Alternative assets are taking the investing world by storm. Since the mid-90s, the US has seen a 50% decline in the number of public companies. Meanwhile, CEOs have doubled capital raises from private investors to support their business growth.
So it’s not surprising investors are discovering the benefits of these and other alternative assets.
Typically, investments in alternatives experience lower volatility, have low to no correlations with public markets, and generate long-term returns—often at higher levels than traditional stocks and bonds. And because of the long-term nature of many alternative investments, they make a good fit for your retirement portfolio.
Startup and pre-IPO companies aren’t the only great non-stock investment opportunities, though. There are plenty of alternative assets to invest in, ranging from securitized art and cannabis to crowdfunding and cryptocurrency. One easy way to invest in alternative assets is through a self-directed IRA at Alto.
To help you sort through your options, we’ve compiled a list of 10 of the best non-stock investments. We’ve also identified partners that offer investment opportunities within each alternative asset, allowing you to access them through your Alto IRA.
1. Venture Capital
By investing in venture capital (VC), you receive an equity stake in new and developing startups. Because VC targets companies at the earliest stages of growth, investments are more risky and usually take longer to yield returns. However, investors in successful startups have seen an average 9x return on investment over 10 years. Not only that, despite the global pandemic, 2020 saw VC returns hitting all-time highs.
Startup investing used to be restricted to venture capitalists who met the high capital requirements needed to invest. Now, you can write smaller checks and get in on the investment opportunities.
How to invest in venture capital with your Alto IRA:
2. Crowdfunding Startups
Want to tap into the vast potential of early-stage startups, but aren’t an accredited investor? Crowdfunding gives you a minority equity stake in early-stage companies alongside smaller investors at low commitment amounts.
Over the past decade, crowdfunding has become a popular way for startups to gain traction for traditional financing, as successful campaigns provide proof of concept to larger investors. This rise in popularity also stems from a collection of successful startups that used crowdfunding. Notable among these are Oculus, which raised $250,000 in crowdfunding and was later sold to Facebook for $2 billion in 2014, and Allbirds, which launched its crowdfunding campaign in 2014 and is set to go public this year.
How to invest in crowdfunding startups with your Alto IRA:
3. Pre-IPO Shares
Imagine buying Snowflake (SNOW) at a $120 initial public offering (IPO) issue price to find that shares rose to $245 at market open on its first day of trading. You would’ve made a nearly 105% return within just a few hours. That’s the potential of pre-IPO shares, which used to be limited to hedge fund and private equity investors.
Today, access has been broadened, allowing you to invest funds in mature startups and reap returns like those from Snowflake before retail investors get access on the IPO date.
How to invest in pre-IPO shares with your Alto IRA:
4. Private Equity
There’s been a lot of buzz around private equity (PE) over the past 20 years. Thanks to its superior returns, the private equity market is projected to reach $5.8 trillion by 2025, according to Deloitte. (For reference, the market was valued at around $500 billion in 2000.)
Though PE takes many forms, it usually involves institutions (large pension funds and family offices) and high-net worth investors pooling private capital to take an ownership stake in mature-but-private companies. After investing, private equity specialists look to make organizational improvements, acquisitions, and other changes to drive company growth and generate higher returns. While this world used to exclude retail investors, the floodgates have opened, allowing regular people to make private equity investments using their self-directed IRA.
How to invest in private equity with your Alto IRA:
5. Private Credit
What do you think about making 5%, 10%, 15%, or even 20% interest on a loan? That rarely happens with public bonds, loans, and other forms of debt, but it can with private credit.
Private credit outcompetes returns from public forms of debt with an average annualized rate of return of 5.9% for one-year loans and 9.2% for five-year loans.
How to invest in private credit with your Alto IRA: Percent
6. Real Estate
“Only the wealthy can afford to invest in real estate.” This maxim used to be true, and people got even richer by including real estate in their portfolios because it acted as a hedge against inflation, producing a steady 9.4% and 10.5% annual return in commercial and residential real estate investments, respectively, over a 25-year average.
Fortunately, these returns are no longer exclusive to the wealthy. Thanks to Alto’s platform partners, you can include real estate in your portfolio without purchasing an entire property. Our partners allow you to buy bite-sized chunks of real estate for as low as a few thousand dollars so you can generate the same anti-inflationary returns that the wealthy do.
How to invest in real estate with your Alto IRA:
- Constitution Lending
- Cornell Capital Holdings
- Eckard Enterprises
- Jamestown Invest
- Secured Investment Corp
- Touzi Capital
- VanWest Partners
7. Securitized Art
It’s nice to show off a beautiful piece of art in your living room. Guests will appreciate your taste, but what they may not know is that the art doubles as an investment.
In 2019, securitized art saw a 6% increase in sales year over year, as more people became art aficionados and learned to appreciate its steady, uncorrelated returns relative to the stock market. The following year, amidst the pandemic no less, Sotheby’s reported a nearly 4x increase in sales of art from the year prior.
Unfortunately, despite its growing value, collectible art has historically been out of reach for most investors. Until now. Today, you can use your Alto IRA to invest in a portion (or fraction) of a securitized work of art. You may not get to look at it on your wall, but you can reap the benefits from an investment standpoint.
In 2020, Bitcoin generated a 50% return, smashing the 16.5% created from the S&P 500’s growth. If you were an investor in Bitcoin, you wouldn’t want those incredible gains to be taxed. Luckily, the IRS allows crypto to be held and traded within IRA accounts. The only tricky thing is finding a platform that helps you do so. Fortunately, Alto offers two different ways to invest in cryptocurrency.
The first is through our Alto CryptoIRA™ platform, which allows you to invest your IRA in more than 60 coins, 24/7, through our integration with Coinbase.
The second is through one of AltoIRA’s managed crypto fund partners:
- BKCoin Capital LP
- Eaglebrook Advisors
- SkyBridge Capital
- Vision Hill Group
Believe it or not, farmland has produced some of the most stable returns over the past few decades. Why? Basic math. Demand for food is growing, but the amount of farmland is decreasing as cities and exurbs grow. This places a higher value on available land.
Farmland is also less volatile than the stock market, making it an interesting long-term alternative. When investing in farmland, your investment can grow from both the appreciation of the land and any profits from crops.
How to invest in farmland with your Alto IRA:
As more states move to allow medical marijuana (if not outright legalization), early investors in cannabis stand to reap big returns. Not only has legal cannabis fast become a multi-billion dollar industry, it’s on track to grow at a 17.8% compound annual growth rate between 2020 and 2027.
How to invest in cannabis with your Alto IRA: MAZAKALI Beyond Impact
Diversify Your Portfolio with Alternative Assets
If you’re interested in the best non-stock investment opportunities, this list is a good place to start.
Investing a portion of your retirement savings in alternative assets can significantly increase returns and add diversity within your portfolio. Not to mention, some alternative investments may generate passive income for the long-term with less volatility due to their illiquidity and low correlations to public equity and bond markets.
With a self-directed Alto IRA or an Alto CryptoIRA™, you can invest your retirement savings in non-traditional assets while reaping the tax benefits of growing wealth in an IRA (see also: Peter Thiel’s $5 billion IRA).