Alternative Investments to Diversify your Portfolio

September 1, 2022

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In today’s world, having a diversified investment portfolio is essential, not putting all your eggs in one metaphorical basket. As inflation remains high, cash value falls, and investors look for assets where the value will track or beat inflation. With interest rates low, investors also need portfolio income to replace lost “risk-free” income from cash deposits. Because markets are volatile, savvy investors expect to invest in assets that will steadily appreciate and not fall in value at the slightest whiff of bad political or economic news. Here are some alternative investments that do not depend on the performance of traditional assets such as stocks, bonds, cash, or real estate and share the above characteristics.

Investments in agricultural land

The price of agricultural land is directly related to the profits from the land itself. Studies of historical data have shown that agricultural real estate assets appreciate at twice the rate of inflation. Arable land also generates annual income from growing and selling crops or tenant rent payments that replace lost revenue when dividends from other investments fall or interest rates are low. Agricultural land is in exceptionally high demand as the population grows and demands more food. Still, the supply of suitable land is shrinking due to urbanization, land degradation, and climate change. Returns on investments in farmland are driven by population growth and rising incomes. Rising consumption rather than the financial markets, and since these are long-term fundamental trends, farmland generates very little volatility and is not affected by short-term ups and downs. Smaller investors have difficulty accessing direct farmland investments due to the capital required and experience in property selection/management. Of course, there are farmland mutual funds or other more innovative structures that allow multiple investors to participate in a more significant asset through a trust or bond.

Forestry Investments

They invest in trees concerned with institutional investors such as pension and hedge funds. Still, there are many opportunities for smaller investors to get involved in direct forest investments and regulated and unregulated forest investment funds—cultivation and sale of wood. As trees continue to grow in size, they also increase in value, so yields are driven by organic growth. The growth rate of trees is well outpacing the inflation rate, making it one of the best-performing asset classes in 30 years and avoiding much of the market volatility experienced. Smaller investors can participate in a forest investment fund or take over managed parcels within commercial forest plantations of different timber species in other regions, from Brazil to Australia. Find out about crypto high yield investment for your portfolio.