Accredited investors are fortunate to have many different options available to them, and alternative investments can provide lucrative ways to diversify a portfolio alongside maximizing returns. If you’re an accredited investor and are looking for ways to build growth outside of traditional stocks and bonds, we’ve compiled a list of ideas to inspire your investment strategy.
Real Estate for Accredited Investors
Accredited investors are eligible to participate in a number of different real estate investments not open to the general public. Each one has different benefits for investors, so it’s easy to find one that might align with your wealth-building goals. We’ll go over three options briefly, but remember there are many ways to invest in real estate.
Real estate syndications, for example, allow accredited investors to pool their money together to purchase a single asset. Through this process, they can invest in a multimillion-dollar property, such as an apartment complex, shopping mall, or industrial warehouse, without shouldering the entire cost and risk. Investors typically select the manager they want to work with to act as the fiduciary, finding the property for investment and providing due diligence throughout the process.
An alternative to real estate syndications is real estate crowdfunding, which also allows accredited investors to pool money for the purchase of a single asset (though some crowdfunding options are also open to non-accredited investors too). However, with crowdfunding, investors are more able to select the asset they wish to invest in. The sponsor for the purchase is already selected, so individuals have the freedom to choose how they want their money invested instead of relying on the sponsor to make the right call.
Investors wanting to get into the real estate game without investing in a single asset can opt for real estate hedge funds. These funds typically purchase stock in publicly-traded REITs and may also purchase real estate assets, creating their own investment portfolios.
Accredited investors focused on maximizing returns can also invest in funds under Rule 506 of Regulation D under the JOBS Act. You can learn more about this Rule — and its subcategories — here. Many of these funds focus on opportunistic real estate investments, specifically those that are priced below market value.
DiversyFund Premier Offerings are focused on maximizing potential returns through both single-asset direct investment and opportunistic funds, specifically targeting distressed assets.
Commodities, such as gold and silver, have a history of helping people diversify their portfolios with alternative investments. Accredited investors can go beyond simply purchasing gold bullion or buying stock in a company dealing with commodities. Commodity hedge funds put the concept on a larger scale, investing directly or indirectly in raw materials or agricultural products. For example, a hedge fund might invest in crude oil, cattle, or platinum. There are several different types of commodity funds: indexes, futures, or direct positions. As with any investment, commodities hedge funds carry risk, but they tend to invest in materials and products that have consistent demand.
We’ve already covered two types of specific hedge funds, but it’s important to note there are many types of funds available to accredited investors. Global, distressed debt, emerging markets, and event-driven hedge funds are just some choices investors can choose. The level of complexity for hedge funds can be considerable, which is why they are only open to accredited investors. For example, event-driven hedge funds seek to benefit from bankruptcies, hostile takeovers, and mergers. Emerging market funds invest heavily in assets from countries with emerging economies, essentially making a bet on the success of those nations. These complicated funds require a unique level of understanding, which is why they are typically open only to accredited individuals. However, hedge funds do give investors a way to target a specific industry or market, so you can find an option that fits with your area of expertise.
Accredited investors have the luxury of having access to a vast number of opportunities for portfolio diversification. Hedge funds can be lucrative, though they also may be subject to market volatility. Commodities may provide a more conservative choice when compared to event-driven hedge funds, and real estate provides a unique option to hedge against market volatility. No matter how you choose to leverage your status as an accredited investor, it’s important to discuss any money moves with your financial expert first. To learn more about DiversyFund’s opportunities for accredited investors, click here.