The World of Alternative Investment
Victor German co-authored this article.
NEW YORK ( TheStreet) --Investors don't like the stock market the way they used to.
Retail investor participation rates in equities markets are low and have been for years. Who can blame them? Competing with high frequency trading isn't easy.
Fortunately, there is a world alternative investment to consider beyond equities, suitable for a broad range of capital levels and risk appetites. Forward-looking university endowment funds like those of Harvard and Yale paved the way, and in recent years smart money in general has taken notice of the alternative investment model.In this article, the first in a series, we'll introduce the reader to several classes of alternative investment: 1. Real Estate:The most familiar way to profit from real estate may be the fix-and-flip, adding value by improving run-down properties. This type of investment can yield handsome returns, but it's a complex and potentially costly venture for those not intimately familiar with the process. A similar idea is to invest in REO, or real estate-owned, properties, either directly or through a fund. In principle the approach can pay handsomely, as banks often look to get rid of distressed properties at a significant discount. In practice, it can be a gamble -- properties are sold as-is, and an inexperienced buyer (or poorly managed fund) can easily fall victim to buying a property with expensive unforeseen issues. Yet another direct investment option is crowdfunding. Sites like fundrise.com and realtymogul.com offer smaller investors opportunities to participate in real estate projects in their communities to turn a profit. For those not excited to get their hands dirty, there are publicly traded alternatives. One option is to buy and hold broad market REITs such as Vanguard (VNQ). There are also specialized REITs that can be used to play on specific market events, for example buying Healthcare Realty (HR) or Healthcare Trust of America (HTA) might be part of a bet on the market consequences of Obamacare. 2. Farmland: We made the case in a previous article that direct farmland investment may offer an attractive return profile for those willing to deal with the assets' inherent complexities. There are three ways to invest directly.
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