Why It Is a Good Time to Start Alternative Investments

The global economy is facing significant challenges, with growth slowing down in many regions. The IMF predicts that global growth will slow further in 2024. 

In Europe, for instance, high inflation remains a key issue, with rates as high as 5.3% in July 2024, largely driven by rising energy costs and ongoing supply chain disruptions. Similarly, China, which used to be a big driver of global growth, is also slowing down due to less investment and reduced consumer spending.  These points to the broader economic difficulties that are transforming markets and creating new obstacles around the globe.

Challenges for Traditional Investors

Traditional investments, especially stocks, are highly sensitive to geopolitical events. For instance, news of trade disputes, conflicts, or changes in government policies can cause stock prices to fluctuate widely. Events such as trade wars or conflicts often create uncertainty and panic, leading to rapid market changes as investors react to the news.

 While these investments remain essential and continue to play a significant role in many portfolios, the current economic environment highlights the importance of diversifying strategies.

The Role of Alternative Investments in a Diversified Portfolio

80% of institutional investors are putting their money in areas like private debt, as investors seek to diversify and find more stable returns amidst market volatility. The traditional investment landscape is becoming increasingly challenging for investors.

Today’s environment has amplified the need for alternative investments, which are less connected with the broader market. Because of this lower correlation with global events, alternative investments can provide a more predictable return, even when geopolitical risks affect traditional markets. 

In times of uncertainty, rather than replacing traditional assets, alternative investments may offer an additional way to stabilise your overall strategy. It will help you manage risks while still aiming for growth. 

Where to Begin with Alternative Investments

For those new to alternative investments, the question of where to begin can seem daunting. However, there are several accessible entry points that can make the process more manageable.

Direct Ownership and Investment Funds

One of the most straightforward ways to get started with alternative investments is through direct ownership. This could involve purchasing physical assets such as farmland, timberland, or art. These tangible assets can provide long-term value and serve as a hedge against inflation.

Additionally, investors can explore investment funds that focus on alternative assets. Private equity funds, REITs, and commodity funds are just a few examples of how you can gain exposure to alternative markets without having to directly manage the assets themselves.

Fractional Ownership Platforms

For those who may not have the capital to make large investments, fractional ownership platforms offer an appealing solution. These online platforms allow investors to purchase fractional shares of alternative assets, such as real estate, art, or collectibles, often with entry points as low as a few hundred euros. This democratization of alternative investments makes it possible for a wider range of investors to participate in these markets.

Traditional investments might not be enough

In an unpredictable economy, traditional investments might not be enough. As we’ve discussed, the global challenges we’re facing — from slowing growth to market volatility — make it crucial to explore new opportunities. Alternative investments offer a way to diversify, manage risk, and seek stable returns even in uncertain times.

By considering alternative investments, you’re taking a smart step to strengthen your portfolio and prepare for the future. The options are accessible, whether you start with direct ownership, investment funds, or fractional platforms. 

FAQ: Alternative Investments Start