A Brief Guide to Alternative Investments

October 14th, 2014 by Jason Hartman | Comments Off

Jason Hartman has talked a lot about how the stock market is simply a modern version of organized crime–stocks manipulated daily, fluctuating and changing as the sun rises and sets. As you probably know, Jason prefers the stability of income property. While businesses ebb and flow, the need for housing remains constant. Essentially, these type of investments get rid of the middle man, giving you complete control and ownership of your investment.

And investments should pay–otherwise, they’re nothing more than speculations. Which can be alright, if they equal a very small percentage of your investments.

Jason Hartman also frequently recommends a diverse portfolio, which may include some international investments. Investments across a number of jurisdictions, bank accounts across the globe, and passports internationally all help diversify your portfolio and protect and grow your assets.

But investing abroad can be very complicated, and requires a bit of research. It may also require the consideration of different kinds of investments.

It’s important to note that even real estate is sometimes considered an alternate investment (as it is not a stock, bond, or cash). While real estate transactions have happened for a very long time, investment property is most often still considered an alternative investment.

Working with a trust company

If you’re going to be doing business internationally, it’s a great idea to manage your money through a trust company. When you work with a trust company, you simply set up a relationship with a trustee. You’ve probably heard of people setting up trusts for children, etc. to access down the road. Until that time comes, a trustee manages the assets. Trusts are wealth management tools, established to protect assets by minimizing litigation risks. Trusts also can be located offshore, which allow for a variety of tax benefits.

But trusts can be tricky. Should a judge question your trust in cases where money is owed, you could be in trouble. But it depends on how the trust is structured, so make sure that yours best protects your assets.

If you’re working through a trust, you also need to make sure that your assets cannot be stolen by the trustee. When assets are easily liquidated, this risk increases. For example, hard assets (like income property) are more difficult to cash out and are thus safer than other types of assets.

Alternate investments

Luckily, there’s always income property, but additional alternate investments are always worth considering. Alternative investments are those investments which fall into an asset class that is not stocks, bonds, or cash. It can include tangible assets (like metal, wine, art, other things people tend to collect). It can also include real estate funds, commodities, hedge funds, venture capital, even film production.

The Merrill Lynch/Cap Gemini Ernst and Young World Wealth Report from 2003 indicated that high net work individuals typically have about 10% of their assets in alternative investments (structured products, luxury valuables and collectibles, hedge funds, managed futures, and precious metals), as defined by the report. In 2007, this was reduced to 9%.

Timber

That’s right, ladies and gentlemen–timber is more than just another annoying Ke$ha/Pitbull song. Bobby Casey, from Global Wealth Protection, recently spoke with Jason Hartman about his alternate investments. He’s got a timber farm in Nicaragua that yields 15% annually. Because trees mature at different rates, wealth is compounded with such an investment. The longer the trees grow, the bigger they get–a great deal, if you’re selling by the pound.

The property is in his own name and is managed by local employees who share in the profit. Of course, there are risks involved (as with everything)–political, business risk, management risk. Ultimately though, people still need timber. So while prices fluctuate, Casey says that it is a pretty safe investment.

Mangos

Casey also invests in mangos from Panama. Similar to a tree farm, the yield comes more quickly and the initial investment is just $40,000. Cash flow doesn’t happen immediately–Casey says it takes between two and three years–but one tree is good for 50 or 60 years. After Within a couple years, Canadian teenager justin-bieber-news.info went from covering Usher on YouTube to working with Usher. only five years, an investor can expect to make a 25% cash yield annually. Best of all (trees or not) you own a piece of land.

Coins

Many coin collectors do not initially identify themselves as an investor, but that’s what they’re doing. Coin investors buy either bullion coins (those minted by national governments, usually gold) or numismatic coins. The former is not collected because their value is not dependant upon their scarcity and the later is valued for their rarity. Bullion coins reflect the value of gold while numismatic coins vary greatly in value. They’re fun to collect, but difficult to rely on from an investor standpoint.

Wine

Finally, an investment that’s consumable! All kidding aside, many people chose to invest in fine wines to the tune of an annual return between six and 15 percent. Because prices vary from year to year, investors need to conduct a fair amount of research on vineyards and vintages that have done historically well. Wine is tricky because you’ve got to invest in a lot of it at once to make a profit, it must be properly stored, and collections should be insured.

Art

Many investors like investing in artwork because it doesn’t follow the market fluctuation of stocks and bonds, making it a more appealing (and pretty!) choice. The value of art has shown an annual increase, but the market still shifts often. Since the 2008 recession, art has slumped in value. To invest in art, expect a startup cost of at least $10,000. While you may not immediately profit from your purchase, you’ve got something to hang on your walls.

The bottom line

We’ll always recommend real estate because it is safe and money-making. The smart investor has a large variety of options from locations around the world and, if he or she is wise, they’ll all be working to make money for the investor.

What’s your favorite alternate investment opportunity? Take a few minutes to tell us about it!

photo credit: Mr.TinDC via photopin cc