The markets are falling — here are 5 alternative assets to invest in

Posted: 9 November 2022 2:33 pm
News
winecellarbarrel_supplied_1800x1000
Sponsored by Hedonova, an innovative fund that gives investors access to alternative assets such as art, wine and startups.
Learn more

A falling market can be scary for everyone. But most seasoned investors know that portfolio diversification plays a critical role in a healthy wealth management strategy. While market volatility may be unavoidable, these five alternative asset classes generally fare better — and maybe even thrive — in a market downturn.

1. Real estate

Real estate investments are generally long-term investments that bank on property values increasing over time. Since the amount of land on earth is finite, it stands to reason that there will always be some demand for real estate to push the value up.

You can invest in residential homes, commercial properties or real estate investment trusts (REITs). Residential and commercial properties lend themselves to tenants and monthly rent checks. REITs, on the other hand, are composed of companies that manage retail properties. As a REIT investor, you’ll receive dividends and hope your REITs value increases.

Fortunately, with real estate investments, you can generate passive income, protect against inflation and enjoy tax benefits. Of course, there’s no guarantee property values will increase. And how fast your investment jumps in value may depend on the neighborhood and the local community.

🔥 Hot tip

Vacation rental properties, like Airbnb and VRBO, are one of the highest-performing real estate categories, with annualized returns of 28% over the last five years. They differ from standard buy-and-hold properties and require careful management and a thorough understanding of the local market. And you’ll need a considerable amount of startup capital to buy the property and handle the recurring costs associated with cleaning and managing a vacation rental. ultrices.

2. Wine

Fine wine gets better with age. And thankfully, it also appreciates in value, producing an alternative — and delicious — asset class. You don’t even need to be a sommelier to enjoy it.

24.85 billion liters of wine were sold worldwide in 2020. This figure is expected to increase to 26.59 billion liters in 2022 and continue to jump from there. While the demand for wine consumption has increased, wine producers lean more heavily toward ready-to-drink bottles that won’t benefit from aging.

Over 95% of wine is intended to be drunk within a couple of years. The amount of fine wine that undergoes the chemical reactions designed to subdue their tannins and create new aromas is very limited, which drives up the price of vintage bottles in the fine wine market. Plus, wine is largely unaffected by economic downtowns, making them a fine alternative investment.

🔥 Hot tip

Wine is completely uncorrelated to the stock market and has historically provided higher returns than the S&P 500. But purchasing fine wine requires an extensive understanding of wine, including production, storage conditions and authentication. If you’re not a wine aficionado with access to a network of wine merchants and auctions, consider using a fund like Hedonova that works with wine experts and professionals and handles the legwork for you.

3. Art

While digital art sales like NFTs have recently generated a lot of buzz, physical artwork is a tried-and-true investment that operates outside the traditional financial markets. Investing in art is a long-term investment that can be used to build potential generational wealth.

Contemporary art has seen a 14% annualized return over the past 25 years, likely due to the growing number of high-net-worth individuals and increased demand for art pieces from China. But art prices can be unpredictable and vary based on many factors, including collector sentiment and the artist’s reputation.

Keep in mind that art can be subjective. After all, while you may feel that Bonnard’s oil painting of a disproportionately tall cat may be worth over $19 million, others may not.

🔥 Hot tip

If you don’t have the budget to purchase an art piece outright, you can opt to own a small piece of art by working with an investment company like Hedonova. By owning fractional shares of artwork, you won’t need to invest millions and won’t have to worry about storage fees or insurance costs.

4. Carbon credits

Carbon credits are like permission slips from the government for companies to generate one ton of CO2 emissions. Companies buy carbon credits, which determine how much greenhouse gas they can produce. If a company emits fewer emissions than its limit, it can sell its carbon credits to another company, therefore creating a form of climate currency that operates heavily on supply and demand.

Demand for carbon credits comes from two sources: First, companies that operate under a cap-and-trade program are issued a specific number of carbon credits each year and are required to operate within their carbon allotments. If a business produces more carbon than allowed, it must purchase credits to offset its emissions.

The second demand is from businesses and individuals who voluntarily buy credits to offset their carbon emissions by investing in projects that reduce their carbon footprint. This market is largely unregulated and projected to grow as consumers become more environmentally conscious.

🔥 Hot tip

The IHS Markit Global Carbon Index, which measures the performance of the global carbon credit market, returned 108% in 2021, and carbon credit prices are up 550% in the last four years. As manufacturing recovers in a post-pandemic economy, carbon credits may see an increased demand.

5. Music royalties

People will always listen to music. One example: During the height of the pandemic when the global economy was especially turbulent and live performances were suspended, people continued to turn to the music industry for entertainment.

Streaming services like Spotify and Apple Music have made music more accessible than ever while simultaneously incentivizing consumers to pay for music. After all, there’s nothing worse than a life insurance ad interrupting your smooth jazz music vibe.

You can purchase royalty rights to catalogs, albums or individual songs. Keep in mind, however, that future royalties can change quickly because of music trends and consumer tastes. For example, artists can make unfortunate decisions that can cause them to lose sponsorships, business relationships and popularity. But surprising revivals can happen too, like Kate Bush’s Running Up That Hill making a comeback nearly 40 years later.

🔥 Hot tip

Music assets vary from artist and genre loyalty. Instead of exclusively investing in new music that generally peaks three to 12 months after release, consider diversifying your music assets. Think about purchasing royalties of stock videos that film companies use in video productions, trending club music and social media audio or beats that composers lease in their songs.

Want in? It may be easier than you think.

These alternative asset classes have traditionally only been accessible to the ultra-wealthy, partly because they typically require extensive funds and exclusive connections. Funds like Hedonova allow main-street investors to buy into these investments without millions of dollars in capital or an elaborate understanding of each industry and emerging market.

By leveraging Hedonova’s industry experts, you can diversify your assets in a single diversified fund, which includes alternative assets like art, real estate and wine. Hedonova boasts a 15.4% return above the S&P 500 and a net internal rate of return of 55.2%. And with a minimum investment of $5,000 and 1% fees on average, you don’t need to have a high net worth to invest in market-resistant alternative assets.

Disclaimer: The value of any investment can go up or down depending on news, trends and market conditions. We are not investment advisers, so do your own due diligence to understand the risks before you invest.
Name Product Available asset types Annual fee
Hedonova
Cryptocurrency,Real estate,Art,Other
1%
Disclaimer: Star ratings are only displayed for products with 10 or more reviews.
loading

Compare up to 4 providers

Compare other alternative-investing platforms here

Ask an Expert

Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and finder.com Terms of Use.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site