If you only invest in conventional investment assets like stocks and bonds, your investment opportunities will be restricted. Thanks to alternative assets, you can break the restrictions. There are a lot of alternative assets that you can invest in and they will give you good returns if you can hold on to them. But you should also know that investing in alternative assets is limited to accredited investors. This exists because a lot of fund managers only rely on private placement registration exemptions that restrict their investor base to the accredited investors. Anyway, as a retail investor, you can still invest in alternative assets in various ways. In this article, we will tell you about some of the private placement alternative investments.
A lot of private companies take on investor capital. They do it because they are in need of money and since they cannot go public, they seek help from investors. Private equity is a broad term and it describes the whole investment scenario of the private capital market. The investment strategy of private equity firms varies from one to another. But usually what happens is they raise capital from both institutional and non-institutional investors. The capital or fund is then placed in promising private companies and it stays there until an exit event like IPO or acquisition. If your invested company makes money, so will you.
Venture capital is a part of private equity and it specializes in investing in companies that are in the early to growth stage. Companies that are in the initial stages have a hard time getting capital because they are not well known, this is where venture capitalists come in. They see potential in a company and invest in it. Early venture capital investors in companies like Facebook, Google, etc. have gained a huge amount of wealth because of the success of the said companies. Keep in mind that this is a risky investment and it can go bust if the company doesn’t succeed.
Peer to Peer (P2P) Lending
Peer to Peer lending is what its name tells you. This is a way of lending money to an individual through a website and cutting off any middleman. You open an account as an investor on a P2P website, and you will get requests for lending money. You don’t have to lend all the money by yourself. You can team up with a few other lenders and create a fund and then lend the whole money to a borrower depending on his creditworthiness.
Tangible assets like gold, real estate are also alternative investments. If you want a stable income for a while you can just buy real estate and build a house and rent it or buy an apartment or a house and rent it. You can invest in REITs if you don’t want to be a landlord. Investing in golds is also a good idea as they are highly liquid and grow in value over time.
Private placement alternative investments and other such offer a good way to diversify your investment portfolio. Smart investors don’t only invest in stocks and bonds anymore; they also invest in private placement alternative investment assets as they are good as assets to invest in.