Alternative Investment Options for Both Long-Term and Short-Term Investments

Does your investment portfolio take a severe hit when the stock market acts up? Are you stuck with decades left on a bond with an interest rate below market value? Do you want to do more to earn money for your retirement?

Traditionally, investing meant buying stocks and bonds or exchange-traded funds (ETFs) and mutual funds, but in today's erratic market, many investors are seeking additional investment options. Investors must diversify to stabilize their portfolios during market downturns and hedge against inflation.

alternative investment options

If your traditional investments leave you unsatisfied with your returns or vulnerable to market fluctuations, consider adding alternative investments that may not depend on external factors like the stock market.

What Does Investing Mean?

Investing involves placing money into a commodity, project, or venture with the expectation of receiving positive returns. Investors balance risk and reward to achieve their profit goals, as higher returns often require higher risk levels.

Many options exist for investing beyond traditional stocks and bonds, including investments like rare collectibles and private equity.

Types of Investments

Investments fall into two primary categories depending on how long they last:

  • Investors make short-term investments to protect their cash and earn money for a particular time or event. For example, you may invest money to raise funds for a wedding or mortgage down payment. Short-term investments typically last less than three years and involve less risk because the investor’s goals center around capital protection.
  • Long-term investments focus on creating wealth rather than preserving capital. These investments last for years or even decades and often involve more risk than short-term options. Higher risk usually means a higher reward potential, making long-term investments worth it for many people.

Your ideal investment type depends on your earning goals and the timeframe you’re working under. For example, if you want to protect your cash from the current inflation, you may decide to make a short-term investment. On the other hand, you may choose a long-term investment if you aim to expand your wealth before retirement many years down the road.

A well-balanced portfolio maximizes returns by taking advantage of both types of investments.

Why Should You Invest in Alternative Markets?

An investor who only buys stocks and bonds doesn’t have the diversification necessary to hedge against economic and market downturns. For example, you don’t want your entire portfolio to suffer when the stock market drops because stocks are your only investments. Many alternative markets offer safer investments than traditional options.

We’re not saying you should abandon your stocks, bonds, and mutual funds. Market experts advise investors to keep their portfolios diverse with a mix of stocks, bonds, and alternative investments to improve stability and fight against market volatility.

Alternative investments also expand your return potential, enhancing returns with less risk of losing your money. The best portfolio uses alternative investments to diversify, get protection from economic downturns, and improve returns.

Eight Best Short-Term Investments

Short-term investments must offer stable returns (if not the highest of returns), high liquidity, and low overall risk to present viable options. The following eight short-term investments contain those three characteristics, making them all sensible alternative options.

1. Roth IRAs

Roth individual retirement accounts (Roth IRAs) provide investors with earning accounts funded by after-tax income. Although an IRA represents a long-term investment, you can use your Roth IRA for short-term needs because you’re allowed to withdraw your contributions. Your Roth IRA account constantly earns money, so these withdrawable contributions will only be a portion of the total amount shown in your account.

Remember, you will incur a fine if you withdraw earnings from your Roth IRA account too early.

2. Checking and Savings Accounts

Most people who venture into investing already have checking and savings accounts with their local banks. Although savings accounts don’t typically provide the most significant returns, they can fulfill your short-term investment needs if you need to keep your money safe for a later date while still making a small return. Some checking accounts also make for decent short-term investments, mainly if they include cash rewards.

3. High-Yield Savings Accounts

The best savings account option for short-term investing is a high-yield savings account, which allows you to earn returns simply by having money in the bank. Many banks and credit unions offer high-yield accounts, some with no related fees. Depositing money into one of these savings accounts is a simple way to protect your cash and make decent returns with no effort.

A high-yield savings account presents a minimal risk because the Federal Deposit Insurance Corporation (FDIC) insures the money. However, investors should be careful keeping cash in one of these accounts long-term, as inflation may suppress returns over extended periods.

4. Bond Funds

Bond funds also provide a great short-term investment option because they tend to mature in less than two years and offer low-risk returns. A bond fund consists of corporate bonds from various companies looking for investment funds. Investors receive interest payments at regular intervals, and returns don’t change much due to economic shifts like rising or falling interest rates.

One of the most significant advantages of short-term bond funds is their liquidity, as investors can buy or sell them anytime, granted the market is open.

5. Certificates of Deposit

A certificate of deposit (CD) is a bank product similar to a high-yield savings account. An investor agrees to keep a specific amount of money in the bank for a certain length of time, typically between three months and five years. The money earns interest over time, and the investor receives their entire principal back with the added interest once the account matures.

CDs are great examples of short-term alternative investments because the FDIC insures them, and returns don’t change with fluctuating interest rates. We encourage you to find no-penalty CDs to avoid fees if you must withdraw the money from the account before the agreed-upon date.

6. Crypto Earn Accounts

Many investors looking for alternative investment options have turned to cryptocurrency, crypto savings accounts, and cryptocurrency IRAs. With a crypto earn account, you can deposit cash and exchange it for a stablecoin. These accounts pay significantly higher interest than traditional savings accounts with rates like 8%.

Investors enjoy the liquidity of crypto earn accounts but take on more risk than traditional options. Crypto accounts aren’t insured like bank savings accounts, and digital theft raises concerns. If you decide to invest in a crypto earn account, find an exchange that offers deposit insurance to help you minimize these risks.

7. Cash Management Accounts

You can make several short-term investments at once with a cash management account. These accounts function similarly to traditional savings and checking accounts, except they don’t limit monthly transactions. Investors find cash management accounts through stockbrokers and robo-advisors that invest the money in safe money market funds or partner banks.

These accounts tend to be low-risk and low-yield, but they offer high liquidity, so you have the money you need whenever you need it.

8. Money Market Accounts

Financial institutions offer money market accounts to investors. These accounts provide an excellent option for short-term investments because they accrue interest payments according to the amount of money currently deposited. Unlike other alternative investment options, investors can withdraw funds from money market accounts whenever they like.

Money market accounts don’t present high risks for short-term investing, as many are FDIC-insured, and investors can easily buy and sell these accounts.

When choosing your ideal short-term investment options from the list above, consider your investment amount, timeline, and money growth goals. Remember, the best short-term investment provides low risk and stable returns, so you have the cash you need when needed. You may consider long-term options if you’re looking for higher risk and higher yield investments.

10 Best Long-Term Alternative Investments

An excellent long-term alternative investment must balance risk with growth potential; investors who make only low-risk long-term investments may find their returns stifled by high inflation. The following list includes alternative long-term investments that may present more risk but could offer significant returns.

1. Art

The fine art market offers a couple of different options for long-term investments. The first involves purchasing a piece of art and waiting for it to appreciate—which it will, according to historical evidence. Art lovers enjoy this alternative option because they can enjoy the painting, sculpture, or other artwork as a tangible investment. Fine art investments can present more risk than other alternative options due to fluctuation within the art market, but they aren’t as affected by the stock market as traditional investments.

The second option involves companies selling several ownership stakes in a single work of art. This option proves more accessible for average investors: rather than needing at least $10,000 to make a complete purchase, investors can purchase shares at lower prices per share. One such company, Masterworks, offers long-term holdings for up to 10 years.

2. Collectible Coins

Collectibles like coins provide another fantastic long-term investment option for those looking for tangible investments they can touch, look at, and enjoy. Coin collectors buy and sell rare coins for sometimes modest and sometimes sizeable returns.

In general, the rarer the coin, the more value it has. For example, certain mintings of the United States Buffalo nickel are worth hundreds of thousands of dollars due to the scarcity of these coins, while more common mintings may only provide modest returns.

3. Private Equity for Large Companies

Many companies don’t issue public stock shares, but investors can still invest in them through private equity. The company receives a certain amount of capital and then repays the investors once it has achieved its desired growth.

Private equity investments can prove risky, as investors only see returns if the company does well and expands according to projected growth. For this reason, investors often become involved in managing the company they invest in to help ensure business success.

4. Venture Capitals

Venture capital, a type of private equity, provides funds to startups in the beginning stages of development, usually through venture capital firms. Investors give money to these startup companies and then wait before making a return. These investments involve high-risk levels because returns depend on the startup’s future success.

Venture capitals don’t provide the most accessible alternative investment option, as many funds require a high net worth at or above $1 million. The funds also lack liquidity but can produce significant returns.

5. Real Estate

One of the most common long-term alternative investment options is real estate, as it offers investors several options to make money:

Renting Real Estate

Rental properties offer investors stable incomes and capital appreciation but involve high costs and more hands-on responsibility than other investments. An investor must ensure that the rent payment covers the property’s carrying costs like the mortgage and additional fees.

Some investors prefer one of the other real estate options below that don’t require property management and landlord responsibilities, or they hire a property management company to handle those things. Regardless of how you take care of them, rental properties offer excellent long-term returns, especially once you have paid off the mortgage loan.

Flipping Real Estate

Some investors purchase homes to flip them; flipping a house involves remodeling or renovating it and then selling the home for a profit. Flipping typically represents a short-term investment, but some people take on renovation projects while living in the house over long periods. An investor may decide to live in a home for decades before selling it for a significant profit.

Crowdfunding Investment Groups

Real estate crowdfunding platforms gather money from a group of investors to purchase real estate and then manage that property while paying the investors a portion of the rental fees. Many of these platforms only cater to accredited investors with a high net worth, but some offer money-making opportunities to investors at every level. Fundrise, for example, allows investments as low as $500.

Real Estate Investment Trusts (REITs)

REITs provide investors with highly liquid real estate investments and significant returns. A trust purchases properties and passes the majority of its income (90% or more) to its shareholders. Much like stock, investors participate by buying into a REIT.

6. Land

Farmland investment opportunities exist for both average and accredited investors. This alternative investment offers relatively stable long-term returns as the market tends to increase slowly but consistently over time. Research popular platforms like AcreTrader and FarmTogether to learn more about farmland investments.

7. Wine

Wines offer a niche collection opportunity that can produce steady returns for investors. Many wine vintages prove valuable to collectors, often gaining value as they age and become increasingly scarce. Investors must research which regions offer the most valuable wines and which vintages wine collectors are currently favoring.

You have two primary options when investing in wine: (1) manage your collection personally by ensuring proper storage of the wine (a potentially expensive task) or (2) invest using a service that purchases and stores the wine for you. As an example of the second option, Vinovest offers accessible wine investments, stores the wine at its facilities, and will even ship an investor their bottles if requested.

8. Gold and Precious Metals

Gold often functions as a rescue asset and inflation hedge. For centuries, investors have used gold as a tangible investment because it gains value over time and offers more stability than stocks and similar investments. If you want to invest in gold or other precious metals, there are a couple of options.

First, you can purchase physical gold or silver in the form of coins, bars, or rounds. Countries mint gold and silver coins worldwide, offering collectors and investors various valuable and attractive options. Gold bars and silver ingots don’t serve as currency but offer value according to the fineness and weight of the precious metal.

The other option involves indirect investing in precious metals to back an IRA or investing through futures, options, and mining stocks. However you decide to invest in gold, silver, or other precious metals, you’ll enjoy a relatively stable asset that doesn’t depend on external factors like the stock market and the dollar’s value.

9. Equity Crowdfunding for Start-Ups

Many start-up businesses get the starting capital they need through equity crowdfunding. Platforms like AngelList and Wefunder allow investors to own part of a company and share in the profits. Many highly successful companies have begun through this method, but investors take on the risk of losing all of their money should the company fail.

Many crowdfunding investment platforms are accessible to non-wealthy investors who don’t want to spend more than $500, making it a great option if you’re a beginner investor trying to diversify your portfolio without making massive investments.

10. Hedge Funds

Hedge funds can offer remarkably high returns to accredited investors. Several investors put money into the fund, which the fund’s manager allocates to various investment vehicles. A hedge fund manager may invest in stocks, futures, options, commodities, and many other investments to produce high returns.

Depending on the manager’s type of investments, hedge funds may present higher risks than other alternative investments. Before investing in a hedge fund, do your due diligence to ensure you make a smart investment.

Let Alternative Investments Work for You With My Digital Money

At My Digital Money, we work round-the-clock to help you create a diverse and stable portfolio by investing in various short- and long-term investments. We set you up for success so you can sit back and watch your funds grow. Remember that you’ll likely experience rises and falls, as with any market, but it’s important to ride out short-term fluctuations to take advantage of high long-term returns.

Contact us to learn more about our alternative investment services. Our team of experts at My Digital Money is happy to answer any questions you may have about cryptocurrencies and investments. Get in touch with us today by using our online contact form or calling 833-636-2008.