How to Get into Alternative Investing
Alternative investing can help boost returns and add diversification, but it’s not for everyone. Here’s what you need to know before you begin your journey.
![A man works on replacing the floor in the basement of a house.](https://cdn.mos.cms.futurecdn.net/bQYWDyoNZ5KWDT5GAncaKL-415-80.jpg)
With recent headlines warning of a potential surge in market volatility, more and more investors are looking beyond traditional asset classes and exploring alternative investing paths. Alternative investing, which includes hedge funds as well as private assets like real estate and side businesses, can provide diversification, reduce risk and generate additional income.
Alternative investing has long been considered the domain of the wealthiest and most sophisticated investors, but don’t let that intimidate you. Like many areas of finance, a new generation of technologies and investment classes are making alternative investing more approachable and transparent.
That said, alternative investing still requires checking a few financial boxes before getting started to ensure you’re building from a solid foundation. For example, before diving into alternative assets, investors should consider eliminating any high-interest debt, creating an emergency fund of three to six months of expenses and having at least $100,000 in savings set aside for long-term investments.
![https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png](https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-320-80.png)
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Once you’ve established a solid financial foundation, it’s time to start exploring alternative investing options. Here are the three main paths to consider when beginning your alternative investing journey.
The DIY approach.
Many people get their start in alternative investing by buying a fixer-upper investment property or starting a side business, as these are some of the most common alternative investments.
This option requires a significant amount of time and effort, but it can also be one of the most lucrative since you don’t have to pay anyone to produce the returns. You’ll want to make sure you’re equipped with the right resources to help guide you along the way. Some I’ve found to be useful include:
- Blogs (for example, BiggerPockets, Financial Samurai).
- Books (The 4-Hour Workweek, Pioneering Portfolio Management).
- Local meetups (for example, EO, YPO).
Self-directed investing.
This path involves relying on your network to source deals or exploring the many alternative investment marketplaces that have cropped up over the past decade, like EquityMultiple for real estate or AngelList for venture deals, for example.
Self-directed investing requires a lot of research and due diligence, but it can be rewarding if done correctly.
This option is best for someone who is well-networked or has the time and knowledge to perform proper due diligence.
If pursuing this path, it’s critically important you choose deals you believe to be in the top 10% of their category, ideally.
MFOs or tech-asset management hybrids.
If you’re passionate about pursuing alternative investments, but don’t have the time or expertise required with options one and two, outsourcing to trusted experts might be an ideal path for you.
There are two primary options, multifamily offices, like IWP, that offer a range of planning and investment diligence services for a flat fee, or tech-enabled asset management firms like Equi (our platform) that rely on sophisticated data and a specialized diligence team to offer portfolios of what we believe to be the top alternative investment products. This is the most “hands-off” and streamlined approach.
Remember, alternative investing can be a rewarding experience, but it's important to do your research and understand the risks before diving in. It's also important to have a solid financial foundation before investing in alternatives. By following these principles, you'll be well on your way to a successful alternative investing journey.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Tory Reiss is a three-time founder of venture capital-backed financial technology startups. He’s currently the CEO of Equi, the elite destination for alternative investments. It is equal parts hedge fund and technology platform, with exclusive access to a variety of uncorrelated alternative investments.
-
Visa Is the Worst Dow Stock Wednesday. Here's Why
Visa stock is down sharply Wednesday after the credit card company came up short of revenue expectations for its fiscal Q3.
By Joey Solitro Published
-
Another Analyst Moves to the Sidelines on Tesla Stock After Earnings
Tesla stock is spiraling Wednesday after the EV maker's big earnings miss and Wall Street has been quick to weigh in. Here's what you need to know.
By Joey Solitro Published
-
Confused by Annuities? Making Sense of the Different Types
Many investors aren't sure if annuities are a good option for meeting financial goals. Let's look at the different categories, along with their pros and cons.
By Kris Maksimovich, AIF®, CRPC®, CPFA®, CRC® Published
-
Talkin' 'Bout My Generational Wealth: Baby Boomers
With retirement, each generation has different priorities and challenges. For Baby Boomers, it's a matter of ready or not, here it comes.
By Alvina Lo Published
-
How to Avoid a Big Hassle if Your Financed Car Gets Wrecked
How an insurance check is made out for repairs can cause a world of problems if the lienholder is left out.
By H. Dennis Beaver, Esq. Published
-
Estate Planning Strategies to Consider as Election Nears
Are big changes in tax laws coming soon? Not likely, but you might want to take advantage of higher estate and gift tax exemptions well before the end of 2025.
By David Handler, J.D. Published
-
How to Get Your Money's Worth From Your Financial Adviser
A good financial adviser will focus on how your financial planning and investment strategy align with your lifestyle and aspirations.
By Pam Krueger Published
-
Think of Prenups and Postnups as Financial Planning Tools
These contracts provide a clear framework for asset management and protection and are especially useful if you get married later in life.
By Andrew Hatherley, CDFA®, CRPC® Published
-
Congratulations on Your Raise: Three Things to Do With It
We're not saying you shouldn't spend it on a new car, but there are some considerations to guard against lifestyle creep and to help ensure a comfy retirement.
By Andrew Rosen, CFP®, CEP Published
-
Check Off These Four Financial Tasks to Finish 2024 Strong
The new year is a popular time to set financial goals, but now is the ideal time to check how you're doing. Four tweaks could make a big difference.
By Daniel Razvi, Esquire Published