7. Art
You can buy art as an investment and enjoy owning something visually appealing. But an artwork's value is not guaranteed to increase, and you are obligated to securely store and maintain the art itself.
Choosing art that retains and grows in value is a specialized skill set that not many possess. Should you buy the works of established, well-known artists or those of up-and-coming artists? To help you with this decision and others like it, you can hire an expert in the art appraisal field who's reputable and trustworthy.
The art market is illiquid, or not easily converted into cash, and it's difficult to predict when a piece of art will gain value. You may need to own the art for longer than you intended and keep it in an environment with the right temperature, humidity, and light exposure, since deteriorated quality can easily destroy its value.
If you want to combine art ownership with crowdfunding and avoid physically owning any art, you can use an art-focused crowdfunding platform like Masterworks. Investors on Masterworks pool their funds to acquire art and pay a fee to hold and maintain the art until it can be sold for profit.
Are alternative investments right for you?
Many types of alternative investments are accessible only to investors with high incomes or high net worths. Regulatory requirements may require you to be an accredited investor, meaning that either your net worth -- excluding your home -- is greater than $1 million or your earned income exceeds $200,000 per year.
Investing in alternative assets often requires a great deal of capital, and these investments can be illiquid, making them difficult to buy or sell. Many online marketplaces for alternative investments have multiyear minimum holding requirements for the assets.
Owning alternative assets is best suited for investors with diversified portfolios. If you are happy with your allocations to traditional securities such as stocks, bonds, and exchange-traded funds (ETFs), then allocating money to alternative assets may be a good fit.
As for which alternative investment types to choose, consider your appetite for risk, your investing time horizon, and how much time you have to devote to investing. Then you can identify the specific alternative investments that appeal to you most.
Advantages and disadvantages of alternative investments
Alternative investments encompass a wide range of options, some of which are much safer than others. Real estate investments can both provide long-term income and accumulate equity, but the same advantage isn't possible with something like cryptocurrency, which may or may not gain value over time but might not generate any other income.
The disadvantages of such a wide range of investments are also pretty much the same story -- they vary widely. Many are very hard to divest. Art or fractional real estate ownership requires a willing and able buyer to take the asset off your hands, so they're somewhat illiquid. However, crypto, for example, can often be liquidated instantly.
