Diversification is an important tool that investors can use to maximize their gains and minimize losses. This is where alternative investments become an integral part of an investment strategy.
In this blog, we’ll walk you through all you need to know about alternative investment options in India. Let’s begin by understanding alternative investments.
What Are Alternative Investments?
Alternative investment options include a broad range of non-traditional assets like P2P lending, lease financing, venture capital, and more. Even real estate falls under the category of alternative investments.
It’s important to note that alternative investment options do not include mutual funds, stocks, bonds, and cash, all of which are common investment options.
What Are Examples Of Alternative Investments?
1. P2P Lending
Peer to peer lending is one of the most recent forms of alternative investments. P2P lending puts borrowers directly in touch with lenders without a traditional intermediary like a bank.
Lenders prefer to invest in P2P lending because it can generate passive income through recurring monthly interest payments. Other benefits include lucrative interest rates (12%) and risk-based investment options.
However, it’s important to invest via platforms that are safe, trusted, regulated and reliable. For example, Cube’s P2P partner, Faircent, is an RBI certified NBFC.
Borrowers are thoroughly vetted and Faircent ensures that you lend only to creditworthy borrowers. Faircent earns only when you start earning.
2. Consumer Loans Via Merchants
This is another form of P2P lending where you lend to prime retail borrowers who have a high credit score. Cube’s consumer loans via merchants partner, LiquiLoans, is an RBI certified P2P NBFC.
Investors prefer consumer loans via merchants with LiquiLoans because it can generate passive income with returns between 8-9.5%. Moreover, the borrowers are thoroughly vetted.
Here's how LiquiLoans investments work on the Cube Wealth app
3. Real Estate
Real estate investments are considered to be alternative investments, to many people’s surprise. You might have to put in considerable effort to buy real estate property.
But based on the locality and the economic conditions, real estate as an alternative investment can have a potentially high resale value. Real estate can also generate passive income through rent or lease.
There are obvious advantages to investing in real estate but the property markets are tough. Thus, It’s important to research the locality and future potential before investing in real estate.
A few cons include the heavy paperwork involved in real estate transactions, large minimum investment amounts, physically travelling to the property to keep a check on it, and the upkeep cost.
4. Venture Capital
You can become a venture capitalist by financing small businesses or startups in exchange for equity. Compared to P2P lending or even real estate, venture capital requires significantly higher capital.
However, you can earn dividends and royalties from the business you’ve invested in. The company’s future sale can also fetch you a handsome buyout.
There are high risks associated with venture capital as an alternative investment since the success of your investment is directly intertwined with the success of the business you are investing in.
5. Antiques And Commodities
Buying and selling antiques and commodities like old bottles of wine and certain mint-condition action figures or comic books is a legitimate alternative investment that many investors dabble in.
But this investment space is only occupied by a select few due to various uncertainties. For starters, coming to a consensus on the valuation of an antique commodity is extremely difficult.
Another problem with antiques and commodities as an alternative investment is the holding period: If the product gains value with each passing year, when is the right time to sell?
Nevertheless, there have been comic books sold for $3.2 million dollars (CGC 9.0) and antiques like Pinner Qing Dynasty Vase sold for $80 million dollars.
Benefits And Risks Of Alternative Investments
Not market linked
Lack of clarity
3 Things You Should Know About Alternative Investments
1. Independent Of The Market
Most alternative investments are not linked to the market so the general market conditions and volatility do not apply to them. Thus, alternative investments can become a hedge against inflation.
However, there are risks involved with alternative investments. Always before investing in any alternative asset.
2. Generate Passive Income
Alternative investments may generate passive income which is a recurring theme seen across some, if not all, alternative assets. The interest payments or gains can help you after retirement.
3. Diversification Option
Alternative investments offer easy and efficient channels for diversifying your portfolio.
Are Alternative Investments Safe?
Every investment carries its own benefits and risks. Thus, it becomes important to invest with advice from a trusted financial advisor. But that’s not all.
Investing in alternative investments options through platforms that are honest and transparent can help you gain confidence in the investment.
For example, Cube’s P2P lending partners are RBI certified and RBI regulated entities who ensure that investors lend only to the best creditworthy borrowers.
Alternative investments are one of the best ways to diversify your portfolio. Most alternative investments can generate passive income, which can be useful for post-retirement expenses and for paying recurring subscriptions and bills.
1. What Is An Alternative Investment Vehicle?
Ans. Alternative investments include anything but traditional investments like stocks, bonds and cash. P2P lending, venture capital, real estate, and even gold is considered to be an alternative investment option.
2. What Are The Best Alternative Investments?
Ans. The best alternative investments are the ones that work for you. A general list of the best alternative investments may include:
Antiques and commodities trading
Not much of a reader? Here's a video on alternative investment options in India.
Note:Facts & figures are true as of 20-10-2021. All information mentioned is for educational purposes and relies on publicly available information. None of the information shared here is to be construed as investment advice. We strongly recommend you consult a Cube Wealth coach before investing your money in any stock, mutual fund. PMS or alternative asset.
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