7 Types of Alternative Investments

Alternative Investments

“Either make your money work for you or you will always have to work for your money” – Marshall Sylver. Whether it’s long-term financial security you are after or having some spare cash for a rainy day, you should consider to start investing – and better sooner than later. Here is a quick guide to the different types of investments:

What are the common types of alternative investments?

1. Fixed Deposits

A fixed deposit is a bank deposit with a clear date of maturity. There are penalties for early withdrawals but once the account reaches maturity, you can withdraw funds without any fines. Or you can choose to leave your funds for another term. The longer you leave your money alone and the higher the amount of funds, the more interest you earn.

2. Precious Metals

Precious metals such as gold or silver are metals that are highly valuable and sought after. Gold is a classic investment that remains as a popular hedge against any trouble. In general, gold and precious metals preserve wealth against rising inflation. If you’re keen to learn more about gold investing, here are 5 tips for you

3. Art and Collectibles

Investors can purchase and sell fine art for a profit. Some fine art pieces may appreciate over time, earning investors a handsome sum of money. However investors should be aware that not all art pieces in the market are authentic or may appreciate in value over time. Besides art, collectible coins are also an avenue where investors can participate in. Annually in Singapore, we usher in the new year as a country with a set of specially designed coins. Investors should do their research or seek expert advice before investing in art and collectibles, to ascertain the true value of the investment as well as to ensure they are dabbling in only authentic goods.

4. Property

The value of property generally appreciates overtime, making property a popular long-term investment. On top of that, renting out your property also allows for the earning of steady and passive income on the side. 

However, the main disadvantage of investing in property is glaringly obvious: entry cost is high. You need a lot of money to buy property. Additionally, property is not liquid and requires plenty of upkeeping. Furthermore as landlords, you run the risk of dealing with destructive tenants. Or worse, no tenants – leaving you with an idle asset. 

Though real estate investments can be a potentially profitable strategy, depending on the conditions of the property market, land prices may be lowered as well. All in all, the decision to purchase a property is a resource heavy one and like any other investments, one should do their own due diligence before making any decisions.

5. Bonds

When companies or governments need funds – perhaps to expand, or to build infrastructure, they can choose not to borrow money from banks. An alternative is to issue bonds which are a form of debt where the corporation/government undertakes the role of the borrower. Investors who purchase those bonds are then the lender. Depending on the type of Bond, Bonds can be bought at face value, with regular interest payments made to the holder and principal paid back at the end of the tenor.

Bonds typically offer lower returns than say stocks, but that can be explained by the level of risks and price fluctuations involved as compared to the latter. In addition, similar to fixed deposits, bonds provide a stable passive income.

6. Cryptocurrency

A cryptocurrency is a digital or virtual currency designed to work as a medium of exchange. Normally, Cryptocurrency trading does not require high start-up capital and opportunities to enter the market are available 24/7. However, the value of cryptocurrencies is widely known to be volatile and unpredictable

Similar to stocks, investors trade cryptocurrency on stock exchanges. Some methods to obtain cryptocurrency include “mining” and or buying them from a trading platform. As the popularity of cryptocurrency rises, so does the risk of it being exploited by wrongdoers. To curb this, the Singapore government has recently passed a bill that will require service providers dealing with cryptocurrencies to be licensed.  

7. Peer-to-Peer Lending

Peer-to-Peer (P2P) lending, or P2P investment, is a type of debt-based crowdfunding enabled by digital platforms that connect SMEs with investors  without going through a traditional financial intermediary. Funding Societies is one such platform and investors on it look to earn interest returns in exchange for participating in a crowdfund. Despite being a relatively new concept in Singapore, it has grown significantly over the years and has shown no signs of slowing down.

Starting from just S$20, P2P investing with Funding Societies caters to a large number of investors and makes a potentially palatable entry opportunity for beginners with a lower risk appetite. In addition, the Guaranteed line of investment products effectively guarantees the returns to investors, making it a possible source of passive income. 

“Should I invest in alternative assets?”

As with any investment, it is important for you to fully understand the investment opportunity and what you are getting into before putting any money.. You can consider alternative investments as means to diversify your portfolio but do bear in mind the risk appetite that you are comfortable with.  With options like P2P Investments in the market, there are varying products that cater to investors with differing investment goals. 

Read more: How to Manage Your Investment Portfolio Like a Pro

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Disclaimer: This article is not meant to constitute/be construed as a form of recommendation, financial advice, or an offer, invitation or solicitation from Funding Societies to buy or subscribe for any securities and/or investment products. The content and materials made available are for informational purposes only and should not be relied on without obtaining the necessary independent financial or other advice in connection therewith before making an investment or other decisions as may be appropriate. View full disclaimer notice here


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