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7 alternative investing platforms to try

Ideas to diversify and potentially boost your portfolio’s returns.

According to a 2020 report by the Chartered Alternative Investment Analyst (CAIA) Association, alternative investments have more than doubled as a share of the global investable universe since 2003.
Specifically, alternative investments as a share of the global investable market have grown from 6% or $4.8 trillion in 2003 to over $13.4 trillion or 12% in 2018. Further, growth is expected to accelerate in the coming years. The CAIA Association forecasts that alternatives will grow to between 18% and 24% of the global investable market by 2025.

So what exactly are alternative investments and how do you as an investor add them to your portfolio? We’ll answer these questions and go over some of the advantages and disadvantages of investing in alternative assets.

What is an alternative investment?

An alternative investment is an investment in any asset class other than conventional categories, such as stocks, bonds and cash. These can include but aren’t limited to:

  • Hedge funds.
  • Private equity.
  • Tangible assets like real estate, fine art and vintage bottles of wine.
  • Cryptocurrency.
  • Private lending.

Basically, if it isn’t stocks, bonds or cash and you can invest in it, it’s an alternative investment.

How to invest in alternative assets

It’s now easier than ever to invest in alternative assets, and new markets emerge regularly. Technological advancements have spurred not only the popularity of alternative investments but also the accessibility, giving everyday investors access to new markets and potentially profitable investment opportunities that used to be out of reach.
Depending on the underlying asset, you can directly or indirectly contribute to alternative investments.

  • Direct investing is, for example, buying a vintage car or precious metal and taking hold of the physical asset.
  • Indirect investing is typically considered as an investment acquired through an intermediary or an investment made on the investor’s behalf. Think private equity investments or hedge funds.

Investors intending to retire can consider self-directed individual retirement accounts (IRAs) as a way to invest in alternative assets. These IRAs are specifically designed to accommodate assets not typically permitted by most traditional IRA custodians.
But perhaps the easiest way to invest in alternative assets nowadays is through any of the numerous online platforms that connect investors with these types of investments. Here are some of those platforms, what they do and how you can use them to build out your portfolio.

7 alternative investment platforms

Investors interested in adding alternative assets to their portfolios should consider the following alternative investment platforms.

1. Invest in a portfolio of alternative assets: Hedonova

Hedonova

Finder Rating: 3.25 / 5 ★★★★★

  • 1-year return. 23.36% as of March 31, 2022.
  • 5-year return. Not available.

Hedonova is a platform that allows investors to invest in a variety of alternative assets, all from a single fund. It operates like an open-ended mutual fund, pooling investors’ money together in a single fund that invests in over 12 different alternative assets. These include everything from startup companies to real estate to crypto to art. Basically, it’s a one-stop shop for alternative investments.
But the minimum starting investment is $5,000, which can be steep for some. Hedonova also charges a 1% annual management fee and a 10% performance fee. And while it’s considered an open-ended fund, Hedonova states that the time required to exit a position can vary depending on the liquidity of invested assets, with a full withdrawal of funds possibly taking up to 30 days.
Investors should also take into account that Hedonova has only been around since 2020, so the long-term success of the company and its investment strategies isn’t yet known.

2. Invest in a variety of alternative assets: Public.com

Public.com

Finder Rating: 4 / 5 ★★★★★

  • 1-year return. Not available.
  • 5-year return. Not available.

Public.com is designed with the beginner in mind, with regards to feel, functionality and cost. Alongside stocks, ETFs and crypto, Public.com now supports alternative assets, following its acquisition of investing platform Otis in March 2022. These assets include art, collectibles, NFTs, luxury goods and more. Users can invest in 'pieces' of these alternative assets just like stocks in a company, allowing them to diversify their portfolio in ways they couldn't before.
Notable assets that are currently offered through Public.com include: Police Car by street artist Banksy from 2003, Hermès Birkin luxury calf leather designer handbag produced from a limited run in 2011, 1st Edition Charizard vintage Pokémon trading card from 1991, and Shattered Backboard Air Jordans, signed and worn by Michael Jordan during one of his iconic moments on court in 1985.

3. Invest in art: Masterworks

Masterworks

  • 1-year return. Not available*
  • 5-year return. Not available*

*Returns vary by artwork. Masterworks states that it has a 15.8% net annualized track record, which is an internal estimate of the performance of the overall Masterworks portfolio for a given period giving equal weighting to each offering.*
Before Masterworks came along in 2018, fine art investing wasn’t very accessible. The hefty price tag of iconic, multi-million dollar artworks yielded a high barrier to entry, limiting access to only very few people.
According to a 2021 report by Art Basel & UBS, works that sold for more than $1 million accounted for 64% by value in 2020, despite only accounting for around 1% of all transactions. In other words, high-priced paintings have been largely inaccessible to the masses. Masterworks allows the everyday investor to include these types of fine art as a part of their portfolio.
In short, the company purchases artworks and files them with the Securities and Exchange Commission (SEC) as a public offering. Shares of the painting are then made available for purchase on Masterworks for as little as $20. Investors then have two options: try to sell their shares on Masterworks’s secondary market, or profit from an eventual sale of the painting some years down the road. According to Masterworks, they hold the painting for between three and 10 years.
Investors also need to consider the fees and their effect on the overall return. Masterworks charges a 1.5% annual fee and takes a 20% cut of the proceeds when they sell the painting. There’s also no guarantee that investors will be able to sell their shares on the secondary market.

4. Invest in real estate: Fundrise

Fundrise

  • 1-year return. 10.8% on average as of April 28, 2022
  • 5-year return. 58.3 on average as of April 28, 2022

Founded in 2012, Fundrise is widely regarded as the first company to successfully crowdfund real estate investing. In doing so, the company essentially opened the door to real estate investing to the everyday investor.
Fundrise users invest in private real estate investment trusts (REITs) of properties purchased by Fundrise itself. These are different from publicly-traded REITs in that you can’t trade them whenever you want. Fundrise advises its users to expect a holding period of at least five years, and investors will pay a flat 1% fee if they sell their shares before those five years are up.
The platform offers investors five tiers to choose from, with initial investments ranging from $10 to $100,000. A 0.15% annual advisory fee is assessed no matter the tier, and investors can also expect to pay an annual asset management fee of up to 0.85%.

5. Invest in event contracts: Kalshi

Kalshi

  • 1-year return. Not available*
  • 5-year return. Not available*

*Kalshi states that the average return on investment for the top 10% of traders on the platform is 59%.*
Kalshi is an exchange that lets investors trade event contracts. Event contracts are derivative contracts that let investors trade on specified events. They can include everything from the amount of rainfall on a particular day to international affairs, to the winner of an Academy Award.
Kalshi’s event contracts are structured as Yes or No questions, each with a yes price and no price that can range from $0.01 to $0.99. Once the outcome of the event has been determined, Kalshi pays out $1 for each correct contract.
Beyond the payout from a correct contract, investors can use Kalshi to potentially hedge their portfolios. For instance, an investor heavily invested in oil stocks could purchase an event contract that pays out if the price of oil declines. If oil prices fall, so too may their oil stocks, but the investor can potentially limit this loss with the proceeds from their correct contract.
While event contracts aren’t anything new, Kalshi is the first platform regulated by the Commodity Futures Trading Commission (CFTC), so investors can rest assured that the platform is legit. Kalshi makes money by charging a transaction fee on the expected earnings on the contract.

6. Invest in wine: Vinovest

Vinovest

  • 1-year return. 19.3%*
  • 5-year return. Not available*

*Vinovest notes that fine wine has returned 10.6% per year over the last 30 years.*
Founded in 2019, Vinovest offers investors a convenient way to include fine wine as a part of their portfolios. With Vinovest, investors have direct ownership of the wine in their portfolio, and they can buy, sell or even enjoy the bottles of wine themselves.
While bottles can be bought and sold at any time, Vinovest notes that most investment-grade wines take 10 to 15 years to mature, which makes Vinovest most suitable for long-term investors. Vinovest also assesses a 3% early liquidation penalty if you withdraw your funds within three years of your initial wine purchase.
Vinovest offers four investment tiers, with minimum investment amounts ranging from $1,000 for the Standard Tier to $250,000 for the Grand Cru Tier. Annual management fees range from 2.85% for the Standard Tier to 2.25% for the Grand Cru Tier. These fees cover the insurance, storage and active management of your portfolio.

7. Invest in collectibles: Otis Wealth

Otis Wealth

  • 1-year return. Not available
  • 5-year return. Not available

Much like Masterworks opened the door to fine art investing to the everyday investor, Otis Wealth is a pioneer in the space of collectibles. The platform launched in 2020 and has been gaining momentum among investors ever since, being acquired by investing platform Public.com less than two years after its debut.
The Otis Wealth platform lets investors buy and sell shares of collectibles, nonfungible tokens (NFTs) and art — everything from trading cards and sports memorabilia to video games, comics and sneakers.
Investors buy and sell shares of SEC-securitized assets and receive a potential return if Otis sells the underlying assets you’re invested in. You can even go see the items you’re invested in with pop-ups and events in New York City.

How we chose these platforms

Access to alternative investments has been picking up in recent years, but options are still limited for some assets. As such, some platforms included in this article are the only platforms currently available for that given asset.
Where available, we also looked at customer reviews. Our overall aim was to give investors a diverse list of alternative investment platforms that are also generally well-received among customers.

Advantages of alternative investments

Alternative investments can be particularly advantageous because of their low correlation to stocks and bonds, especially in markets where these conventional investments are underperforming. That’s what Terri Spath, certified financial analyst, certified financial planner and founder of investment advisory firm Zuma Wealth said about the benefits of adding alternative investments to a portfolio.
“The biggest benefit of alternative investments comes from their low correlation to stocks and to bonds,” Spath said. “With stocks bleeding the profits from portfolios and bonds like dead money thanks to inflation and interest rates, alternatives are where we are putting a lot of client money.”
While alternative assets can help reduce a portfolio’s market risk, they can also give investors exposure to potentially lucrative investments.
“Alternative investments are often attractive from both a risk perspective and a return perspective,” says Robert R. Johnson, a professor of finance in the Heider College of Business at Creighton University. “From a risk standpoint, alternative investments are often viewed as good diversification vehicles … Alternative investments are also often attractive from solely a return standpoint, because the returns from asset classes such as venture capital and hedge funds can … be greater than the returns from the more traditional classes.”
Here are some of the main advantages of alternative investments.

  • Diversification. With their low correlation to conventional investments, alternative assets can help diversify your portfolio, reduce market risk and maximize your overall returns.
  • Potential for bigger returns. Though they may be riskier, returns from alternative investments such as venture capital and hedge funds can also be greater than the returns from the more traditional asset classes.
  • Interesting and exciting investment opportunities. From vintage cars and real estate to investing in crypto or the next big startup, alternative investments can add some flair to a portfolio for investors who aren’t with just stocks and bonds.

Risks of alternative investments

Alternative investments are generally more complex than traditional investments. They can also have higher fees associated with them and many aren’t regulated by the SEC, which means investors need to spend more time doing their homework and understanding the potential risks involved.
They’re also known for being relatively illiquid compared to traditional investments, which means investors should expect to have their money tied up for a longer period.
“One of the biggest problems with many alternative investments is a lack of liquidity,” says Johnson. “Other assets, like commercial and residential real estate have significant transaction costs and can be converted into cash over a longer period and with greater price uncertainty. This is an aspect of many alternative investments that the purveyors of those investments often times gloss over.”
So while alternative assets provide investors with a great diversification tool and the potential for a higher return, investors need to be aware of the unique risks associated with these investments.
These are some of the biggest risks of investing in alternative assets.

  • Lack of regulation. Many alternative assets aren’t regulated by the SEC, which means they don’t have the same safeguards as traditional investments. This can lead to an increase in fraud, especially if the investment is complex.
  • May be highly illiquid. Some alternative assets lack a secondary trading market or tend to be illiquid because of their complexity and difficulty in valuing them. Others have lock-up periods that prohibit investors from accessing their money, should they need to sell. With some alternatives, it could be years before you can sell out and liquidate the asset.
  • Can be highly volatile with large variations in returns. There are no guarantees in any investment, but alternative assets can be especially volatile and produce large variations to the returns.

Bottom line

Because of their low correlation to traditional assets, alternative investment can be a diversification option for investors. But consider your time commitment and your tolerance for risk before jumping in. Investors should always understand what they’re investing in and the associated risks. This is especially true with alternative assets due to their increased complexity and lack of federal regulations.

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