Home/Learn/Exploring the Different Types of Alternative Investments

Exploring the Different Types of Alternative Investments

Alternative Assets

Feb 22, 2023

Exploring the Different Types of Alternative Investments

When it comes to saving money, most individuals tend to rely on conventional investments such as stocks, bonds, and cash. These types of assets can be seen in 401(k)s and savings accounts, which are popular for ordinary investors.

In addition to traditional investing, there is an alternative way to invest, known as alternative investments. These investments can provide an additional layer of diversification and potentially higher returns.

Defining Alternative Investments

Alternative investments are not the same as conventional investments like stocks, bonds, or cash. Unlike traditional investments, this type of investing involves assets that can't be easily converted into cash or sold. These investments are often referred to as alternative assets and can offer various benefits.

Alternative investments are an ever-growing asset class with a variety of options accessible to the average investor. These investments may have distinctive qualities that set them apart from traditional assets, such as stocks and bonds. As a result, all kinds of investors and market specialists must stay up-to-date with the opportunities presented by alternative investments.

Types of Alternative Investments

Private Equity 

Private equity involves investing money into businesses that are not traded on the public stock market. This type of investment typically consists of funds being used to purchase shares of a company, which can then be sold in the future for a profit. These investments can also provide funds for business expansion, acquisitions, or other operational objectives. Their subsets include:

  • Venture capital: Venture capital is invested in early-stage, high-risk companies with the potential for high returns. 
  • Leverage buyouts: Leveraged buyouts involve purchasing a company or its assets from another company, usually with borrowed funds. 
  • Growth equity: Growth equity is capital that is invested into companies that are already established and have the potential to grow further.

Private debt

Private debt is money borrowed from private sources, such as individuals, private companies, or venture capitalists, instead of borrowing from a traditional bank. These sources of financing can provide greater flexibility than a bank loan and can often be used for investments that may not qualify for conventional bank financing.

The lender is usually a private debt fund, which makes money by charging interest on the loan and then collecting the loan's principal amount when the loan is paid off. Private debt provides companies with quick access to large sums of capital, allowing them to invest in new projects and expand their operations.

Hedge funds 

Hedge funds are investment funds that utilize a range of strategies to attempt to make greater returns than a standard investment. They are created and managed by experienced professionals who use their expertise to trade various assets such as stocks, bonds, and derivatives. 

These specialists may employ a variety of methods, such as long-short equity, market neutral, volatility arbitrage, and quantitative strategies, to attempt to produce high returns for their investors. Only accredited investors, like institutions and wealthy individuals, can access hedge funds that allow them to make potentially large returns.

Real estate 

Real assets are physical items that have tangible value. Examples of real assets include land, timberland, farmland, and intellectual property such as artwork. Real estate is the most common type of real asset, and it is the largest asset class in the world.

It is an appealing investment choice because it combines features of both bonds and stocks. With real estate, you can receive a current cash flow from tenants paying rent, similar to bonds. You can also increase the asset's long-term value, similar to stocks, known as capital appreciation. The size of the investment is another attractive feature.


Alternative investments offer returns that are not correlated to the stock market, which can help to protect investors from any downturns in the stock market. They come in many forms, including real estate, private equity, hedge funds, and more. Each type of investment has risks and rewards, so it is essential to research and understand the risks associated with each type of investment before committing your capital. 

For alternative investments, turn to Investment.com. High-yield asset classes are now accessible to everyone. Download the app now to take control of your financial future.