Alternative investments are incredibly popular lately. That’s fundamentally because of investor desire to harness outperformance, but also because people are looking for uncorrelated returns to protect against another stock market crash like we saw in 2000 or 2008.
Decades ago, the ideal portfolio mix touted by investment advisors was 60% stocks and 40% bonds. More recently that school of thought has changed, with some advocating for a heavier allocation to stocks given the need to focus on growth over income — and the last decade of disappointing bond market performance from both a capital gains and income perspective. But if you don’t like bonds and you don’t trust stocks, then where can you turn?
The answer: alternative investments that include private equity stakes, commodities, real estate, and even stakes in art and music. Here’s what these alternatives have to offer, and how you can attempt to cash in:
— Private equity.
— Commodities.
— Fractional art shares.
— Music royalties.
— Real estate.
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Private Equity
Most investors are familiar with the high potential of private equity — that is, stakes in privately owned companies that are traded off public exchanges. These include venture funding rounds for pre-IPO companies and startups. Unfortunately, leading private equity funds have minimum investment requirements that are seven or even eight figures, placing them well out of reach for all but the wealthiest investors.
That said, there are increasingly more options for smaller investors looking to get a piece of the private equity market. These include platforms like Nasdaq Private Market, Yieldstreet and Hiive that allow access to various investments that otherwise aren’t publicly traded.
To be clear, private equity investments are necessarily exclusive and hard to come by — meaning they can often be harder to fairly price and don’t lend themselves to quickly executed transactions. But if you’re truly interested in an alternative investment, these platforms allow a more populist approach to private equity.
[READ: 5 Great Fixed-Income Funds to Buy for 2025]
Commodities
Commodities are hard assets that are the building blocks for a host of products and services. Many investors are familiar with gold as a go-to commodity investment in times of inflation or market uncertainty, but beyond precious metals there are also “base” metals like copper and steel, energy commodities like oil and natural gas, and agricultural commodities including corn and soybeans.
Investors interested in commodities can theoretically buy precious metals like gold and silver in the form of coins or bars as a direct investment. But that can be impractical thanks to the lack of liquidity and costs associated with storage and insurance. Futures contracts tied to commodities can provide exposure to a wider array of materials, providing broader flexibility as well as a chance for diversification.
Additionally, there are ETFs that provide exposure. These include specific funds like the SPDR Gold Shares (ticker: GLD) tied to just a single commodity, as well as broad-based funds like the Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC) that holds a bit of everything.
Fractional Art Shares
Every year, investors get wind of jaw-dropping art sales — such as the 2024 auction of a work by surrealist Leonora Carrington that sold for $28.5 million. But aside from speculating on unknown painters or ponying up millions for a work from an established master, how can someone get in on the potential profits of the art scene?
The answer is platforms that allow you to purchase fractional shares in art. These include Artemundi and Masterworks, among others. There are limitations such as investors being required to meet a minimum investment thresholds for certain works that can be upwards of $10,000, or prohibitions on owning more than 10% of an individual work of art. The fees also can be quite steep, and your money can be tied up for years before you’re able to sell your stake to another investor.
That said, works by popular artists like Andy Warhol have decades of outperformance when compared with the stock market, and these fractional art platforms are sometimes the only practical vehicle for those who want alternative investments in the art market.
Music Royalties
Similar to investing in paintings, you can get a stake in hit songs if you’re looking for a way to play non-correlated investments that have a lot more risk but also the potential for a lot more reward.
Platforms including SongVest and Royalty Exchange provide outright or fractional music royalties, tallying up small amounts of cash every time a song plays and then paying out the total regularly to the folks who collectively own a piece of that music.
Once again, fees can add up and there’s not always an easy way to sell your stake after you invest. But music royalties are one of the most interesting and uncorrelated ways to generate passive income from your investment over the long term.
Real Estate
Real estate stocks and ETFs like the Vanguard Real Estate ETF (VNQ) offer an indirect way to gain exposure to property. But make no mistake, these investments are fundamentally about companies that hold real estate as part of a bigger business model that can include a lot of other overhead.
Direct investment in real estate is harder to achieve, since it typically requires a mortgage or commercial real estate loan. But buying a second home and renting it out offers not only a direct income stream but also appreciation if the property value increases.
It’s much harder to buy a bigger, multifamily rental property. However, there are platforms like Fundrise and Crowdstreet that offer exposure for as little as $500 for a small stake in individual apartment buildings or other projects.
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5 of the Best Alternative Investments for 2025 originally appeared on usnews.com
