According to a 2022 report by the Chartered Alternative Investment Analyst (CAIA) Association, alternative assets made up 12%, or $18 trillion, of the $153 trillion in global investable assets at the end of 2020. Growth in this asset classes is expected to accelerate rapidly in the coming years, reaching 18% to 24% of the global investable market by 2025.
What exactly are alternative investments and how do you add them to your portfolio? Here’s what constitutes an alternative asset, how you can invest and which platforms you should try if you want to diversify your portfolio with this burgeoning asset class.
An alternative investment is an investment in any asset class other than conventional categories, such as stocks, bonds, mutual funds and cash. These can include but aren’t limited to:
Basically, if it isn’t stocks, bonds or any other traditional asset and you can invest in it, it’s an alternative investment.
What Matt thinks about real estate investing
REITs are a great way to diversify a portfolio outside traditional investments and can be attractive for their competitive dividends and long-term capital appreciation. REITs let anyone invest in large-scale, income-producing real estate, and they've been a favorite among investors looking for a steady stream of income for decades.
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.
Retirement-focused investors 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 assets. Here are some of those platforms, what they do and how you can use them to build out your portfolio.
8 alternative investment platforms
Investors interested in adding alternative assets to their portfolios should consider the following alternative investment platforms.
SoFi's expansion into alternative assets is the company's latest move to broaden its all-in-one finance and investing platform, giving its members new opportunities to customize their investment strategies, diversify their portfolios and enhance their portfolio's return potential. Through expert-run funds from Ark Invest, Carlyle, Franklin Templeton, KKR and Clarion Partners, SoFi members can gain exposure to commodities, foreign currencies, private credit, hedge funds, venture capital and real estate.
These funds are available in SoFi's IRAs too, which means retirement-minded investors can diversify into alts while reaping the tax benefits of IRA investing, all through SoFi's user-friendly platform.
Pros
Invest in alternative asset mutual funds and interval funds
Expert-run funds from Ark Invest, Franklin Templeton and other well-known investment management companies
Alternatives are available in SoFi IRAs
User-friendly browser and mobile platforms
Cons
Lowest minimum investment is $500
Fund fees may apply
Limited research tools
Available asset types
Stocks, Options, Mutual funds, ETFs
Minimum Investment
$500
Annual Fee
Management fees vary by fund
Signup bonus
Get up to $1,000 in stock when you fund a new account within 30 days
Available asset types
Stocks, Options, Mutual funds, ETFs
Minimum Investment
$500
Annual Fee
Management fees vary by fund
Signup bonus
Get up to $1,000 in stock when you fund a new account within 30 days
Public.com is a beginner-friendly investing platform that's been growing its lineup of alternative assets. Alongside stocks, bonds, ETFs, options and Treasury Bills, Public.com offers crypto, art, collectibles, NFTs, luxury goods and music royalties. Invest in shares of these alternative assets just like stocks in a company. But while Public.com offers commission-free trading for stocks and ETFs, it charges a 2.5% commission to buy and sell alternative assets.
Notable assets that are currently offered through Public.com include: Police Car by street artist Banksy from 2003, Tom Brady's rookie card and Shattered Backboard Air Jordans, signed and worn by Michael Jordan during one of his iconic moments on court in 1985.
Pros
Invest in art, collectibles, luxury goods and more
Buy shares in alternative assets just as you would stocks
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.
Vinovest offers four investment tiers, with minimum investment amounts ranging from $0 to $250,000. Annual management fees range from 1.90% to 2.50% depending on your chosen tier. Vinovest also charges a 2.5% buy-side trading fee, a 1% sell-side trading fee and a 1.5% yearly storage fee, billed monthly. 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.
Yieldstreet is a one-stop shop for investing in alternative assets, with one of the broadest selections of alternative asset classes on this list. Its offerings include:
Real estate
Venture capital
Private equity and private credit
Crypto
Short-term notes and structures notes
Transportation
Art
Legal finance
But some assets are only open to accredited investors, and Yieldstreet requires a minimum investment of at least $10,000. It also charges an annual management fee from 0% to 2.5% depending on the asset.
Pros
Invest in a variety of asset classes including art, real estate and commercial offerings
The Prism Fund is available to non-accredited investors
Cons
Most offerings are only available to accredited investors
With an entry point of just $20 per share, Ark7 offers low-cost access to high-yielding real estate: rental homes. Diversify your portfolio with fractional shares of curated rental properties that provide monthly distributions and the potential for long-term appreciation. Use your IRA to invest and trade your shares on a secondary market. Ark7 is available to both accredited and non-accredited investors.
Pros
Fractional real estate investing
$20 minimum investment
Invest through an IRA
Cons
3% one-time sourcing fee
8-15% monthly asset management fee
1 year minimum holding period before you can sell your shares
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 has since added private credit and venture capital opportunities to its lineup of available investments.
Fundrise users invest in private real estate investment trusts (REITs) for as little as $10. Expect a holding period of at least five years, though you can sell early for a flat 1% fee. Fundrise charges a 0.15% annual advisory fee, and its real estate funds have an annual 0.85% flat management fee. Meanwhile, Fundrise's Innovation Fund, which invests in a diversified portfolio of private high-growth technology companies, has annual management fee of 1.85%.
Pros
$10 investment minimum
IRA accounts available
Private real estate, private equity and venture capital opportunities
Cons
1% early liquidation fee
0.15 annual advisory fee and 0.85% management fee for real estate funds
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.
Through Masterworks, you can invest in securitized blue-chip artworks for as little as $20. You can then hold the artwork for any potential sale or, if there's demand, trade your shares on the secondary market. Any potential profit from an eventual sale of the painting will be some years down the road. According to Masterworks, they hold the painting for between three and 10 years before selling. Masterworks also charges a 1.5% annual fee, takes a 20% cut of the proceeds when they sell the painting and requires a minimum of $15,000 to open an account.
Pros
Access to blue-chip art investing
Low minimum investments
No transaction fees
Cons
1.5% annual management fee
Masterworks takes 20% of the profits when a painting sells
Kalshi is an exchange that lets investors trade event contracts, which 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.
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 want more than 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.
Compare alternative investment platforms
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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.
Frequently asked questions
An alternative investment platform is any investment platform that offers access to alternative assets.
Four examples of alternative investments include real estate, artwork, precious metals and investment-grade wine.
The best alternatives to the stock market may be assets that do well when stocks underperform. This can include bonds, which tend to move in the opposite direction of stocks, and real estate, which has no correlation to the stock market.
Matt Miczulski is an investments editor at Finder. With over 450 bylines, Matt dissects and reviews brokers and investing platforms to expose perks and pain points, explores investment products and concepts and covers market news, making investing more accessible and helping readers to make informed financial decisions.
Before joining Finder in 2021, Matt covered everything from finance news and banking to debt and travel for FinanceBuzz. His expertise and analysis on investing and other financial topics has been featured on CBS, MSN, Best Company and Consolidated Credit, among others. Matt holds a BA in history from William Paterson University.
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