Alternative Assets Explained: Investing Outside of the Stock Market
It's not the 1950s anymore. Now you can branch out and invest in everything from crypto to farmland to exotic cars.
Updated Jul 20, 2021
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The richest rapper in the world is none other than Kanye West—yes, the same Kanye who announced on Twitter that he was $53 million in debt back in 2016.
If you look at historical data, alternative investments have performed better than the stock market overall.
Five years later, he’s worth $6.6 billion, according to a Bloomberg report. That’s not because The Life of Pablo was flying off the shelves, either. Kanye’s music catalog is worth about $110 million.
Instead of cashing in on his flow, Ye managed to turn it all around, making smart investments, but not the kind you might think. Apparently, he’s only got $122 million in cash and stocks.
That means over 98% of the Yeezy fortune comes from alternative investments (like Yeezys). So what are alternative assets, and how can you snag some? Let's break down what alternative investments are and hype you up with the best examples.
Hold up: What are alternative assets?
Hold up: What are alternative assets?
Alternative investments are any value-producing asset that isn’t the mainstream stuff: stocks, bonds, and cash. Investing in alternative assets can mean buying up anything from real estate and startups to foreign cars, luxury watches, rare sneakers, Birkin bags, fine art, crypto, gold, and even sports cards.
Ye’s portfolio of alternative investments, which includes the Yeezy label (worth over $3 billion), isn’t uncommon. Nearly every rich rapper out there holds a lot of their money in alternative assets.
Diddy’s got a streetwear brand and a line of vodka. Jay-Z has Tidal, Rocawear, Roc Nation Sports, and a $4.5 million Basquiat painting. And 50 Cent put his money in a luxury car collection and a champagne brand. While the stock market is a good strategy for consistent long-term growth, alternative investments have the potential to produce more profit in less time.
Now let's look at what the open market for alternative investments looks like.
Wait a minute: You’re telling me I can make more cash off a pair of Air Jordans than the stock market?
It’s possible. Alternative investments don’t always outperform the stock market and can be risky. Many alternative investments are in collectible asset classes, like comic books or Pokemon cards, that see less volatility due to liquidity constraints, thus their prices are relatively more stable. But, this isn't true of all alternative investments.
Cryptocurrency, for example, is notoriously volatile. The value of one Bitcoin can drop thousands of dollars in a matter of hours—which also means it can gain a few Gs during your lunch break. Every investor making an alternative investment does so at their peril, so know that there aren't the same safety nets for some assets as there are for traditional investments.
That said, alternative investments can be as stable as mutual funds—investing in real estate, for instance. And if you look at historical data, alternative investments have performed better than the stock market overall. Farmland is a super relevant example because it's one of the only alternative investments that has more than doubled in value every decade for the last three decades with less volatility than other assets.
For example, HoneyBricks—a real estate investing platform that lets you invest in income-generating rental homes using crypto—boasts up to 20% target return. Those investment returns are better than the average long-term stock market investment. What makes HoneyBricks innovative is that it leverages the efficiency and transparency of the blockchain to make investing in real estate faster and easier.
With more liquidity and lower investment minimums than other platforms, HoneyBricks is the best (and maybe only) place to invest in real estate with assets like Bitcoin and Ethereum.
Jay-Z’s Basquiats and Picassos also stand a chance at beating out stocks. According to Masterworks, an app that lets you buy small shares in famous masterpieces, the contemporary art market has outdone the stock market for the past 15 years. Investing in the masters gets aesthetes an extra 5.5% in returns, making fine art one of the best alternative investments to have.
If there's one thing institutional investors can get behind, it's a good bottle of wine. Our study on fine wine found that it outperformed other asset classes and has less downside risk and lower volatility. Similarly, we found that an investment in a rare bottle of whiskey performed better than stocks, bonds, gold, and even bitcoin over three market crashes.
As far as alternative investments go, the most stable tangible assets to own are diversified wine and whiskey collections. The problem is that wine is more of a hassle than traditional investments, but platforms like Vint fix that. You can invest in curated collections of the most coveted wine bottles on Vint starting at $50, making it easier than ever to add bottles of high-end vino to your portfolio.
And while investing in startups can be risky (9 in 10 fail), you only need one zero-to-a-billion unicorn to 100x your money. Peter Thiel famously turned $1,664 into $5 billion, starting with an investment in PayPal in 1999. He had the inside scoop, but now apps like Republic vet startups for you and let you invest with as little as $100. Now that's an alternative investment you can't refuse.
If you're one of those accredited investors who wants to get in early on the biggest private companies, then the investing platform Dizraptor has you written all over it. Startups are some of the best high-growth alternative investments you can add to your portfolio if you're willing to take a chance on a fledgling company. Download the Dizraptor app and invest in companies like SpaceX and Stripe for as little as $1000.
MoneyMade provides analysis and original data on over a dozen alternative investment assets, so you can make informed decisions. We help you discover new alternative investments through our discover page featuring 200+ partner platforms. Don't know where to start? Take our MoneyMatch quiz to find the best alternative investments for you.