Investing is a lot like cooking. There are some basic ingredients that everyone knows about and uses: chicken and potatoes, or stocks and bonds. But there’s also a whole world of different ingredients, or alternative assets: sumac and lemongrass, or private equity and collectibles. If you want to become a Gordon Ramsay of yourself when it comes to investing, then these alternative assets are worth a…taste. 

Let's explore what alternative assets are, why people like them, and how you can get started.

Alternative assets: seasoning to your investments

Alternative investments (or “alts”) aren't your typical stocks or bonds. They can be physical items, “private” investments, or just different ways of investing. Most investors treat alts as compliments, accents, or SEASONING in their investment portfolio. Am I running away with this cooking analogy too much? Yes, chef! I’ve been watching a lot of The Bear.

What are some types of alts?

Here’s a few popular ones:

1. Real Estate: Buying buildings or land; if you own a house, that’s an alternative investment!

2. Commodities: Things like gold, oil, or wheat; if you have jewelry, that can be an alternative investment!

3. Collectibles: Rare items like art, comic books, or cars; if you still have Pokemon cards, nerd! Just kidding, that’s also an alternative investment. 

4. Private Equity: Owning parts of private companies; you know SpaceX? It’s still a private company!

5. Hedge Funds: Special investment strategies that are usually more complicated than regular mutual funds you might invest in.

How do alts boost your portfolio?

There’s a few reasons why it might be worth mixing in some alternative assets to your portfolio.

1. They can make more money: Sometimes, they grow faster than regular investments. A key example of this is private equity. For major pensions, the average returns of private equity over the last 21 years was 11%, while regular stocks returned 7%. A spicy kick to your portfolio! 

2. They spread out risk: They often don't follow the same patterns as stocks and bonds, so adding them to your portfolio can often make your total investment portfolio less risky overall. 

3. They can protect against inflation: Some alternatives, like gold, may hold their value when prices go up.

Don’t overdo it!

But be careful, these investments can also be tricky:

1. They can be hard to sell quickly

2. They might be more expensive to buy and sell

3. It can be harder to know their true value

4. Some are riskier and you could lose more money

How to start cooking with alts

If you want to give alternative investments a taste, here are some ways to start:

1. Real Estate Investment Trusts (REITs): These are like stocks for real estate. 

Example: Prologis - focused on logistics and industrials; think Amazon warehouses

Example: American Tower - invests in communications infrastructure like cell towers

2. Exchange-Traded Funds (ETFs): Some ETFs focus on commodities or other alternatives.

Example: Invesco Global Listed Private Equity ETF - holds publicly traded private equity companies

Example: Accelerate Diversified Credit Income Fund - invests in loans given to medium-sized private companies

3. Online Platforms: Some websites let you invest in art or other collectibles.

Example: Masterworks - gives you the opportunity to invest in fractions of fine art

Example: Fundrise - lets you invest in real estate, private credit, and venture capital

Alternative assets: kicking your portfolio up a notch

Alternative assets can be a real boost to your investment portfolio. But remember, it's important to carefully research them before investing. And don’t dump all your money in them. Would you pour 50 chillies and a pint of vinegar into your favourite tomato sauce recipe? DO NOT - CHEF WILL BE FURIOUS. But a bit of each could really take that dish to the next level. HEARD, CHEF.