words Al Woods
Data trackers unveiled that the alternative investment industry could grow by 59% by 2023 due to a desire for yield and an increasing number of investors turning to new markets like cryptocurrency to make a profit.
Seasoned investors know that diversification across their portfolios can boost long-term returns and lower risk, so they buy Ethereum online and purchase alternative assets from different classes to safeguard their wealth. In 2023 alternative investments will continue to appeal to institutional and individual investors. Based on market research, a few investment classes will offer higher return chances this year. Identifying them is crucial for alternative investors because it can help them choose the right space for investing on attractive terms.
Researching what sectors are expected to be the hottest in 2023 can provide investors with some food for thought when exploring their choices for corporate or personal funds.
Image by rawpixel.com on Freepik
What are alternative investments?
Some experts believe that the term needs an update, considering the number and diversity of investors who are turning their attention towards alternative investments. Some alternative investors manage the world’s largest sovereign funds and endowments, and several have dedicated their portfolios to assets from alternative classes. They run the gamut from cryptocurrencies to luxury jewellery, art, venture capital, and private stocks.
What are the top alternative investment sectors in 2023?
Some investors and market experts state that the market could experience a recession downturn in the following months. Therefore, this might be the ideal moment to seek alternatives and create a diversified portfolio. Depending on your available funds, you can put from 30% to 70% of alternatives into your portfolio.
Here are the sectors that could gain steam in 2023.
Investment in digital currencies and blockchain is escalating, and a recent survey showed that around 25% of people are expected to own cryptocurrency in the future. According to statistics, the number of Americans buying digital currencies doubled from 2018 to 2019.
Cryptocurrencies are virtual currencies; therefore no government issue them, and no financial institution or central bank governs them. Cryptography secures digital currencies, so it’s impossible to counterfeit them. Blockchain technology includes encryption algorithms that secure online payments and encrypt all transactions and sales records. It also protects the anonymity of crypto users, encouraging them to invest. Unlike traditional currencies, most digital currencies limit how many coins can be minted, triggering inflationary pressure. Investors use digital currencies as hedges against inflation.
Are cryptocurrencies safe investments?
All investments are risky because assets’ prices usually fluctuate in market environments. You should be aware of blockchain-based coins’ volatility if you want to add them to your portfolio.
The artificial intelligence sector continues to be trending as more people are discovering the benefits of investing in innovative technology. Suppose you want to invest in next-generation assets; AI-powered technology can prove a great choice for you. You can also integrate automated, AI-supported investing in your processes to cut down the time drain and eliminate the stress associated with the endeavour. Technology can review more data points than a team of humans could ever evaluate.
Research shows that AI startups have great growth potential; hence several VC funds and angel investors are focusing their efforts on this niche. However, if you don’t understand how the technology works, it’s challenging to identify the assets that will work.
Real estate is one of the most popular alternative investments. Even if it doesn’t make the top hottest alts, due to high-interest rates, it’s still an asset class that could benefit your investment portfolio. Most alternative investors use real estate to generate passive income while they involve in more active investment activities. Real estate has always been defined as a solution to benefit from downside protection.
Finance specialists state that cryptocurrencies and flight capital from traditional assets could boost real estate’s potential in the long run.
Factoring or merchant debt
These are different types of business loans that fund established companies with a track of financial performance and cash flow. Because it’s an investment managed by a lender or through a fund, you’re loaning or buying against cash flows into an organisation. The borrowing company gets the resources necessary to expand or use as working capital and offer you a regular repayment or a percentage of the business.
The benefit for you is that merchant or factoring debt includes attractive yields, which are often connected to underlying corporate assets. Remember that no one can guarantee that the business you invest in will survive. Therefore, it’s best to invest via a third party with a broad portfolio and low default rates to avoid the instance of the borrowers failing to perform as expected.
Private equity healthcare investments
The healthcare sector is in a full explosion in the aftermath of COVID-19. From cannabis-related products to biotechnology and telemedicine, it’s one of the sectors that will most likely generate profit.
Suppose you want to invest in private equity healthcare to diversify your portfolio, you can pick from multiple ways to get involved with this asset class. The most popular means are private equity firms, VC, angel investing and investing via pre-IPO funds.
As any other alternative investment, this also comes with a risk. Not all companies entering the sector will survive and thrive because the process of launching new technology is challenging, considering the regulatory requirements in the sector. The secret to investing in private equity healthcare successfully is to vary your assets and choose the ones with the highest growth potential and lower risk.
The energy sector will continue to generate substantial returns in 2023. Suppose the inflation won’t ease and the Consumer Price Index grows again, energy prices will probably spike.
However, it’s a wise decision to invest in the energy sector because it’s a defensive niche that is relied on by all manufacturers and consumers. Specialists expect the renewable energy sector to register stable growth in the following month, considering developments in infrastructure.
Alternative investments will continue to gain traction, and many won’t even be labelled as alts because they have a history of offering asset protection, income, and portfolio growth.