What are the Best Alternative Investments?

October 12, 2021

Who says that investing is solely a game of buying and selling stocks? Stocks are highly volatile, and relying solely on company stocks leaves you subject to the ebbs and flows of the stock market and the larger economy.

In other words? If you’re doing well, you’re doing great, but if the stock market crashes, you could lose everything.

This is why it’s essential to diversify your investment portfolio, especially with stable alternative investments. Here’s a look at some of the best alternative investments that you should consider.

What are Alternative Investments?

Alternative investments are not a single type of investment, but rather a broad classification of investments—basically, they’re any type of investment that doesn’t fall into one of the three conventional investment categories:

  1. Stocks
  2. Bonds
  3. Cash

Unlike their conventional counterparts, alternative investments tend to be somewhat illiquid, especially in comparison to conventional assets like stocks. This is due to the limited turnover resulting from more limited buyers and a different (and more difficult) valuation process.

However, they are an excellent tool for portfolio diversification, since they have a low correlation to the stock market (and may even move in the opposite direction to the stock market).

The Best Alternative Investments on the Market Right Now

Some of the best alternative investments have been around for a long time. Others are newer to the field but have proven themselves to be highly profitable.

Here are some of the best-tested and best-valued alternative investments for you to consider.


Art is a type of real asset investment, meaning a physical asset with intrinsic value due to its physical properties. These have a very low correlation to the stock market and are more stable (but less liquid) than financial assets.

For this reason, art collection has emerged as an important investment tool—not just to diversify your portfolio, but also to hedge against inflation.

We’re not talking about your mom’s flower paintings. We’re talking about blue-chip art, art of high value that is reliably profitable and is expected to hold or increase its economic value regardless of ups or downs in the market. To be clear, this has nothing to do with the art’s importance to a collector, museum, or even art history—art’s blue-chip status refers solely to its resale value.

For this reason, blue-chip artists are often artists you would recognize the moment you saw their names—artists like Picasso, Miro, Chagall, and Dali, to name a few. These are well-recognized artists whose positions have been solidified by exceptional sales numbers on the auction market.

Real Estate

Another type of real asset (one of the oldest real assets still in use) is real estate. If you own an apartment building and lease out the units, or even if you rent out your beach house to vacationers, you’re a real estate investor.

The key difference between investment properties and personal properties is how you intend to use them. You buy personal property to live in, and it is not considered an investment because you don’t earn money on it (or at least, it’s an asset, but not one that earns value).

An investment property, on the other hand, is acquired for the express purpose of earning money. This is done in one of two ways: by flipping the property to earn money on the sale, or by leasing out the property to earn income from the rent.

Hedge Funds

Don’t let the term hedge fund throw you off with Hollywood imagery of Wall Street bankers. A hedge fund is simply a type of investment partnership that pools investors’ money and invests it in an effort to make positive returns, much like a mutual fund.

The difference between a mutual fund and a hedge fund is that a hedge fund has far more leeway to invest aggressively, and they’re allowed to use tactics that are barred from mutual funds. The name itself derives from the use of trading techniques that managers can perform—since the aim of these funds is to make money regardless of whether the market rises or falls, a fund manager can hedge themselves by going long (in the event of a market rise) or short stocks (if they foresee a market drop).

Because of this leeway, hedge funds are solely limited by their mandate—to earn money no matter what. This means the fund managers can use a wide variety of investment vehicles (including other alternative investments) which may carry added risk but higher payoffs.

Venture Capital

Venture capital is a form of private equity that investors provide to start-up companies believed to have significant long-term growth potential. In fact, this type of investment focuses exclusively on companies in the early stages and growth stages.

This is a critical investment for start-ups, many of which lack access to public financing since they don’t have an extensive revenue or operational history. For investors, it allows you to get in on the ground floor while the buy-in is still cheap, and a successful investment can offer outsize returns.

This type of investing is only suitable for those with a hearty risk appetite. There’s a high chance of failure since many of these companies don’t have profits (or even revenue) yet, but on the other hand, there’s a huge reward if the company succeeds.

Ready to Get Started with Alternative Investments?

What if we said that you could benefit from an exciting asset class that outperformed the S&P 500 by 180% from 2000–2018?

That’s blue-chip art, and here at Masterworks, our mission is to democratize the $1.7 trillion art market by making it possible for everyday investors to earn profits on multi-million-dollar artworks. We do it the way investment managers run any investment account—by using data to help you make informed decisions and invest in the right assets at the right time. Sound good? Then click here to get started with your membership application and learn how we can put the exciting blue-chip art world to work for your financial goals.

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.