“Stocks and bonds.”
For many Americans, those three words encapsulate the vast majority of their investment world. Maybe they hold individual stocks and Treasuries. Maybe they hold equity or fixed-income mutual funds and ETFs. Regardless of how they’re getting them, that’s what they’re getting.
But there are alternatives.
They’re called … well, alternatives.
What Are Alternative Investments?
Like many things in the financial world, the term “alternative investments” doesn’t have a fixed definition—it varies from one institution to the next. But for general usage, alternatives are any investments that aren’t stocks and bonds.
It’s a wide world that encompasses all sorts of varied investments, including real estate, commodities, cryptocurrencies, private equity, private debt, even collectibles such as wine, art, and sneakers.
It’s also a massive industry—and it’s getting bigger.
“From its modest beginning as an acquisition strategy largely known as ‘boot strapping,” the alternatives industry is now expected to grow to more than $24 trillion in assets in 2028 from $15 trillion in 2022,” Henry H. McVey, partner, head of Global Macro and Asset Allocation, and CIO of the balance sheet of global investment equity firm KKR, wrote in a September 2024 paper.
Why Are Alts Getting Bigger?
Experts point to a variety of factors; chief among them is a desire for a source of higher returns that’s not correlated with stocks and/or bonds:
“Asset allocators predict that alternative assets will continue to be an increasingly important component of a total portfolio, as alternatives have historically demonstrated the trifecta of lower volatility, diversification benefits and return enhancement,” BNY (the Bank of New York Mellon) says in a January 2025 report.
KKR’s paper, which looked at performance over the past decade through 2023, shows that a variety of “private” (not publicly held) alternatives beat up on most other asset classes—indeed, private alts accounted for four of the five top-performing assets during that 10-year period.
BNY also points to a growing retirement savings gap—one where stocks and bonds might no longer be enough to meet the challenge: “Alternative investments, on the other hand, not only offer potential returns to help close the gap but also have the long-term duration and return enhancement to match most investors’ retirement timelines.”
KKR, citing a World Economic Forum analysis, says the global retirement savings gap is $70 trillion (with the U.S. accounting for 40% of that), and expects the number to spike to $400 trillion by 2050.
And alternatives might be filling that gap sooner rather than later.
Earlier this month, President Donald Trump issued an executive order that could ease the path to alternatives being included in 401(k) plans, “directing certain federal agencies to review and, if appropriate, to take formal regulatory steps to expand the ability of 401(k) and other defined contribution retirement plan participants to invest in private equity and other alternative investments,” Alexander P. Ryan, Sarah E. Haddy, and David M. Mohl of Willkie Farr, a provider of business legal solutions, wrote in an August client alert.
Questions to Ask About Alternatives
So, alternatives can provide differentiated returns, and they’re likely to be a growing option for everyday investors as time marches on. What should you know about investing in them?
First, whenever you consider any alt, you’ll want to ask yourself at least a few questions to determine whether the investment is appropriate for you:
- How liquid is it? How quickly and cheaply can you convert these assets to cash if you need to sell? Example: You can sell a stock within minutes and have the actual money in your account within a couple of days. That’s “liquid.” Now imagine doing that with an apartment building. Awful, right? That’s “illiquid.”
- What’s my investing time horizon? Many alternatives tend to be illiquid. That’s not a problem if your money will free up in the time you need it to. But if you need your money in, say, a year, you probably shouldn’t invest in certain alts, such as private equity or real estate crowdfunding sites.
- How patient am I? Along the same lines, some alternatives—even those with high potential upside—can take a long time to bear fruit, and again, it might be years before you can actually reap your rewards. So liquidity also matters in managing your emotions.
- How do they fit into your budget? A person with just a few bucks to spend will have limited options—a smattering of stocks, maybe an ETF or two. But the more money you have, the more options that open up, and that’s true for both stocks and bonds as well as alts.
- What do you enjoy? Some people prefer to “invest in what they know,” and that’s true for both traditional and alternative investments alike. It’s not necessary to consider your personal enjoyment, but if you plan on spending time and taking a more active role in your investments, you might as well buy something you have an interest in if that’s an option.
Let’s take a look at a handful of options to give you an idea of what the world of alts looks like:
Related Link: 11 Best Non-Stock Investments [Alternatives to the Stock Market]
1. Private Stock Offerings
When you think about stock investing, you naturally think about publicly traded stocks—company shares that are traded on markets like the New York Stock Exchange or Nasdaq.
However, privately held companies issue stock, too.
The potential upside for privately held stock is enormous. Oftentimes, investors are getting in on the ground floor of what could be a potentially high-growth company. But the risks are much higher, too. Publicly traded companies are required to regularly give detailed reports of their financial situations—information that’s vital for valuing investments and determining risk/reward. Privately held companies can be much more obtuse, making it far more difficult to figure out exactly what you’re buying.
The problem? You and I typically don’t get to decide whether the juice is worth the squeeze because we can rarely access this kind of stock. It’s usually either issued to employees as compensation, or issued to larger investors—private equity, hedge funds, accredited investors (usually high-net-worth and/or extremely skilled), and others—as part of fundraising rounds.
But every now and then, a private company trying to raise funds will open a stock offering to accredited and non-accredited investors alike.
Related Link: The 13 Best Mutual Funds You Can Buy
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Example of a Private Stock Offering
Pacaso, for instance, is a real estate app that allows people to buy partial interests in vacation homes in more than 40 markets, including Italy, the U.S., Mexico, and the Caribbean. Unlike timeshares, in which buyers are effectively just purchasing the right to use the home during specific periods, Pacaso buyers are purchasing equity in the home and can benefit from any appreciation in its value.
And the app has opened up a new investment opportunity: the company itself.
Pacaso currently only has less than 1% penetration in what it believes is a massive, $1.3 trillion total addressable market (TAM) for luxury vacation home ownership. While it was previously working on national brand awareness, the company says it’s refocusing on its core: “luxury homes in luxury markets for the [high-net-worth] customer.”
To accomplish that goal, Pacaso is attempting to raise more than $56 million in new funding. It’s doing that by offering up “Class D” common stock, which is available to both accredited and non-accredited investors alike, at a minimum investment of just over $1,000. Learn more about Pacaso.
Editor’s note: This stock offering is expected to close in late September.
2. Private Real Estate (CRE Crowdfunding)
“Buy land, they’re not making it anymore.” – Mark Twain
Commercial real estate (CRE)—basically any land or property that’s used for business rather than living—can line your pockets in two ways:
- Rent can provide you with steady, passive income.
- Property values typically appreciate over time.
Of course, you’ll need to get financing—which means you’ll need to convince your lender that you know what you’re doing when it comes to, say, assessing net operating income potential, screening tenants, maintaining properties, and handling all of the finer legal details of buying and selling real estate. And once you get financing, you’ll either have to buy or build the commercial real estate property, after which you’ll need to go about screening and eventually leasing out space. Once you figure out all of the expenses you’ll carry, whatever’s left over is your profit.
Related Link: Which Type of Real Estate Investment is Right for You? 8 to Know
Nevermind that you’ll have to factor in all of your time spent, the stress from handling commercial real estate negotiations, meeting tenant obligations, and practically living on call to handle any emergencies that might transpire.
Or … you could just outsource all of the hard work to real estate crowdfunding platforms.
Crowdfunding platforms do virtually all of the work. You simply select investing opportunities and provide the capital, then collect returns—either in the form of regular income, profits from the sale of real estate, or both.
Examples of Private Real Estate Investments
Fundrise is a popular real estate investing platform that allows you to diversify through its numerous funds. Each fund holds a number of properties and is designed to provide varying levels of risk and income.
Investors can open a Starter account with as little as $10 and instantly be plugged into an income-and-growth real estate fund. The higher your account tier (which is determined by the size of your minimum investment), the more specialized strategies you’ll have access to. And while being an accredited investor will also open up your options, you don’t need to be accredited to invest. Learn more about Fundrise.
First National Realty Partners (FNRP) is a vertically integrated CRE investment firm that’s focused on a very specific niche: grocery-anchored commercial real estate.
FNRP’s team leverages relationships with top-tier national-brand tenants—including Kroger, Walmart, and Whole Foods—to provide investors with access to institutional-quality CRE deals both on- and off-market. Unlike many of the other sites on this list, which are equity crowdfunding platforms, FNRP offers private placements that only an accredited investor can access.
Unlike Fundrise, however, FNRP does require a high minimum investment ($50,000) and is limited to accredited investors. Learn more about FNRP.
3. Fine Wine
Alternatives don’t have to be stuffy and hyper-practical—they can also involve collectibles that bring you a lot of joy, whether that’s baseball cards, shoes, art, or wine.
Wine can increase in quality as it ages, for one. And with rare wines, supply and demand work in your favor: Only a finite amount of wine is produced in specific regions each year, and as people drink that wine, the supply diminishes. As demand increases for the dwindling supply, the price people are willing to pay for it rises.
Fine wines have the potential to deliver long-term, stable growth. They also have a low correlation to the economy, so wine can act as a hedge against inflation and economic recessions.
Unfortunately, you can’t simply buy a bargain wine from the grocery store, stick it in your basement for a few years, and expect to reap an eventual profit. If you want to make money from wine, it needs to be of high quality, ideally rare, and stored in optimal conditions.
Example of Wine Investing
Unless you already have vast wine knowledge and a professional storage setup, you might want to consider a platform such as Vinovest, which allows you to invest in both wine and whiskey.
Vinovest ensures authenticity, stores it for you, and ships it to buyers when they’re ready to sell. Users of the platform can fund an account with a mere minimum of $1,000, select an investment style, and wait patiently as their account balances (hopefully) grow. Starters are put into a curated selection of bottles and barrels, and the portfolio is automatically rebalanced for you. Learn more at Vinovest.
Want to discover more ways to invest outside of the stock and bond markets? Check out our fuller look at alternative investments.
Do you want to get serious about saving and planning for retirement? Sign up for Retire With Riley, Young and the Invested’s free retirement planning newsletter.
