What are the various alternative investment strategies?


#1

I am interested in expanding my investing portfolio beyond stocks, property and bonds…

Can someone please outline the various alternative investment solutions out there?


#2

In a market economy, almost everything costs money. This means that you can invest in almost anything. So, a stock isn’t necessarily one type of investment

e.g. MTG - the shares for the trading card game “Magic The Gathering

There are many types of alternative investments, but I am going to name the most basic ones.

Farmland
Farmland is probably the most common alternative investment class. It is a safe investment, insofar as it is out of sync with the broader stock market and it rises and falls with inflation. This is obvious, as inflation is tied to food prices. When inflation rises up, farmland will as well.

Farmland has generated pretty incredibly returns over the past few years. The average return of the stock market from the previous century was about 7% (including dividends).

Farmland has achieved similar growth, but with far less volatility.

Investing in farmland is more difficult than you might think. You can invest in various farmland REITs listed on the Nasdaq, but personally I am not a fan (I have tried to be though). There are no companies which seem completely focused on long-term stable growth with safe debt levels. Gladstone Land seems to have a problem managing debt and Farmland Partners’s stock has nearly halved since their IPO.

The best way of investing in farmland is either through a private equity fund (provided you have the money), or by buying the farmland yourself (provided you have the money).

Until another stable farmland REIT appears, I think it will be difficult to invest in farmland with a margin of safety. Even if farmland is a stable asset class, I would avoid the debt if I could…

Timber
Another popular investment class is timber. Investing in wood might be one of the unsexiest investments I can think of… but it has generated stable returns over the past few years.

Timber is used in many college endowment funds, because it has generated very stable returns over time and it is relatively stable.

Judging by the index, it also looks like it is far less volatile than the stock market, probably because it is more difficult to buy and sell.

I think Timber would be a great investment as part of stable, diversified portfolio…

Sidenote: you could get exposure to these asset classes from an ETF, but I would advise against it. ETFs are passive investment often confused with index funds. Whereas IF are stable over time, ETFs are far more dangerous as they comprise of complex derivative contracts. Personally, I would avoid them at all costs.

These are just two asset classes…I will ad a few more later on - when I get time…