Alternative investments refer to financial assets that do not fall into the conventional investment categories, such as stocks, bonds, or mutual funds. These investments are often used to diversify investment portfolios and reduce risk. 

 

Traditional investment instruments like fixed deposits, provident funds, and stocks are typically the preferred choice of Indian investors. However, the popularity of alternative investments has been growing due to the potential for high returns.

Types of Alternative Assets

Here are some types of alternative investments that are prevalent in India.

1. Real Estate

Real estate is one of the most popular forms of alternative investments in India. This includes investing in residential properties, commercial properties, and Real Estate Investment Trusts (REITs). Real estate could provide steady cash flow in the form of rent and potential appreciation over time.

2. Gold and Other Precious Metals

Precious metals like gold, silver, and platinum are considered a form of alternative investment. They are often used as a hedge against inflation and currency fluctuations. In India, traditional and risk-averse investors prefer to invest in gold in the form of jewellery or coins. 

3. Art and Collectibles

Investing in art and collectibles such as vintage cars, coins, stamps, and other rare items has gained popularity in India. These assets can appreciate over time and can be a good store of value.

Benefits of Investing in Alternative Investments

Alternative investments can offer several benefits:

Diversification

They can help diversify your portfolio as an alternative to traditional or popular investment avenues

Potential for Higher Returns

Some alternative investments have the potential for providing higher returns, depending on the asset the

Inflation Hedge

Certain types of alternative investments, like real estate and commodities, can act as a hedge against inflation

Lower Volatility

Unlike traditional or market-linked tools, these investments are often exposed to less volatility

Drawbacks of Opting for Alternative Investments

Before investing in alternative assets, it’s crucial to consider the following disadvantages:

  1. Higher Risk: Alternative investments are speculative in nature, illiquid, and vulnerable to market shifts and regulations

  2. Lack of Liquidity: Many alternative investments, like real estate, are illiquid, making it challenging to access funds when needed

  3. Complexity: Understanding alternative investments demands expertise and research, limiting accessibility for novice investors

  4. Regulatory Oversight: Some alternative investments may not be regulated, increasing the risk of fraud

Disclaimer

The information provided by BFDL herein above is related to the Non-Partnered Banks/ NBFCs and is just for the purpose of information and under no circumstances the information provided hereinabove is intended to be source of advice or recommending any financial investment advice or endorsement of any sort. 

The information including interest rates with regard to fixed deposit, provided on this website is gathered through publicly available sources over the internet and is considered as accurate and reliable to the best of our knowledge. BFDL disclaims any responsibility or liability regarding inaccuracies, omissions, mistakes etc. as well as offers by the Non-Partnered Banks. The use of information set out is entirely at the User’s own risk and User should exercise due care prior taking of any decision, on the basis of information mentioned hereinabove. You are advised to visit/ contact the respective Banks/ NBFCs to verify the information before making any investment or opening an account. Further, BFDL does not undertake any responsibility or liability to update this information. YOU ARE SOLELY RESPONSIBLE FOR ANY LIABILITY OR DAMAGE YOU INCUR THROUGH ACCESS TO OR USE OF THE SITE OR SUCH INFORMATION OR MATERIALS EXCEPT WHERE THE LAWS AND REGULATIONS OF A PARTICULAR JURISDICTION CONCERNING WARRANTIES CANNOT BE WAIVED. Additionally, display of any trademarks, tradenames, logo and other subject matters of intellectual property owners. Display of such Intellectual Property along with the related product information does not imply BFDL’s partnership with the owner of the Intellectual Property of such products. 

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FAQs on Alternative Investments in India

Why is investing in precious metals popular in India?

Investing in precious metals like gold and silver is popular in India due to their historical stability, hedge against inflation, and diversification benefits for investment portfolios. Additionally, they are a tangible asset that retains value over time, providing a sense of security amid market volatility.

What are the risks associated with investing in art and collectibles?

While art and collectibles may appreciate over time and offer diversification, they also come with risks. The value of art and collectibles can be highly subjective and can fluctuate based on trends and other factors. Additionally, there can be issues related to authenticity, storage, and insurance.

How can I start investing in alternative investments like real estate, precious metals, or art and collectibles?

It’s important to first thoroughly research and understand the risks and returns associated with each type of investment. You may also want to consult with a financial advisor.

Are alternative investments suitable for all types of investors?

While alternative investments can offer diversification and potentially high returns, they are exposed to some risk and may not be suitable for all investors. It’s always recommended to consider your financial goals, risk tolerance, and investment horizon before investing in these types of alternative assets.

What are some common types of investment alternatives?

Here are three common types of alternative investment instruments: 

  • Precious metals like gold and silver 

  • Real estate in terms of land or residential properties  

  • Antique collectibles, vintage apparel, coins, etc

What are the 7 types of investment?

Here are some of the most common types of investment avenues:

  • Stocks 

  • Bonds 

  • Mutual Funds 

  • Exchange-Traded Funds (ETFs)

  • Certificates of Deposit (CDs 

  • Retirement schemes 

  • Alternative investments 

Are there tax benefits to investing in alternative investments?

Yes, there can be tax benefits associated with investing in alternative investments, depending on the specific investment type and prevailing tax laws. You could consult a tax advisor for detailed information on the tax implications of investing in alternative assets.

Can alternative investments be part of a diversified investment portfolio?

Yes. Integrating alternative investments such as real estate or commodities alongside traditional assets like stocks and bonds can enhance portfolio diversification.

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