You guys know that I love multiple income streams. Multiple income streams are a vital part of creating Indestructible Wealth for you and your family. The question is, how are you going to get there?
I believe that it is crucial to incorporate one or more alternative investment vehicles into your mix of investments and revenue generating activities that make up your wealth portfolio.
On my podcast, in my blog and financial education materials, and in my forthcoming book, I discuss alternative investment strategies for adding passive income streams to your wealth generation portfolio. We discuss the whys, hows, and whats of alternative investing (as well as conventional investing).
When it comes to taking the plunge and putting your money where your mouth is with alternative investments, I recommend that you begin with something you are genuinely knowledgeable about—or at least something you have enough interest in to become educated about.
I recently counted my income streams and came up with at least 16 different revenue generating activities that I’m invested in. The weirdest one is probably poker. That catches most people off guard, but I’ve earned 6 figures playing the game over the last several years. Out of sheer love of the game and the camaraderie of playing with friends and strangers, I’ve sharpened my skill set. Now that I’m good enough to play competitively, I can’t say I’m upset at having the extra hundred grand around. I consider the time I invested in playing and learning the game to be a kind of alternative investment, if you will.
Now, would it have made sense for me to try to create a similar income stream out of, say, betting on horses? If I had, I’d likely be out a lot more money because I have no interest in horse racing and, therefore, no knowledge about it. Maybe it’s an obvious point I’m making, but many people make the mistake of trying to create alternative investments out of things they don’t understand or don’t have sufficient interest in to take the time to learn about. My poker example demonstrates that almost anything can be turned into an alternative investment, but likewise, anything can also become a money pit.
If you’ve done your Indestructible Wealth homework, you know that most of the investments I recommend will be in safe, low risk instruments. I never advise changing your lifestyle in order to invest in something risky, like NFTs or the “next big” crypto, just because there’s an outside chance of huge returns. I’ve been there myself, and the results weren’t pretty. When we put money towards alternative investments, we understand that in those cases where the returns are higher, the risks will be bigger, and so we only dedicate money to alternative investments that we know we can live without.
What is an Alternative Investment?
Let’s define our terms here. An alternative investment is usually defined as any investment made in an asset class apart from cash, bonds, or stocks. Some alternative investments are as old as time, such as investment in real estate, gold and silver, or fine art. But now we’ve got a ton of options for alternative investing. Every year it seems that new asset classes are added to that list, such as crypto mining and NFTs.
When you’re looking to broaden your investment horizons, consider the niche topics you know about. Maybe these are things you’ve been following since childhood. Sports fans might want to invest in baseball or other sports cards, which are making a comeback, or in sports memorabilia. Maybe you’ve travelled quite a bit in 3rd world countries and would like to give back by making an alternative investment in an entrepreneurial venture abroad. Combine something you know about with a place where you see a need. Do you notice that local farms in your area are struggling to keep up with demand? Why not consider investing there?
So when you’re deciding on your next alternative investment, choose wisely. It’s important to know yourself when choosing your investments, because you are the key to your success.
Why Alternative Investments?
Diversification into alternative investments is key, now more than ever, with the volatility of world markets and with inflation threatening to rage out of control. Paying into a mutual fund may feel safe, but there really is no set-it-and-forget-it investment anymore. Should you invest in gold and silver? Should you buy real estate? Should you devote your time to crypto trading? No one can tell you the answer besides you.
There is money to be made in any and every asset class. The question is, which one is right for you? Alternative investing allows you to take the reins, leveraging any niche knowledge and life experience that you may have, whether you’ve been on the planet for 25 or 65 years. Your unique background can help you understand where the asset has come from and where it may be going.
Many alternative investments may not have the liquidity of a traditional investment in the stock market, and it may not be as easy to track their progress. But as a student of at least one or more areas that are suitable for alternative investing, you will find a way to manage the alternative investments in your portfolio, hopefully adding to them as time goes on and your investing prowess improves.
Types of Alternative Investments
Crypto—We’ve talked a lot about crypto as an alternative investment on the podcast, but it bears repeating. Crypto is an asset class that is here to stay. While governments around the world continue to devalue your hard earned savings by printing money and causing inflation, you may feel helpless to do anything to protect your savings.
I’m here to tell you that you’re not. Crypto is being adopted by major players in every industry, from Wall Street banks to some of the top football players in the United States who are opting to get partial payment in Bitcoin. Now, this doesn’t mean that every coin out there is a good alternative investment; in fact, a lot of them are crap and will go to zero. But I think it’s fair to say that no investment portfolio is complete at this point without crypto.
If you want to get in on my crypto picks, which my team and I research exhaustively before recommending and investing in them ourselves, get on the waiting list to join my upcoming crypto mastermind group.
Once you’ve taken the plunge into crypto investing, you may be intrigued enough to want to jump on the crypto mining bandwagon as an alternative investment. However, this is a different affair than it was 10 or 15 years ago. Back then, you could set up shop with a desktop computer and go to town on mining when you weren’t using that computer for work. Today, crypto mining is a serious alternative investment venture that requires dedicated computing power and, frankly, cash to invest.
Other crypto maneuvers
Owning crypto is smart. Mining for crypto is very smart (I think of it as a legal way to print money), provided you have the money to invest. Another level to this whole crypto game is staking and lending your crypto. In short, staking crypto is a way of guaranteeing your crypto to the blockchain, agreeing to dedicate it for a fixed period of time. Crypto lending is the same as when your bank lends out the money in your savings account. Not surprisingly, staking yields a higher return than lending, which is safer and easier to execute and allows you to liquidate your crypto at will.
This is one of my personal favorite alternative investments. I am personally invested heavily into self-storage units, and I couldn’t be happier with the results. It’s an ultra-boring investment, and that’s what makes it so great.
When people pay $100 to $200 per month for a storage unit, they’ve obviously got stuff in there that greatly exceeds that rent. Maybe they’ve moved or downsized and they just don’t have a place yet to put that stuff. If they’ve moved across the country, it’s going to be a hassle to get it to their new location. Or maybe they’re just working abroad for a year. Whatever the reason, they are highly motivated to keep paying that low rent because, of course, they want their stuff back at some point in the future. They’re not going to risk losing thousands or tens of thousands of dollars worth of stuff, right?
People typically pay, and they pay on time. As an investor, I don’t have to deal with tenant drama, or a rental property that has an issue every other month, or drastic ups and downs in the real estate market. For the investor with a significant amount of money to invest, I consider self-storage units to be an alternative investment winner.
Did you know that there is someone in the world who “owns” the first ever Tweet? Jack Dorsey sold the Tweet, which simply reads “just setting up my twttr” for a cool $2.9 million. The Tweet came with a certificate that is “autographed” by the original owner and the ownership is transferred on the blockchain. In the last year or so, digital art, music, videos…truly any digital asset can and has been converted into an NFT for sale. Digital real estate and fashion, skins or other elements of video games, virtual trading cards, and even memes can be created and sold as NFTs.
If you’re finding it hard to wrap your head around this one as an alternative investment, you’re not alone. But if you find it fascinating, it’s a weird, weird world that is heating up at the moment with many potential gains to be had.
Three words: I recommend it. What other asset allows you to invest so little of your own money while you have someone else pay down the loan—and you have a physical asset at the end? There are not many, my friends. Now, does this mean that real estate investing is risk free? Absolutely not. I’ve both gained and lost money through real estate investments, but I play the long game here, and in the end, I expect to win on every real estate deal I do.
Real estate investing takes either time or money. That is, you either pay someone to manage the property, or you take the time to do it yourself. Do you have the skills to make repairs and interact with tenants? Great! Real estate could be a very lucrative business for you. If not, there are companies that can do the heavy lifting for you. Just make sure you choose one that will leave you with plenty of passive income. While many investments are unpredictable at best, real estate has proven itself to be a consistently high-performing alternative investment.
Did you know that offices with thousands of dollars worth of copiers or desks or computers rarely own that equipment? Or that construction outfits typically lease their heavy machinery? Or that science labs often lease their microscopes?
For the same reason that you lease your car, a business leases its equipment: these are prohibitively expensive items that require more cash than most businesses have on hand. So, reliable businesses with good credit pay a premium to lease the latest equipment. When the lease is up, they take out a new lease on a new piece of equipment. And wouldn’t you like to get in on that equation? There are funds dedicated to equipment leasing only—do your homework on this alternative investment if it seems like something you can sink your teeth into.
Investing in art is a risky move, and you definitely need to know what you’re doing to be successful with this alternative investment. Maybe you have the rare gift of being able to see into the future to know what people will be willing to pay for a piece of art decades down the line. Art is subject to aging, breaking, or, if it is very valuable, being stolen. If you move, you will have to take the objects with you, which can be expensive and logistically challenging. Getting your money out of art should you need it may be vastly more difficult than putting it in. But a great upside to collecting art is that you can enjoy it for as long as you own it.
Investing in commodities is a world in and of itself. Commodities are things that are consumed directly or materials that are used to create other products. They are basic building blocks of consumer goods and are always in demand. Wheat, oil, precious metals, corn, lumber, and cattle are all commodities. Commodities are inherently volatile as an investment, and your success as an investor, or lack thereof, will be dependent on your understanding of supply and demand.
There are a number of ways to invest in commodities: by holding them yourself (particularly in the case of precious metals), by investing in futures (and you had better know what you’re doing if you opt for this route), ETFs of physical commodities (allowing you to pool resources and invest in one or more commodities), or, of course, owning stock in a producer of a commodity.
While the con of commodities as an alternative investment is their volatility, the many pros include that they are a hedge against inflation since their prices, by definition, rise as inflation rises. In addition, their performance is detached from the greater market as they each have their own specific supply and demand quotient. Finally, you can use them to hedge against other investments. Commodities are not an alternative investment for the faint of heart, but if you know what you’re doing, you can win big.
For high net worth investors, investing your money into private companies allows you to support small ventures that you truly believe in. You can help shape the outcome without necessarily getting into the nitty gritty and having to build something from the ground up. When you get involved, and how much you commit to the project, is ultimately up to you, and there are ways of investing with others as a group to mitigate your risk. Ultimately, private equity is an alternative investment that tests your foresight, judgment, and appetite for risk. It’s an investment in your education that will continue to pay dividends if you do your due diligence and stay invested with your time and energy, not simply with your money.
This is another alternative investment for high net worth individuals, as it may require hundreds of thousands of dollars or more to join a hedge fund. Hedge funds are inherently risky as they allow leveraged, debt-based investing and short selling, and they may purchase asset classes that are closed to other funds. Overall, hedge funds tend to underperform compared to the S&P 500, and as such, investors must choose their fund wisely.
Investing in farmland has the potential, similar to real estate, to increase in value and is typically considered to be inflation-proof. You may wish to invest in farmland that is near or relatively near your home as an investment in your community as well as an investment in your bottom line. While you are waiting for the land to appreciate, you may decide to lease it out to those who want to grow on it. There are also funds that allow you to pool your investment with a group of investors who are dedicating resources to farmland investment.
You know one thing for certain: People will always need to eat. Like real estate investment, farmland investment is considered to be an inflation hedge. Estimates put return on farmland investment at approximately 11 percent, and returns have been positive every single year since 1990. A stable investment that is not generally affected by the mainstream financial system, farmland investment could be a wise alternative investment to consider.
When you’re looking for an instant business with the potential for immediate brand recognition, you might be up for investing in a franchise. With established franchises, there is a windfall of reliable information about what you can expect to make in your area with a given brand. You may also choose a lesser known franchise that nonetheless provides you with a product, marketing, and a sales process without your having to do a thing. Once you’ve purchased the franchise, however, it’s far from a plug-and-play deal. Unless you have the resources to hire a manager, you’re going to be getting your hands dirty with this alternative investment.
I have always held that you are the most important asset you can ever invest in, and I would be willing to bet that that will never change. You are the ultimate “alternative investment,” because anything you invest into yourself can compound exponentially. And the exciting and scary thing about this alternative investment is that no one can tell you how to use your resources.
You need to follow your intuition, your gut instinct, your head, your heart. All of these can give you valuable input into how you invest your time and resources into making yourself a better entrepreneur and investor. There is always a way to leverage your talents and skills into an alternative investment that will generate returns for the rest of your life. This requires that you think like an investor, and it’s one of the best educations you can ever get.
I want you to take my Indestructible Wealth principles and make them your own. Don’t settle for an ordinary life. Wherever you are in your wealth creation journey, you can make your resources work for you. Whatever your goals and values in life, there is always a way to make your resources grow at a faster rate.
If you find this information helpful, consider joining my Indestructible Wealth Mastermind group. There, we learn from each other, and alternative investments are a huge part of our discussions and education.