Alternative Investments

When we talk about investing we generally think about the stocks or fixed income market. But as we all know the Toronto stock exchange hasn’t done very well in the last 5 years and bond yields are still relatively low. More investors are starting to look into alternative ways to put their cash to good use. One way to do this is through alternative investments.

Alternative investments behave differently than traditional markets. Their returns have a low correlations with those of standard asset classes. In other words, they don’t follow the stock market or the bond market. Some examples of alternative investment classes include commodities, hedge funds, managed futures, wine, art, private equity, real estate (residential, commercial, farmland, REITs, etc.)

Earlier this year I bought some silver coins. These are pure commodities. The value of these coins over the last 5 years definitely out performed the TSX composite.  Hedge funds and derivative contracts are usually for accredited investors with deep pockets. Vintage wine, paintings, or other types of art also do not fluctuate with the stock market and can be a great store of value over the long term. Real estate is a tough one. Depending on location this investment can either be hit or miss in the last 5 years. But it doesn’t follow the financial markets, and I don’t know anyone who has invested in land for a long time and have lost money consistently.

Getting into alternative investments isn’t difficult (^_^) If you own a REIT, either private or public, then you are already investing in this space. Buying a rental property also makes you an alternative investor. Please keep in mind that alternative investments are usually less liquid than traditional assets so if you are thinking about doing anything in this space I suggest you take a long term approach.

Random Useless Facts:  The first European stock exchange was established in Antwerp, Belgium, in 1531.

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Modest Money
08/29/2012 6:29 am

Good to hear more about why you are considering the alternative investment we were talking about recently. It does make a lot of sense to not be over-reliant on the stock markets. I’m definitely not diversified enough in this regard, but it’s something I’ll have to keep in mind going forward.

08/30/2012 6:44 am
Reply to  Modest Money

Too bad there are no etfs or something that has every type of investments there is.

Steve@The Loonie Bin
Steve@The Loonie Bin
08/29/2012 5:43 pm

I’ve saved some money to start investing in land way out in the booneys where it’s cheap and plentiful. I may not get much of a return, but my kids might!

08/30/2012 6:45 am

That’s what I’m planning to do as well. Land is a great long term investment because they’re not making any more of it.

Harry Campbell (@PFPro1)
08/29/2012 8:48 pm

It definitely makes sense to diversify. In my retirement accounts I hold stocks(domestic and international) and bonds(domestic). But I also own real estate, CD’s, and a small amount in lending club.

08/30/2012 6:46 am

Sounds like you’re very well diversified 🙂 I want to get more exposure in the real estate market.

08/30/2012 9:00 am

I tried penny stocks once, not a true alternative investment but far enough removed from normal investing for me to lose money:)

08/30/2012 4:43 pm
Reply to  Rob

The best lessons are the ones learnt the hard way. There’s definitely potential for small cap firms though if you pick the right ones.

08/31/2012 11:34 am
Reply to  Liquid

Well I used Jason Bond Picks, great service, good picks but I keep getting whipsawed by he market, was very hard tomget the right entry and exit points, finally decided it was too much risk too little profit