Alternative
Investments
Beyond traditional investments, investors often find opportunities for alternative investments including real estate and real estate investment trusts (REITs), precious metals, and collectible investments such as rare coins (numismatics), artworks, watches, memorabilia and cars.
Many investors own real estate as their first and best investment, often in the form of a primary residence. Real estate investments also include second homes and rental properties, and real estate investment trusts. Retail investors can buy shares of a mutual fund focused on real estate, or they can purchase shares of REITs on major exchanges, where they trade alongside stocks. Real estate investment trusts invest in a wide range of real estate types, either through direct investment in real property (equity REIT) with revenues from rents, or through a mortgage REIT with mortgage loans, mortgage purchases, and mortgage securities; hybrid REITs offer a combination of features. These investments are often tax-friendly, and they offer a liquid marketplace with the possibility of high yields for investors.
Precious metals are a popular asset for careful, well-informed investors. These are metals such as gold, silver, platinum and other even-rarer platinum-group metals including palladium, rhodium and iridium. Their values are driven by rarity and their overall demand as a commodity, including the demand for jewelry, and their use in special industrial applications. Investors can buy these assets in physical form, whether as coins (either bullion or rarities), ingots, or even bulk jewelry. Or, investors and speculators can trade futures contracts and options on precious metals. Other ways to invest in precious metals include buying shares in funds that are focused on precious metals or mining companies, or directly buying shares in mining companies themselves.
A collectible asset is a physical item that is valuable due to its rarity and appeal, and which appreciates over time. Investment-grade collectibles often include rare coins, antiques, stamps, toys, comic books, sports memorabilia, and rare cars. Unlike a mass-produced, widely-available item, a truly valuable collectible is widely desired but not easily found. Those who invest in collectibles should take the time to know their particular niches well enough to independently assess the value of prospective purchases, and rely on multiple information sources rather than on any single seller. The time horizon for a collectible investment is important: Certain “fads,” especially those which are being hyped, may not increase in value as quickly as expected, while top-quality collectibles in mainstream markets may gain value consistently, or hold value during a downturn. In fact, since collectibles generally do not offer revenues, their advantage as an investment is that their values are expected to rise together with inflation, at a minimum. Experienced certified financial advisors and certified financial planner help investors meet their goals by building and managing balanced, tax-friendly portfolios that include collectibles, real estate interests, precious metals and other alternative investments.