Are you looking for ways to grow your business? You might have plans to recruit extra staff to deal with your mounting workload, extend your premises to cater for an increase in demand or even open up additional locations to establish a more significant market presence.
Whatever your intentions, it’s likely you’ll need some capital to work with. Aside from the traditional avenues of seeking funding from lenders such as banks, there are other ways for businesses to try and drive further revenue and support their expansion plans.
Alternative investments, for example, are becoming an increasingly attractive proposition. A report from PricewaterhouseCoopers predicts alternative asset classes will reach $21.1 trillion by 2025, which would amount to a 15% share of all global assets under management.
But what exactly are alternative investments? What are some common examples and what are the potential benefits for businesses looking to capitalise on the opportunities that they provide?
What is an alternative investment?
An alternative investment is an opportunity for businesses to invest in assets that are different from traditional instruments like cash, stocks and bonds. Alternative investments can be tangible or intangible – we’ll discuss some specific examples further down the page – and they offer the chance for businesses to diversify their portfolios.
It is often more difficult to calculate their underlying worth, because they can be unique and therefore the valuation process is likely to require a degree of specialist knowledge or understanding. As a general rule, they offer lower liquidity than traditional investments and their purchasing costs tend to be higher.
What are some examples of alternative investments?
There are some alternative investments that deal in tangible assets. These might include precious metals, antiques, art, stamps or even wine. Then there are intangibles, which operate within the financial sphere. These may include venture capital, where individuals or businesses provide funding to help start-ups launch and establish themselves. In return, the start-up gives up an equity ownership stake to the investor.
Foreign exchange (forex) is another example. This is the trading of one currency for another, for example the US Dollar against the Japanese Yen. Trillions of Dollars are traded every single day, with various markets across different time zones meaning trades can continue almost 24/7. Businesses looking to explore this particular avenue can sign up with a forex broker who may provide a forex account that offers a welcome bonus of $30 of capital pre-loaded to begin the trading journey.
What are the advantages of alternative investments?
Alternative investments can benefit businesses because they offer a chance for portfolio diversification. Although they tend to come with higher purchase prices attached, that risk is balanced out by the greater rewards on offer if your investment pays off. Additionally, investing in tangible assets such as precious metals, real estate or oil can create a valuable hedge against inflation.