5 Best Alternative Investments In India Beyond Stocks And Bonds
Introduction:
Many investors construct their investment portfolios by allocating funds to conventional assets such as stocks, bonds, and fixed deposits. These assets offer the potential for growth and diversification to a certain extent. Nonetheless, some investors aim for diversification that extends beyond these customary asset categories.
Such investors typically turn to alternative investment avenues to diversify their portfolios beyond traditional investment tools. Diversification ensures that an investor’s portfolio continues to gain in value even if the volatile markets are not performing well. But the bigger question that arises here is what are these alternative investments and how can you identify the best ones to add to your portfolio? This blog tries to answer all such queries. Keep reading.
What are alternative investments?
Alternative investments refer to a range of non-traditional assets beyond the usual stocks, bonds, and fixed deposits. These can include real estate, commodities, private equity, hedge funds, venture capital, infrastructure, cryptocurrencies, and more.
Unlike traditional investments, alternative assets often have unique characteristics, such as lower liquidity, higher complexity, and less transparency. They may also offer different risk-return profiles and have varying degrees of correlation with traditional markets.
Investors seek to invest in alternative investment avenues to provide diversification to their portfolios, potentially enhance returns, and mitigate risks associated with conventional investment tools.
5 best alternative investments in India
Below are the five best alternative investment avenues in India for portfolio diversification in 2024:
1. Real estate and REITs
Real estate has long been a favoured investment asset class in India, offering stability and the potential for appreciation. You can buy a residential or commercial property at a popular location to earn returns through price appreciation in the future. You can also make regular rental income. However, direct investment in real estate can be capital-intensive and illiquid.
Real Estate Investment Trusts (REITs) provide a more accessible way to invest in real estate, offering exposure to income-generating properties without the need for direct ownership. They typically invest in commercial properties such as office buildings, malls, and warehouses.
2. Gold and precious metals
Investing in precious metals, such as gold, silver, platinum, and others is another prudent method to diversify your investment portfolio. The prices of these metals have appreciated decently in recent years.
You can either purchase them as coins or bullion or in the form of jewellery. You can also invest in digital gold through Sovereign Gold Bonds (SGBs). The Reserve Bank of India (RBI) issues SGBs from time to time to help investors looking to diversify their portfolios.
3. Cryptocurrencies
Cryptocurrencies, led by Bitcoin and Ethereum, have taken the financial world by storm in recent years. While they’re known for their volatility, they also offer unparalleled growth potential.
India has also witnessed a surge in cryptocurrency adoption, with a growing number of investors recognising its potential as a hedge against inflation and a store of value. With the right research and risk management strategies, investing in cryptocurrencies can offer significant returns in the short to medium term.
4. Peer-to-peer lending
Peer-to-peer (P2P) lending platforms have emerged as an alternative source of financing for both borrowers and investors. In India, P2P lending has gained traction as a way to earn attractive returns while diversifying away from traditional fixed-income investments. By connecting individual borrowers with investors willing to lend money for a return, P2P lending platforms offer an opportunity to earn higher yields than traditional fixed deposits or bonds.
5. Art and collectibles
Investing in art and collectibles has gained popularity among high-net-worth individuals seeking to diversify their portfolios. India has a rich cultural heritage, with a thriving art market that encompasses traditional and contemporary artworks. Investing in art and collectibles requires expertise and careful curation, but it can offer the potential for significant returns over the long term.
From paintings and sculptures to rare coins and vintage cars, there’s a wide range of collectible assets that you can consider adding to your investment portfolio.
To conclude
These alternative investment avenues offer an array of opportunities to diversify your portfolio and potentially enhance returns. However, all of them come with their own set of risks and rewards. Thorough research, due diligence, and risk management are essential to making informed choices and achieving long-term financial goals.
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