A Beginner’s Guide To Alternative Investments

November 11, 2021

If you have extra money lying around, it’s always a good idea to invest in something. Earning passive income is one of the most effective ways to achieve financial independence. But how and where to start?

This article will go through some of the most profitable alternative investment opportunities. We will also be sharing some tips, what to consider when making this decision, and of course, where to start.

Most people think that investing is only limited to stocks. Together, let’s debunk that notion and identify ways to maximize your returns.


Basically, investing is the act of allocating resources into profit-making endeavors. Alternative investments, on the other hand, are your non-traditional channels that go beyond the stock market. These include real estate, hedge funds, art, collectibles, and a lot more.

Since not everyone can be like the Wolf of Wall Street, people have gravitated towards these less risky options. They may not lead to as much overall yield within a limited time, but it’s generally safer, and more suited for the average investor.


The main reason why people invest is to earn a profit. It’s that simple. Instead of leaving your cash in a bank, where it grows by an average of 0.06-percent each year, allocating it towards a different venture can yield more dividends.

Here’s a list we compiled of the scenarios why someone would even consider this in the first place. Does anything sound familiar?

  • Saving Up for Something – Is your son or daughter going off to college soon? Planning a family vacation? Or are you simply preparing for retirement? Whichever the case is, anticipating an upcoming expense is one of the most common reasons for getting into investments. This way, you’ll have multiple streams of income coming in.
  • Inflation – Let’s face it. The value of $10,000 is no longer the same as it was ten years ago. And that’s largely because of inflation.

    Every year, the prices of basic necessities like food, gas, rent, electricity, and water increase. Investing your money in a lucrative venture will allow your money to maintain its value, and ultimately, the living standard you have grown accustomed to.

  • Inheritance – As parents, we always have our children’s best interests in mind. Being smart with your money now will mean a brighter future for them.
  • Emergency Funds – Accidents can happen at any time or place. Having money tucked away somewhere will mean you’ll have a contingency to fall back on. It will also prevent you from draining your life savings.


Alternative investments have become a well-accepted method for growing value. Because of this, more and more of them are popping up each day. For your benefit, we decided to focus only on the most recognized examples. We’ll also be enumerating the pros and cons of each, as well as who they are usually best suited for.

  1. Real Estate – Buying a piece of land or property is one of the best alternative investments available. Real estate, if it’s in the right location, almost always increases in value.

    Currently, there are different ways of approaching this. The first is to purchase an undervalued property and wait for its market price to increase, before selling it again. This is the most common practice, requiring the least amount of steps.

    Another possibility is flipping. Some people choose to invest in worn down and dilapidated structures, furnish them, and put them back up for sale. However, we only recommend this approach to individuals with a strong construction background or those who know someone with such a background.

    Either route has proven to be equally successful in recent years.

    Pros: Has the potential for a huge return, lots of case studies to go over

    Cons: Requires large amounts of capital to start as well as lots of research, can be potentially time-consuming

    Who is This For: People looking for a “quick home-run”  and have the time and resources to spare. Of course, experience in either interior decorating or general contracting will help a lot.

  2. Luxury Items – Not many people know this, but buying designer shoes and bags, high-end watches, jewelry, and precious metals is actually a form of investing. Their value steadily increases on a year-to-year basis, although not by a huge annual margin.

    The capital required to purchase luxury items isn’t a big amount either, compared to something like real estate. But because most luxury items are already sold through retail stores in America, you’ll need to travel to the country of origin for the best deals. These are typically European countries like Switzerland, France, and Italy.

    Be careful of imitations as well. They may look like originals, yet have none of the value. Having them in your possession can also be against local or international laws.

    Pros: Can be entered into by anyone, potential for growing family inheritance value
    Cons: Finding the lowest priced items is difficult, lots of fakes already in the market, and sentimentality could be an issue

    Who is This For: Someone savvy with a good eye for details and strong business sense

  3. Artwork – We could have included this in the last number. However, it takes an entirely different skill-set to earn from artwork, not to mention a vast network and white-hot passion. Trust me, you won’t get by with a fake-it-until-you-make-it approach.  

    Like most luxury commodities, paintings and sculptures, especially those made by world-renowned artists, can more than double in value. Unfortunately, they could just as easily lose their worth. That’s why you need to be fully entrenched in the art scene or know someone who already is.

    Actually buying what may one day become a valuable piece is also quite difficult, because of their one-of-a-kind in nature. You’ll need to be active in auctions, scour ritzy pawnshops, and travel the world to make this a viable venture.

    Pros: High potential for profit, not as much capital required as real estate

    Cons: Requires a certain level of expertise, very difficult to penetrate this market

    Who is This For: A person already with a strong knowledge about artwork, who has time to do research.

  4. Cryptocurrency – In our list, this is perhaps the most controversial type of alternative investment. After all, it has only been a few years since Bitcoin, Ethereum, and Cardano were introduced.

    For anyone who isn’t familiar, cryptocurrency is virtual money that can be traded across different platforms. Unlike stocks, they aren’t governed by any entity. Instead, their value is derived from blockchain technology, or the level of demand the currency has in the greater global community.

    At present, more and more users are softening up to the idea of investing in cryptocurrency. Many establishments are even accepting it as an alternative to cash payments. Truly, the world is changing, one legal tender at a time.

    Pros: It isn’t difficult to penetrate and requires very little capital

    Cons: There is still a negative stereotype surrounding it, and because it’s not regulated by any local or foreign government agency, cryptocurrency isn’t covered by most cyber-laws; very volatile

    Who is This For: Ideal for individuals who don’t have much time, as they can invest in cryptocurrency while still maintaining a day job.

  5. Mutual or Hedge Funds – Our final alternative investment option works in a similar way. Mutual funds and hedge funds pool together resources from a group of individuals before a manager re-infuses it in different enterprises. The profits are then divided equitably among everyone involved.

    Now, what sets them apart is determined by the uncertainty. Mutual funds are typically low-risk endeavors that result in steady profits. Hedge funds, on the other hand, are a lot more complex. These usually involve high-risk strategies that could potentially lead to a higher payout.

    Pros: Lower risk of bankruptcy compared to the other choices, they can be easily customized depending on your risk appetite

    Cons: Their outcome is determined by another person’s knowledge and not your own

    Who is This For: This is a good start for those with limited knowledge about investments. Very minimal maintenance is needed to earn a profit.


No matter what you say, investing in anything will always be a leap of faith. One way of managing expectations is by considering the following factors.

  • Budget – First thing’s first; Identify an amount you’re willing to put up. This will help determine which among the alternative investment options is best suited for you. Be realistic, but also enter with a mindset that you aren’t getting that back anymore. This should guide you in identifying how much is a safe quantity for you to invest.
  • Risk Appetite – We’ve used this term several times above, and it essentially means the level of risk you are willing to experience. This varies from person to person, so be sure to identify all the circumstances.

In general, high-risk ventures that require more time and effort typically result in greater earnings.

  • Needs – How you plan on using the earnings is a major factor that will require careful deliberation. Is it something essential, or just an embellishment? Will it be something you can do without?


Finding success never happens overnight. What most people don’t realize is all this is a process filled with highs and lows. To minimize the risks involved, here’s a list of recommendations you might want to consider.


Of course, the first thing you need to do is identify a budget. How much are you willing to spend and what profit do you expect to yield? Seeing the distance between these two points should help you identify what steps to take next.

Also remember to never risk anything you aren’t willing to lose.


Most, if not all, of these alternative investment opportunities already have a ton of educational resources readily available. Several people have their experiences to share, too. All you need is a quick internet search.

When doing so, understand how each one works. Most importantly, determine what each venture will require from you, whether it’s time, expertise, or additional capital. Having all this information should shift the odds in your favor.

I would also suggest enrolling in training sessions and seminars. There are so many free classes online that can easily fit into your daily routine. Yet, they provide so many eye-opening insights.

As we mentioned earlier, investing in luxury items, real estate, artwork, and cryptocurrency all require a certain level of knowledge. It’s important to come to the table with a learner’s mindset.


Investments may be passive income, but they still require some tending to. Keep track of the progress, shifts in trends, and updates. This way, you slowly become an expert, while also getting a better feel of when to pull out, or invest more.

Ultimately, investing is a skill that’s honed through experience. Your encounters and learnings, day in and day out, will prove valuable in the long run.


Don’t be scared to admit that you don’t know everything. Turning to individuals who have more experience is the easiest way to learn. They’ll be able to guide you, give feedback, and help you navigate potential potholes. You might need to pay a small commission. But hey, it’s still a lot better than losing money traversing through this foreign land alone.

Alternative Investing in a Nutshell

Let’s face it. Living in this world won’t get any easier. So instead of working for money, we need it to work for us.
Thankfully, there are so many potential opportunities to earn passive income, in the form of alternative investments. These will allow you to maximize the value of your assets, and keep up with the growing inflation rates.

It’s important to keep in mind that with several choices available, it’s essential to reflect on our own needs, aspirations, strengths, weaknesses, and what we are willing to give up. This way, despite the risks, we can arrive at a decision that yields the best possible results.

Masterworks is a fintech company democratizing the art market. Our investors are able to fractionally invest in $1mn+ works of art by some of the world's most famous and sought-after artists.