Jryntorica Qysalind 
When people think of investing, the first images that come to mind are usually stocks, bonds, or mutual funds. These traditional building blocks have long been the backbone of retirement accounts and long-term wealth strategies. Yet in recent years, more investors have been exploring options outside of the mainstream. These are known as alt investments, or alternative asset classes.
Alternative assets have been around for decades—wealthy families have invested in art, farmland, and private businesses for generations—but digital platforms and greater transparency have made them more accessible to everyday investors. If you’re curious about diversifying your portfolio with alternatives, it’s worth understanding what they are, how they work, and the benefits and risks they bring.
What Are Alternative Assets?
Alternative assets are any investments that fall outside of the traditional trio of stocks, bonds, and cash. Some of the most common examples include:
- Real estate: Rental properties, real estate investment trusts (REITs), or crowdfunding platforms.
- Commodities: Physical goods like gold, oil, or agricultural products.
- Private equity and venture capital: Investments in companies that aren’t publicly traded.
- Hedge funds: Pooled funds that use advanced strategies to seek returns.
- Collectibles: Fine art, rare wines, vintage cars, or even sports memorabilia.
- Digital assets: Cryptocurrencies and blockchain-related projects.
This is a broad category, and each type of alternative asset carries its own unique structure and characteristics.
Why Do Investors Consider Alternatives?
The primary reason is diversification. Alternatives don’t always move in lockstep with stock or bond markets. That means they can provide balance when traditional investments are under pressure. For instance, gold has historically held its value during periods of high inflation or stock market volatility. Real estate, on the other hand, may provide steady rental income even when equities decline.
Beyond diversification, investors turn to alternatives for:
- Inflation protection: Assets like real estate and commodities often rise in value as prices increase.
- Potential higher returns: Private equity and venture capital can produce outsized gains, though they come with higher risks.
- Access to unique opportunities: Alternatives allow investors to benefit from markets and industries that aren’t available through public exchanges.
The Risks to Keep in Mind
Alternative assets are not without their drawbacks, and they may not suit everyone. Some of the main risks include:
- Illiquidity: Many alternatives can’t be easily sold. For example, investing in a private business may require holding the asset for years before seeing returns.
- Complexity: Alternatives often require specialized knowledge. Real estate investments demand an understanding of local markets, while private equity involves evaluating business models.
- Higher Costs: Hedge funds and private investment vehicles often charge significant fees that eat into returns.
- Uncertainty: Especially in newer categories like digital assets, values can fluctuate dramatically, and regulations are still evolving.
Because of these risks, alternatives are typically best suited for investors who already have a stable foundation of traditional assets and are comfortable with some level of uncertainty.
How Much Should You Allocate?
Financial experts generally suggest that alternative assets should only make up a portion of a portfolio. A common guideline is between 10% and 20%, though the exact number depends on your risk tolerance, goals, and time horizon. Overexposure to alternatives could leave you vulnerable to volatility or illiquidity, but a thoughtful allocation can enhance returns while reducing overall risk.
Who Are Alternatives Right For?
- Long-term investors: Since many alternatives require patience, they suit those who don’t need immediate liquidity.
- Experienced investors: Alternatives may require more research and comfort with complex investments.
- Those seeking diversification: If your portfolio is heavily concentrated in stocks, adding a mix of real estate or commodities can bring balance.
Practical Example
Imagine an investor with a portfolio split evenly between stocks and bonds. During a market downturn, both asset classes may decline together, creating heavy losses. But if that investor had also allocated 15% of their portfolio to real estate and commodities, the impact might be softened. The alternatives act as a cushion, helping to stabilize overall returns.
Alternative investments have moved from the fringes to the mainstream, offering everyday investors a chance to diversify and pursue new opportunities. They are not without risks—complexity, higher costs, and illiquidity all come with the territory—but for those who understand and manage these challenges, alternatives can be a valuable addition to a portfolio.
Companies like SoFi have made it easier for individuals to explore and access alternatives, providing educational tools and platforms that were once reserved for high-net-worth investors. With thoughtful planning and the right balance, alternative assets can complement traditional investments and help you build a more resilient financial future.
