Best Alternative Investments

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Contributor, Benzinga
February 14, 2024
alternative investments

Even if you’re relatively new to investing, you know the value of diversifying your portfolio to protect your principal investment by spreading your risk across different types of assets.

As market volatility and uncertainty have become the norm rather than the exception, more retail, or individual, investors are turning to alternative investments to diversify their investment portfolios, mitigate risk and seek higher returns.

Once strictly the domain of institutional investors and high-net-worth people, the alternative investment industry has recently soared in popularity. Individual investors might have stayed away because some alternative investments are complex, and most are illiquid, which means they can’t be sold quickly to get cash.

According to the Chartered Alternative Investment Analyst Association (CAIA), alternative investments represented $18 trillion in assets under management (AUM) in 2020. In other words, they made up 12% of the $153 trillion global investment market that year. 

PwC’s estimate of global AUM is lower — reaching $145.4 trillion by 2025. However, investments in alternative asset classes are expected to reach $21.1 trillion, or 15% of the market, by next year.

Alternative investments are assets that aren’t traditional stocks, bonds or cash. Alternative investments include, but extend beyond, these assets:

  • Real estate
  • Lending
  • Gold and precious metals
  • Commodities
  • Fine art and collectibles
  • Cryptocurrencies
  • Crowdfunding
  • Private equity
  • Hedge funds

The number of alternative investments has grown because investors want assets with lower correlations, which refers to how two securities move in relation to each other. This is desirable because interest rates have risen, and inflation has remained high. 

A lower correlation also means that assets are less likely to move in the same direction if the economy dips. In addition, most alternative investments aren’t tied to traditional market

Best Alternative Investments You Can Make Right Now

The range of alternative investments beyond the traditional asset classes is wide. The list below isn’t close to exhaustive, but it does represent the best alternative investments you can make right now.

Real Estate

Real estate is the largest investment asset in the world. Investing in real estate means you are buying land or residential or commercial property. Alternatively, it can mean that you’re doing either of those through a real estate investment trust (REIT).

Buying residential or commercial real estate as an investment can provide you with cash flow through rental income. It also can appreciate over time, bringing you equity. 

If you don’t want to collect rent and take care of a property, you can invest in a REIT. A REIT manager invests your money in different properties, manages them, collects rent and shares the annual profits with you.

Like many alternative investments, real estate requires expertise and patience. You must do your research and understand your risks. 

  • Residential or commercial rental property: You buy a building and collect rent.
  • Real estate investment trust: Your money is pooled through a REIT manager who buys properties, manages them and shares the rent with you.
  • Land: You can subdivide the land, develop it yourself or let it appreciate.

An added benefit of real estate investing is that the market is far less volatile than stocks and bonds.


Lending allows you to earn interest on what you loan and also earn your money back when the loan is paid off. Here are two types of lending used in alternative investing:

  • Peer-to-peer lending (P2P): Done online without financial institutions, you can use this to select your borrower based on income, credit and other factors and typically charge a higher interest rate.
  • Mortgage debt: You can buy defaulted mortgages at a discount and profit from the difference between what you paid and what is paid back or lend to borrowers who want to buy or refinance.

Lending is an alternative investment that can give you high returns. However, this investment also has risks: default, fraud and failure of online platforms. 

Fine Art and Collectibles

Investing in fine art typically has been left to high-net-worth individuals. That said, famous paintings and other collectibles — rare coins, vintage cars, jewelry, wine, trading cards — are being bought and sold among retail investors.

Collectibles are a tangible investment and typically appreciate. However, to avoid being scammed, you need expertise, and you will find these investments harder to turn into cash if you have a financial need.

Gold and Precious Metals

There are several ways to invest in gold and other precious metals, such as silver, platinum and palladium. You can buy physical metal, such as bars, coins or jewelry, or you can invest in gold exchange-traded funds (ETFs), gold mutual funds, mining stocks or futures. 

These securities track the price of the precious metal. They are more liquid than when you’re holding the physical metal. You can buy stock in companies that mine gold and silver for a higher return. However, mining company stocks come with a higher risk.


If you’re investing in commodities, you’re trading raw resources and materials. Gold is a commodity, as is oil and natural gas.

You can buy futures contracts or gain access through ETFs. Commodities can be volatile, though. Thus, it’s important to think about how gasoline fluctuates because of oil prices. But commodities offer diversification and a hedge against inflation as the rise in price helps you.


If you have a tolerance for a volatile asset and are ready for virtual alternative investing, cryptocurrencies such as Bitcoin, Ethereum, Tether, Solana, Binance Coin and more might be for you. These digital or virtual currencies use a decentralized ledger known as Blockchain for security and transactions.

The price of cryptocurrencies has shot up as their popularity has grown. The price in May 2016 was $500. It traded at $45,800 on Jan. 2, 2024, according to Forbes. Ethereum is right behind Bitcoin, selling for $11 in April 2016 and $2,416 in January 2024.

These digital currencies don’t have much regulation, but governments are increasingly beginning to look at issues of consumer protection, financial stability, competitiveness and financial inclusion.


Through an online platform, you can raise money from a large number of people for a business, project or cause. This is known as crowdfunding, and it can allow you to invest your money in a way not available through traditional investing.

It can also be a great way to diversify your portfolio, earn a higher return or impact your community. However, it also comes with high risk, such as fraud, lack of regulation, volatility and illiquidity.

Private Equity

Private equity is a way for you to invest in companies whose stocks are not publicly traded. As an investor, private equity doesn’t just allow you to diversify your investments and earn a high return. It also provides you with an opportunity to influence a company’s management and strategy.

Illiquidity and higher risks and costs are the downsides. Thus, this kind of alternative investment is better left for investors who can weather high volatility and a long-term commitment of capital.

Hedge Fund

A hedge fund is an investment fund that trades assets that are relatively liquid. Hedge fund managers use different investment strategies — long-short equity, market neutral and quantitative strategies — to attempt to earn a high return on their investments. Hedge funds are exclusively the dominion of institutional investors and high-net-worth individuals.

Find Your Alternative Investment and Diversify

Traditional financial markets continue to ride up and down, and interest rates remain high. As these trends persist, retail investors seek the best alternative investments to help diversify their investments, lower their risks and reap higher returns.

Frequently Asked Questions


What is the best-performing alternative investment?


Real estate tops the list of the best-performing alternative investments. Investing in rental properties and REITs sits atop all others.


What is the fastest-growing alternative investment?


Venture capital, a form of private equity, is considered to be one of the fastest-growing areas of alternative investment. Venture capital investors typically enter during the start-up phase and work with small companies that have growth potential.


What is the best alternative to stocks?


The answer depends on your preferences, risk tolerance and goals. You have several choices of alternative investments. Explore several and find what works for you.