cards

   2. Returns can be driven by passion, rarity, and market trends

6. Cryptocurrencies

   1. Digital assets like Bitcoin and Ethereum

   2. High volatility, high potential upside

7. Crowdfunded Platforms

   1. Access to real estate, startups, and small business debt

   2. Lower minimums and broader accessibility

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Are Alternative Investments Right for You?

While alternatives can play a valuable role in a portfolio, they’re not for everyone. Many are less liquid, carry higher fees, and can be harder to value. That said, even allocating a small portion of your portfolio to alternatives can offer meaningful benefits — especially if you’re thinking long-term and have done your due diligence.

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Learn More: The Ultimate Guide to Alternative Investments

Want to go deeper? Our Ultimate Guide to Alternative Investments covers everything from asset classes to platforms, fees, risks, and how to get started. It’s the perfect next step if you’re serious about building a more diversified and resilient portfolio.

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Final Thoughts

Alternative investments are no longer just for the ultra-wealthy. With the right education and tools, everyday investors can now access this expanding universe of opportunities. Whether you’re looking to hedge against market swings or chase higher returns, alternatives might be the missing piece in your portfolio.