A variety of alternative investment strategies have are becoming increasingly prevalent due to their potential to offer superior returns over more conventional methods. While many of these strategies may be considered more risky than traditional strategies, the rewards in some cases may end up outweighing the risks to such an extent as to displace the original method.
Direct Investments in Startups
Also known as peer-to-peer lending, the rise of self made billionaires and the success of startups in recent years has emphasized the popular perception as opportunities for investors to generate a massive return from even a relatively modest investment. Naturally, this form of investment is particularly risky. Many startups end up never getting off the ground, going under within a few years. In contrast, conventional investments have a substantially lower risk of a total loss. To some degree, this can be offset by the ability to personally vet the startup that one invests in, allowing an informed decision to be made regarding its ultimate success or failure. Nevertheless, this form of investment remains high-risk but promises high rewards.
Perhaps the most modern form of investing, equity crowdfunding is a method by which startups promise equity in exchange for a initial funds to get their enterprise off the ground. As with the prior form of investment, this approach remains risky. However, the quantity of funds involved, by virtue of the nature of crowdfunding campaigns, tends to be substantially smaller than that of direct investments in startups. This allows for a greater degree of diversification and also means a lower barrier for entry into the market. Once can gain equity at a cost of only a few hundred dollars, allowing one to invest in a variety of promising enterprises with limited risk in the event of failure.
Investing in real assets is a more secure method than those previously discussed. Real estate, oil, precious metals, agriculture land, as well as luxury and collectible items are relatively low risk options for investment. Given the nature of assets, there is little danger of the investment being lost entirely as it would be if a startup were to fail. As one might expect, this form of investment is not likely to yield the massive returns that a wildly successful startup might promise. Instead, an investment in real assets offers steady long term growth in the value of the investment with a lower level of risk than that found in most conventional investment options. Real assets are a conservative investment and among the lowest risk options among alternative investment strategies.