Blocks United

Building Wealth Using Alternative Investments

This is article 3/10 in Part I of our series, How To Build Wealth and Grow Crypto Assets and Income by Staking.

We’ll discuss alternative investments and how they can make valuable additions to your portfolio. We hope you learn something and enjoy!

Key Takeaways

  1. Commodities, like precious metals, oil, timber and wheat
  2. Futures contracts
  3. Exchange Traded Funds (ETFs)
  4. Stocks in exploration and production companies
  5. Infrastructure assets
  6. Master Limited Partnerships (MLPs)
  7. Cryptocurrencies
  8. Collectibles
  9. Private equity
  10. Private credit
  11. Hedge funds
  12. Venture capital

Types of alternative investments

If you are looking to build wealth, alternative investments might be something to consider. They can provide diversification and potentially higher returns than traditional investments, like stocks, bonds, or real estate.

It’s important to note that alternative investments come with a higher level of risk and may not be suitable for all investors.

Some examples of alternative investments include:

1. Commodities like gold, oil, timber, and wheat can act as a hedge against inflation and add diversification to a portfolio.

These types of investments are often volatile, but can also provide a good return over the long term.

There are several ways to invest in commodities, including:

  • Futures Contracts can be bought or sold for commodities such as crude oil, gold, and agricultural products. These contracts allow investors to speculate on the future price of the commodity at a future date.
  • Exchange-Traded Funds (ETFs) provide investors with exposure to a basket of commodities and can be bought and sold like stocks.
  • Mutual funds that invest in commodities or companies involved in the commodity industry.
  • Some investors choose to hold physical commodities such as gold bullion or silver coins.
  • Investing in stocks of companies involved in commodity production and exploration, like mining or oil companies.

Infrastructure assets like roads, bridges, and airports can provide a stable source of income and can be a good hedge against inflation.

Alternative investments, roads and bridges

These investments can be made through infrastructure funds, municipal bonds, or by directly investing in infrastructure projects.

3. A Master Limited Partnership (MLP) is a type of business structure. They are usually formed by companies in the energy sector to raise capital for expansion and growth.

MLPs are structured as partnerships, rather than taxed at the corporate level. They avoid double taxation and pay out a significant portion of their income to shareholders as dividends.

As a result, MLPs are attractive to income-focused investors.

4. Cryptocurrencies, like Bitcoin and Ethereum use cryptography for security. Cryptocurrencies are decentralized and operate on a blockchain.

Public blockchains are transaction databases that function as distributed ledgers. Transaction records are kept by decentralized miners and validators, instead of on a centralized corporate server.

These blockchains operate independently of governments and central banks.

We run validator nodes that create and verify blocks for Polygon, Cosmos Hub, and Kava.

There are risks associated with investing in cryptocurrency. The lack of oversight and regulation can make crypto investors more susceptible to fraud and hacking.

Plus, cryptocurrency values can fluctuate rapidly, so it can be difficult to value and predict the performance of these investments.

5. Collectibles, like art, rare coins, stamps, and vintage wines are alternative investments. They can be illiquid, however. That means that in the event of a financial emergency, it may be difficult to sell the collectible quickly or at a fair price.

Alternative investments, like collectibles, may require a high level of expertise to make money.

For example, investing in fine art requires knowledge of the art market, the value of different artists, and knowing how to value its condition.

Similarly, investing in rare coins, stamps, or vintage wines requires knowledge of those markets. You must know the rarity, condition, and historical significance.

6. Private equity investments are ownership stakes in a private company or a portfolio of private companies.

These investments are usually only made available to institutional investors or high-net-worth individuals. These investments are not publicly traded on stock exchanges.

Private equity firms typically aim to generate returns through a combination of operational improvements and financial engineering.

Examples are leveraged buyouts, growth capital investments, and turnaround investments. They are considered to be high-risk, high-return opportunities that are not suitable for all investors.

7. Private credit investments allow high-net-worth individuals to lend money to private institutions. These loans offer higher yields than many publicly traded bonds, but can be difficult to sell if you need money fast.

8. Hedge funds use a variety of investment strategies, like long/short, leverage, and derivatives to generate returns.

Hedge funds can be a good option for investors who are willing to accept higher levels of risk in exchange for potentially higher returns.

They are generally only available for accredited investors, having $1 million or more liquid net worth.

9. Venture Capital invests in early-stage startups and can be a high-risk, high-reward option for investors. VC investments typically require a significant amount of capital and a long-term time horizon.

Well-known VC companies are Andreessen Horowitz, Pantera Capital, and Sequoia Capital.

Alternative investment management fees, performance fees, and transaction fees may be high. These fees reduce your returns and should be considered.

Another important factor to consider is the level of expertise required. Venture capital, private equity, private credit, and hedge funds require a high level of knowledge. They are less suitable for the average investor, but alternative investments like real estate and commodities can be more accessible to the average investor. These investments are often easier to understand.

Diversification is key. Investing in a variety of alternative investments can help spread out the risk and increase the chances of achieving your investment goals.

In addition, be aware of the tax implications of alternative investments. Consult with a tax professional or financial advisor to understand how they may affect you.

Alternative investments include commodities, infrastructure assets, MLPs, cryptocurrencies, collectibles, private equity, hedge funds, and venture capital. They can generate higher returns than traditional investments, but it’s important to understand the level of expertise required, potential risks, tax implications, liquidity, and fee structure.

Be on the lookout for the next article in the How To Build Wealth Series: Alternative Investment: Affiliate Marketing.

Frequently Asked Questions

Adding alternative investments to your portfolio will provide diversification and may increase your returns, but may also add volatility. It’s important to know your time horizon and risk tolerance.

Tax implications, reduced liquidity, fee structure, high minimum investment, complexity and expertise required, and lack of regulation.

Environmental, social and governmental (ESG) investments are trending, investing with moral values that align with public good.

Market research firm, Preqin says the total dollar value has more than doubled between 2015 and 2021 to $13 trillion. That amount is forecast to reach $23 trillion by 2026

Nothing we say is financial advice or a recommendation to buy or sell anything. Cryptocurrency is a highly speculative asset class. Staking crypto tokens carries additional risks, including but not limited to smart-contract exploitation, poor validator performance or slashing, token price volatility, loss or theft, lockup periods, and illiquidity. Past performance is not indicative of future results. Never invest more than you can afford to lose. Additionally, the information contained in our articles, social media posts, emails, and on our website is not intended as, and shall not be understood or construed as financial advice. We are not attorneys, accountants, or financial advisors, nor are we holding ourselves out to be. The information contained in our articles, social media posts, emails, and on our website is not a substitute for financial advice from a professional who is aware of the facts and circumstances of your individual situation. We have done our best to ensure that the information provided in our articles, social media posts, emails, and the resources on our website are accurate and provide valuable information. Regardless of anything to the contrary, nothing available in our articles, social media posts, website, or emails should be understood as a recommendation to buy or sell anything and make any investment or financial decisions without consulting with a financial professional to address your particular situation. Blocks United expressly recommends that you seek advice from a professional. Neither Blocks United nor any of its employees or owners shall be held liable or responsible for any errors or omissions in our articles, in our social media posts, in our emails, or on our website, or for any damage or financial losses you may suffer. The decisions you make belong to you and you only, so always Do Your Own Research.

The Blocks United Promises

To be ethical and trustworthy

To charge minimal commission so you can get the highest yield

100% uptime. Our validator nodes run 24/7/365

Aligning our values with our delegators. We've self-staked tokens alongside yours.

Responding to delegator questions and inquiries in a timely manner.

Contributing to the communities we validate for.

Get Weekly Staking Updates!

We’ll send you staking opportunities weekly, including our popular “Cosmos Airdrops” email. We’ll never spam or try to sell you anything and you can unsubscribe anytime!

Join our Email List

Get content like this sent directly to your inbox!

Contact Us!

Thank you!

Please check your email to confirm your subscription.

Don't forget to follow us on your favorite social media.

As a reminder we will never sell, share or misuse the information you’ve kindly provided us. We take this seriously and value the trust you’ve placed in us. Thank you!

Contact Us!

We are happy to help you navigate Proof of Stake and answer any questions you may have. 

If you are currently staking with us and having an issue, please let us know and we will get back to you right away.