The best alternative investments for 2023
Tech has been a game changer for finance. It’s making the sector more accessible to the average retail investor, with the experience of world-class institutions no more than a click or tap away. In particular, tech has broadened exposure to alternative assets, an investment class that in the past was almost exclusively reserved for the ultra-wealthy. So why should the layman care about alternative assets? Which ones present the most opportunity? And how can you go about adding them to your portfolio?
Read on to find out.
The benefits of alternative assets
“Alternative” is a broad term used to describe investments outside public equities, bonds, mutual funds, and cash. Because of their low correlation with standard equity and bond markets, alternative assets offer some powerful benefits, including higher overall return potential and acting as a hedge against inflation. They can also function effectively as part of an income investing portfolio, as well as help reduce volatility as part of a long-term diversification strategy.
Alternative investments to consider for 2023
While diversification is no guarantee of success, distributing your investments across a range of asset classes helps reduce risk overall. In terms of alternatives, there are so many flavors to choose from that investors may find they’re able to bolster their portfolio while also getting involved in areas of special interest, whether that be emerging technology or fine art.
Here are some of the best alternative investments to evaluate for 2023.
1. Franchising
Of course we had to put this one at the top of our list. But there’s a reason we’re so partial to the asset class, and why franchises have long been a favored investment of the ultra-wealthy.
Benefits
- Recession- and inflation-resistant
- Regulated by the FTC and SEC
- Low volatility with high-yield potential
- Equity appreciation
Challenges (of the traditional model)
- High upfront costs
- Operational expertise required
- Large time investment for franchisees
How to get started
FranShares: Hey, that’s us! We’re changing the franchising game with our fractional investing model. Our best-in-class franchise management team ensures that our investors enjoy truly passive income through quarterly distributions without having to manage the franchise – all for as low as $500 with zero fees.
2. Wine & Whiskey
Who wouldn’t want to own a commodity that ages like … fine wine? This asset class shares many features with other collectibles as value is driven by the quality, provenance, and rarity of a given vintage.
Benefits
- Recession-resistant
- Direct ownership of a finite resource
- Consistent yield and attractive return on investment
Challenges
- Long time horizon
- High initial outlay
- Collection upkeep and insurance costs
How to get started
Vinovest: Liquid asset connoisseurs can use Vinovest to enjoy returns on expertly curated portfolios of investment-value wines. Vinovest handles the acquisition, shipping, storage, and maintenance of collectible vintages, while investors have the choice to either hold onto the bottles for later sale or enjoy the wine themselves. Vinovest’s newest product, Whiskeyvest, applies a similar investment model to casks of rare whiskey.
3. Real Estate
Traditionally a lucrative asset class, potential investors can choose to invest in real estate either directly by actively owning/managing properties, or indirectly through crowdfunding or real estate investment trusts (REITs).
Benefits
- Equity appreciation
- Generation of passive income
- Tax advantages
Challenges
- Interest rate fluctuations
- Saturated market
- High transaction costs
How to get started
Fundrise: One of the first to revolutionize alternative asset investing, Fundrise leverages the buying power of its massive network to build diverse portfolios structured to withstand market forces. In addition, Fundrise’s tech-first approach streamlines business processes, lowering fees substantially for investors.
4. Venture Capital
Ever fancy yourself a shark? Diversifying your portfolio by investing in new or growing companies can be an exciting and rewarding means of building wealth.
Benefits
- Outsized return potential (think Uber or Amazon)
- Network building within the startup ecosystem
Challenges
- High volatility
- High initial capital outlay
How to get started
Alumni Ventures: A network-based venture capital firm, Alumni Ventures is out to democratize this once-exclusive asset class for accredited investors. The investment minimum for the Alumni and Total Access Funds is a relatively accessible $25K, while $10K will get you in the door of one of Alumni’s thematic Focused Funds.
5. Art
If you have a special interest in creative works, adding fine art to your investment portfolio can bring deep personal satisfaction, as well as the potential for excellent returns. Depending on their provenance, some fine art pieces can fetch mind-boggling sale prices.
Benefits
- Attractive return on investment
- Inflation hedge
- Ownership of an asset with historical and cultural significance
Challenges
- Fickle market based in part on an artist’s reputation
- Illiquid asset
- Storage and maintenance costs
How to get started
Masterworks: Like Vinovest has done for fine wine, Masterworks is making it possible for retail investors to participate in the fine art market. Along with removing the hassle of managing a collection of potentially fragile pieces, the platform allows users to buy and sell representative shares of their artwork.
6. Farmland
Much like residential or commercial real estate, there are a few different options open to investors who want to diversify with agricultural land, including direct ownership, farmland REITs, and/or hedge funds.
Benefits
- Equity appreciation
- Passive income generation
- Low volatility
Challenges
- Production is dependent on the weather/climate
- Limited liquidity
- Long holding periods
How to get started
AcreTrader: This investment platform is bringing a high-tech approach to one of the world’s most historic asset classes. AcreTrader purchases parcels of farmland and securitizes them, allowing investors to buy and sell shares equivalent to tracts of that land and to profit from annual distributions.
7. Cryptocurrency
Crypto has been all over the news recently, and not for the greatest reasons. While there’s no question that the asset class is extraordinarily risky, it can still be a valuable addition to a well-balanced portfolio, especially for investors who are interested in a more aggressive strategy.
Benefits
- Outsized return potential
- Cutting-edge technology
Challenges
- Highly volatile
- Unregulated market
How to get started
Coinbase: Coinbase is a one-stop shop for crypto management that offers investors exposure to hundreds of different cryptocurrencies. Their exchange makes buying and selling simple, with an interface similar to most stock brokerage platforms.
Ready to Add Franchise Investing to Your Portfolio?
If you’re an investor looking to incorporate alternative assets into your 2023 strategy, investing fractionally with a FranShares franchise portfolio offers high earning potential and diversification in a completely passive model.
To learn more about FranShares and this unique opportunity, speak to our Investor Relations team.
