What Is An Alternative Investment?

An alternative investment is any investment that falls outside the traditional areas of cash, bonds and stocks.  As they have little correlation with these investments, alternative investments are less exposed to market conditions, meaning that diversification into them could reduce overall portfolio risk.

All You Need To Know About Alternative Investments

This resource was published in 2013

Since 2008, problems have persisted in traditional stockmarket-focused areas of saving, investing and financial planning.  Many people have been disappointed by the returns on their money. In the 13 years since the year 2000, the FTSE 100 is virtually unchanged. High volatility has been a constant feature and it’s expected to continue whilst debt across the world remains at record levels.  Investors have also been put off by high charges, significant bonuses and the perception of a selfish culture in financial services and banking. 

Against this backdrop, it’s not surprising there’s been a growing appetite for alternative ways to invest that doesn’t involve the stockmarket. 

8 Alternative Investment Sectors Arranged In Risk Order

Set out below are each of the eight sectors that make up the alternative investment area. We’ve listed them in risk order, with property representing the lowest risk in our opinion. Click on the relevant blue buttons to see more detail about each sector.

property

Alternative Investment: Property (1 of 8)

Property is the best known alternative investment widely used as a diversifier in traditional portfolios and is, perhaps, now more mainstream than ‘alternative’.

Property

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Alternative Investment: Precious Metals (2 of 8)

There are three key drivers behind precious metals prices – investors looking for a store of wealth, industrial demand and speculators expecting price growth.

Precious Metals

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Alternative Investment: Farmland (3 of 8)

Productive agricultural land is a tangible asset that can be directly owned and offers the prospect of both regular income and capital preservation. 

Farmland

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Alternative Investment: Forestry (4 of 8)

There are a significant number of drivers behind forestry investment, including a desire to invest in green projects, growing timber prices and relatively consistent returns.

Forestry

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Alternative Investment: Energy (5 of 8)

Energy has been a long standing classic defensive investment, with success dependent on actively managed funds, regular portfolio rebalancing and diversification.

Energy

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Alternative Investment: Land (6 of 8)

Land has been a directly held alternative store of wealth for the rich for centuries. There are now more opportunities for retail investors to purchase land, but investments need careful assessment.

Land

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Alternative Investment: Collectibles (7 of 8)

Collectibles include classic cars, fine wines, art, stamps, furniture, antiques, watches and jewellery. They are rarely approved for SIPPs but store wealth due to their status as highly desirable items.

Collectibles

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Alternative Investment: Other Investments (8 of 8)

There are other investments that do not fall into the other sectors, some of which are explored in this section.

Other Investments

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