What Are 'Alternative Investments'?

If you’ve been following the investing world lately, you may have noticed a lot more conversation around alternative investments. Once reserved for large institutions, alternatives are now becoming a regular part of well-diversified portfolios for retirees and high-net-worth families.

The global alternatives market is projected to grow from $15 trillion in 2022 to over $24 trillion by 2028.

What Are Alternative Investments?

“Alternative investments” simply refers to anything outside of traditional public stocks and bonds. Instead of owning shares that trade daily, investors might own physical assets, lend capital privately, or invest in long-term projects.

The Five Main Types of Alternative Investments

1. Real Estate: Investments in apartment buildings or commercial properties (e.g., a private real estate fund distributing monthly rental income).

2. Private Credit: Providing loans directly to businesses outside the stock market. This is the fastest-growing segment, offering reliable income.

3. Private Equity: Ownership in private companies before they go public. (Note: We view the risk here as often uncompensated for retirees).

4. Infrastructure: Assets such as roads, bridges, and renewable energy projects that generate stable, inflation-linked cash flows.

5. Commodities: Tangible assets like gold, oil, or farmland to hedge against inflation.

The Role of Alternatives

Alternatives work best as a complement, not a replacement. Most investors dedicate 10% to 20% of their portfolio to alternatives to achieve:

• Diversification: Smoothing out market swings.
• Income: Generating steady cash flow (especially via private credit and real estate).

The Insight Planning Approach

Alternatives aren’t about chasing trends; they’re about building stability. We help you strike the balance, identifying when the potential benefits of alternatives justify the costs and complexity.