5 Benefits of Investing in Alternative Assets
Individual investment portfolio diversification became critical in the aftermath of the 2008 financial crisis. An account of the crisis will reveal the enormous financial stress that traditional financial market investors experienced. A market known for stocks, bonds, and cash exchanges came crashing down, taking thousands of investors with it.
Individual elements who paid the price of the spiralled market plunged with their hard-earned money were much more than the overall market crashes. Even an established company like Lehman Brothers could not withstand the storm at the height of the meltdown, as it was swept under the carpet in the process.
As the storm began to subside, investors were forced to think outside the box in search of alternative investments and assets that would withstand the test of time and perhaps be free of the shackles of the traditional financial market. This quest eventually resulted in the mainstreaming of an often overlooked class of assets known as alternative investment assets. This asset class has proven to be dependable over the years, yielding attractive incomes that could occasionally qualify as a not-so-passive income stream.
This article investigates alternative asset classes and the inherent value they possess that may benefit investors, particularly with the advent of blockchain and the simplification of investment processes. Let’s get started.
What are Alternative Investments?
Assets in the alternative investment class can be regarded as assets that do not fall under the auspices of traditional investments such as stocks, bonds, or cash investments. Usually, alternative assets are considered to be less liquid with a longer investment duration. However, they have the tendency to yield a considerable profit over time.
Traditional investments enjoy the benefit of easy liquidity as they are mostly available for trade on public exchange markets all around the world; from the New York Stock Exchange to the Tokyo Stocks Market. However, the downside is that the market is heavily regulated and all exchanges must follow established rules which are usually stifling. Thus, it is no coincidence that the global financial crisis had regulations at its epi-centre, and its ripple effect was felt all around the world.
You could learn more about the differences between these two asset classes in this link.
Common Types of Alternative Investments
Now that we have already established that alternative investments exist beyond the purview of traditional investments, it is best that we shed light on this asset class and the types of investment that qualifies as alternative assets.
Below are investments that fall under the alternative investments class;
- Real estate
- Private equity
- Hedge funds
- Collectibles (including digital collectibles)
- Structured products, among others
Cryptocurrencies and Alternative Digital Securities
Cryptocurrencies and blockchain technology have evolved into the most notable solutions to emerge from the 2008 global financial crisis. Blockchain has emerged as a decentralised solution for money, financial transactions, and investment options. Its returns to early investors have multiplied many times over the years.
Several decentralised projects continue to emerge on the blockchain, offering investors tangible value for money and an often reliable investment alternative. They are based on creating a financial system that is independent of centralised structures and providing financial services.
Furthermore, traditional finance is beginning to recognise the blockchain’s realities, as what was previously restricted to TradFi is now possible on the blockchain. The Initial Coin Offering, Initial Decentralized Offering, Initial Farm Offering, and Initial Exchange Offering have all emerged as viable alternatives to the Initial Public Offering; here is an article on these various cryptocurrency crowdfunding models. In addition, digital securities are now available on the blockchain. This means that investors can now freely diversify their portfolios by investing in high-yield alternatives without being constrained by the constraints and regulations that exist in the traditional financial market.
Despite the fact that cryptocurrencies are generally volatile, the rapid growth and continued emergence of projects in the space almost certainly guarantees a positive return on investment, which is solely determined by the forces of demand and supply, and is dependent on the potential and offerings of projects and solutions.
Along with exchange offerings and securities, crypto as an alternative investment offers hedge funds, asset trading, non-fungible tokens, digital collectibles, and investment in the emerging field of the metaverse. It is obvious that the blockchain intends to outperform the traditional financial market in terms of functionality and investment options, and it is only natural to say that it is rapidly realising these potentials.
The 5 Most Important Benefits of Investment in Alternative Assets
Portfolio diversification was one of the lessons learned by many investors in the aftermath of the 2008 economic meltdown. It became clear that investing entirely in stocks and bonds does not make the most financial sense. As a result, diversification into non-traditional asset classes has emerged as the preferred option. Diversifying your portfolio helps you prepare for rainy days because it is nearly impossible for all asset classes to experience a decline at the same time.
It is no exaggeration to say that in the age of blockchains and cryptocurrencies, digital asset classes — NFTs, DeFi, Metaverse, and the like — are the best form of alternative investments.
Higher Returns on Investment and Stability
Alternative investment asset classes have been shown to outperform traditional investments in terms of returns over time. Returns on Blockchain and cryptocurrency investments are even more impressive. It is not uncommon for crypto investments to return as much as 1000 percent in a year. As an example, consider Solana. Non-fungible tokens have a high, near-instant sale value and an even higher resale value for collectors.
As more investors become aware of these opportunities (particularly in digital alternative asset classes), it is clear that digital is the next generation of profitable investment portfolios.
Unique Markets and Innovative Products
The emergence and gradual mainstreaming of blockchain and cryptocurrency have resulted in the emergence of a distinct and novel market for innovative products that were previously non-existent. Consider securitized tokens, ICO, crowdfunding, NFT marketplace, flash loans, uncollateralized loans, token presale, and other examples that are not readily available in the traditional financial market. These products have completely reshaped the financial landscape, providing investors with newer and more promising investment options.
Passive Income Stream
For the better part of the last decade, the cost of living has risen all over the world. However, in most parts of the world, there has been no corresponding increase in individual and household income. As a result, most people’s standard of living has fallen, leaving families scrambling for alternative sources of income.
Alternative investments and asset classes enable investors to earn consistent and, in some cases, substantial income. Because of the nature of alternative investments, you do not have to be present as much as a typical day job requires. It is usually done gradually and does not interfere with your regular source of income. With a higher yield level, crypto investments become even less stressful.
Free of Manipulations
Blockchains provide decentralisation and freedom from centralised authorities, whereas alternative investments provide financial freedom. This is made possible by less stringent governmental control and the elimination of manipulative means. You are guaranteed a fair and transparent market exchange governed by market forces. This means that your investment is less vulnerable than it was at the start of the previous financial crisis.
BlockX is Offering the Digital Alternative Investment to Investors
As the whole world continues to embrace alternative investments, BlockX has launched the perfect platform for investors to partake in this novel investment option through digital alternative asset investments.
BlockX operates as a blockchain infrastructure that supports the development of blockchain-native protocols pertaining to Decentralized Finance, Non-Fungible Tokens, and the Metaverse. It offers project developers the option to build a high-potential project that could attract investors.
BlockX also runs a sister protocol called Tokenizer which serves as an alternative to the traditional investment market. The protocol enables investors to invest in the most promising alternative assets across real estate, hedge funds, and NFTs, and to also purchase tokens of projects as securities. Security tokens could then be purchased and sold on the Tokenizer marketplace in exchange for more traditional but blockchain-based financial services such as insurance, and the likes.
The entire BlockX ecosystem is built to be robust and rewarding for investors who see the long-term potentials of blockchain and cryptocurrencies, and are not deterred by its often volatile market.
For more details about BlockX, check out the links below: