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March 29, 2021

At the risk of sounding basic, we’re going to go ahead and restate an investing 101 bedrock principle: Diversify your portfolio. Those early in their investment journey might take that to mean buying stocks from a few different companies whose operations are uncorrelated. But that would amount to a basket with some different colored eggs in it – all still bound to the fate of the basket.


Though the stock market is indisputably the greatest wealth generation machine of all time, the rise of algorithmic trading has tangled the performance of individual companies to the market at large. That’s why investors are looking to diversify their portfolios not only within the stock markets but in other alternative investments.


So, which alternative investments are likely to lead the charge in 2021? We list a few in this article that you should take a serious look at.



Artwork


Much like hedge funds, investing in artwork has always been the preserve of the wealthy. And that may be the best single argument to consider investing in it.


If you’re an average investor, you probably don’t know much about artwork. And you probably don’t have the hundreds of thousands of dollars – or even millions – that you would need to purchase the most priceless pieces of art.


But there’s an investment platform known as Masterworks that will allow you to purchase a small sliver of fine artwork for as little as $20.


They emphasize pieces they believe will have the best price growth potential, so you don’t even need to know anything about art to participate.


Precious Metals


Precious metals mainly include gold, silver, platinum, and palladium. Gold is the easiest to invest in since you can do so in various forms. That includes gold bullion coins and bars, gold exchange traded funds (ETFs), gold-mining stocks, and gold funds (which are primarily comprised of the stocks of gold-mining companies).


Gold-mining stocks are admittedly speculative, and while they can have tremendous upside potential when the price of gold rises quickly, they can just as easily crash and burn. Holding the metal itself is safer for the average investor. The most convenient way to do this will be through a gold ETF



Cryptocurrency


Cryptocurrency is the wild west of the investment universe.


It’s an independent, Internet-based exchange system that’s not tied to any government or country. They’ve only been around for a little over a decade, and they’re not well understood. But that’s precisely what gives it at least some credibility as an alternative investment. It’s completely uncorrelated with any other type of asset.


If you’re interested in investing in cryptocurrencies, you can trade them for free on Robinhood, and with very little money. But be careful with cryptocurrencies since they don’t have a long track record.



Rental Real Estate


If owning your own home is a solid alternative investment, rental real estate maybe even better. It has many of the same advantages, including long-term appreciation and the paydown of the mortgage on the property. But you’ll also get the benefit of rental income to cover the operating expenses, and hopefully generate a profit.


While individual rental property is expensive, you can invest more cleanly through real estate crowdfunding platforms. 


There are platforms that allow you to invest in apartment complexes with a small amount of money. Best of all, apartment buildings often perform well even when financial assets are in decline. After all, people always need a place to live, even during the worst of times.



Investing in Yourself


Most people don’t think of this as being an alternative investment but it’s actually one of the best investments you can make.


For example, by investing in improving your health, you’ll be increasing your energy and vitality, which can improve your productivity. And by taking specific courses or training programs, you can be acquiring valuable skills that will improve your income earning ability. That’s the single biggest asset most people have.


It may also pay to invest some money learning how to create a whole new income source, such as a business. For example, you can learn to make money with a blog, or you can invest some money in building a new business. After all, if you’re willing to invest money in the stock of other companies, why not just invest in a business of your own?



The purpose of adding investments to your portfolio isn’t to create overnight riches, even though some advocates promote them as doing just that. Rather, it’s to add a source of income that is likely to perform well even when more traditional assets are languishing in the gutter.