By Scott Harrigan, President of Alto Solutions
The start of 2025 has already been a turbulent time for the markets. Amid ongoing economic uncertainty and market fluctuations, many investors are looking for ways to diversify their portfolios and manage risk more effectively. Yet, despite growing interest, many are held back by long-standing myths about alternative investments. These misconceptions can prevent investors from exploring opportunities that institutions have relied on for decades.
With years of experience at the forefront of alternative and private market investments, Scott has seen firsthand how access to these opportunities has evolved. From leading capital-raising platforms to driving innovation in digital asset securities, he has worked to bridge the gap between investors and the alternative market. His deep understanding of the space has helped countless issuers and investors navigate the complexities of private markets and unlock new sources of growth.
In this article, we’ll debunk the most common myths surrounding alternative investments and show how today’s investors have more access and control than ever before.
Common Myths About Alternative and Private Market Investments
Despite the growing accessibility of alternative investments, several persistent myths continue to discourage investors from exploring these opportunities. These misconceptions often stem from outdated information or misunderstandings about how alternatives work. Below we take a look at four common myths and the reality behind them.
Myth #1: “Alternatives and Private Markets Are Only for the Wealthy”
Historically, alternative and private market investments were reserved for institutions and ultra-high-net-worth individuals, creating an exclusivity whereas many everyday investors felt like it was not an option available to them. However, times have changed. The rise of innovative fund structures and investment platforms has significantly lowered entry barriers. Today, investors can start with minimums as low as $100.
One key factor in this shift is registered funds, which follow strict government regulations for transparency and protection. These include mutual funds, ETFs, and some private funds, offering regular investors access to alternatives like real estate, private equity, and commodities with lower minimum investment amounts. These funds pool money from various investors and are managed by experts who follow strict regulations to ensure transparency and protect investors. They also offer greater flexibility than traditional alternatives, allowing easier buying and selling, which makes them a good choice for those seeking liquidity.
At Alto, we’ve seen this shift firsthand:
- Many investors start with an initial investment of $1,000 or less, then increase their commitments as they identify new additional investments they wish to make.
- Startups and real estate are the most popular alternative asset classes for our investors.
- Many investors diversify by allocating funds across multiple asset classes.
Once only for the wealthy, the rise of innovative fund structures and investment platforms has lowered entry barriers, making alternative investments accessible to a broader range of investors.
Myth #2: “Alternatives and Private Markets Are Too Complicated”
Private markets are often perceived as overly complex and difficult to navigate. However, advancements in transparency, regulatory oversight, and the development of user-friendly platforms have significantly streamlined the investment process, making private markets more approachable for investors at all levels. Many of these investments now come in straightforward structures, making them more accessible than ever.
Additionally, investors can hold private market and alternative investments in familiar investment vehicles like self-directed IRAs (SDIRAs), which allow individuals to invest in private equity, real estate, hedge funds, and more—all within tax-advantaged accounts.
When people save money for retirement, they tend to consider it over a longer time horizon, such as 20 to 40 years, which allows them to stay the course in the market and maximize long-term gains. What many investors don’t consider is that this time horizon is also a good fit for alternative investments, like real estate or other unique assets, which can require a time period of 5-10 years to deliver strong returns. By investing in alternatives through self-directed IRAs, investors are pairing investments that perform well over the long term with an account that is built for the long term. Self-directed IRAs (SDIRAs) also offer tax benefits, making these investments a smart way to save for retirement while keeping more of what they earn.
Consider the following insights from Alto’s investor base:
- 35% of accounts are funded from Fidelity, Schwab, and Vanguard accounts.
- 52% of IRA accounts opened are Roth accounts.
- Over 45% of investors have had multiple funding events.
- While the average funding amount is $41K, nearly 24% of accounts have had at least one transfer under $1,000.
- 69% of investors who initially funded less than $1,000 added more funds later, often exceeding their initial investment.
- As investors age, their number of funding events tend to increase due to evolving financial circumstances.
Myth #3: “Alternatives Are Too Risky”
All investments come with risk, but alternative investments can serve as a valuable tool to reduce overall portfolio risk when used strategically. Private market investments such as private credit, real estate, and infrastructure typically have low correlation to public markets, meaning their performance is not closely tied to the ups and downs of stocks or bonds. This diversification can help stabilize returns, especially during times of economic uncertainty.
Market volatility has continued into early 2025, with notable fluctuations in equity markets. For example, a Goldman Sachs strategist recently revised the firm’s S&P 500 full-year earnings growth estimate from 11% to 9%, reflecting ongoing uncertainty in traditional asset classes. In periods of heightened volatility, some investors consider alternative investments as part of a diversified portfolio. While alternative investments may provide exposure that differs from public markets, they also involve unique risks, including illiquidity, lack of transparency, higher fees, and the potential for loss of principal.
At Alto, total funding activity increased by 16% year-over-year in February 2025, with the average funded amount per investment rising by 15%.* These figures reflect investor activity on our platform and are not indicative of investment performance.
Investors should carefully review the offering materials and consider whether a private alternative investment aligns with their financial goals, risk tolerance, and liquidity needs.
*Source: Alto internal data, February 2025. Figures reflect aggregate funding volume on the platform and not returns to individual investors. Alto does not guarantee investment returns.
Myth #4: “Private Market Investments Are Too Illiquid”
A common concern among investors is that private market investments require locking up capital for extended periods, making them unsuitable for those who need liquidity. While it's true that some private funds and investments may have longer hold periods, not all are inherently illiquid. In fact, a variety of options now offer more flexibility, allowing investors to access their capital or adjust their portfolios as needed.
For example, certain platforms have developed secondary markets where investors can sell shares of alternative investments, providing an opportunity to exit or adjust their holdings before the investment's maturity. Additionally, interval funds, which allow for quarterly redemptions, enabling more frequent access to funds without the traditional long-term lock-ups that many associate with alternatives, have grown in popularity in recent years.
For those looking to use retirement funds, utilizing a self-directed IRA to hold alternative and private market investments can help align investment durations with retirement timelines, reducing the immediate concern of liquidity. Since IRAs are designed for long-term growth, the need for frequent access to funds is less pressing, making alternatives an even more attractive option for retirement planning. This approach allows investors to take advantage of the diversification and risk-mitigating benefits of alternatives, while still staying on track with their long-term financial goals.
With these evolving options, investors now have greater flexibility and control over their private market and alternative investments, making it easier to incorporate them into a diversified portfolio without sacrificing liquidity when needed.
What Level of Exposure to Alternatives and Private Markets Should an Investor Have?
While the ideal allocation varies based on an individual’s risk tolerance and financial goals, institutions such as pension funds and endowments have historically embraced alternatives to enhance returns and reduce market volatility. For example, in 2024, Harvard’s $52 billion endowment allocated nearly 80% to alternatives, including private equity investments, hedge funds, and real estate. Similarly, asset managers like BlackRock are recommending private investment allocations of 5% to 20%.
With increased accessibility and liquidity options, individual investors can now integrate alternatives into their portfolios in a way that suits their needs—whether it’s through startup investing, real estate, private credit, or other asset alternative classes.
The New Reality of Alternative Investing
Today’s alternative and private market investments are more accessible, flexible, and transparent than ever before. Lower minimums, better liquidity options, and advanced technology have made it easier for investors to explore and integrate alternatives into their portfolios. As more investors recognize the benefits of diversification, alternatives are no longer a niche opportunity—they’re a key part of modern portfolio strategy.
At Alto, we believe in providing investors with the tools, education, and flexibility needed to make informed decisions about alternative and private market investments. Whether you’re just getting started or looking to expand your portfolio, there are more options than ever to help you navigate this evolving landscape.
Want to learn more? Explore our platform and see how alternatives can work for you.
