11 Lucrative Alternative Investments For Accredited Investors (2024)

Alternative investments can take many forms, from hedge funds and private equity to real estate and fine wine. 

Some of these alternative assets have low stock market correlations and are a great way to diversify your investment portfolio.   

But, some of them have higher risk and are accessible only by accredited investors. 

Let’s explore what criteria you need to meet to become an accredited investor and 11 of the best alternative investments for accredited investors. We’ll also cover the pros and cons of this form of investment.

How To Become An Accredited Investor

Accredited investors are individual or institutional investors permitted to invest in securities that aren’t registered with the Securities and Exchange Commission. 

According to the SEC, to be considered an accredited investor, you must meet one of these conditions:

• Income: You should have a consistent annual income of at least $200,000 (individual) or $300,000 (combined with a spouse or partner.).
• Net worth: Your net worth should be over $1 million (individually or together with a spouse or partner), excluding the value of your primary residence.
• Financial professional: If you’re a financial professional holding a valid Series 7, 65, 82 license or a “knowledgeable employee” of a private investment fund, you can qualify as an accredited investor.  

Legal entities that can become accredited investors include:

• Financial entities like banks or insurance companies
• Limited liability companies (LLCs) or trusts with assets over $5 million
• Legal entities where all equity owners are accredited investors
• Registered Investment Advisor (RIA) entities or broker-dealers

However, you should keep in mind that there’s no formal process for an individual or legal entity to become an accredited investor. Also, no federal agency or board of certification verifies the status of an accredited investor. 

Rather, the onus for verifying an accredited investor’s status goes to the company they’re planning to invest in. 

Now, let’s see what alternative investment assets are open to accredited investors.

11 Alternative Investments For Accredited Investors

Here are some of the best alternative investments any accredited investor should consider:

1. Fine Wine

Fne wine is a particularly rewarding alternative investment asset class, thanks to its low market volatility. 

Additionally, fine wines (like the revered bottles of Domaine de la Romanee-Conti), improve in quality and increase in value as they age, giving you attractive returns on your investment. 

If you’re an accredited investor searching for an easy way to start a successful fine wine portfolio, check out Vinovest. 

Vinovest is a premier wine investment company that helps you buy, sell, and store wine from anywhere in the world with just a few simple clicks. Among the benefits are lower minimum investment requirements ($1,000) as well as insurance coverage and provenance checks. 

You’ll also receive investment advice and wine portfolio management assistance to smoothen your investment experience. 

2. Hedge Funds

A hedge fund is a professionally-managed investment fund (like a mutual fund or ETF.)

While a hedge fund is usually subject to far less regulation, keep in mind that it often utilizes a riskier investment strategy for higher returns. So, if you’re a more experienced investor seeking high returns, this might be a good investment option.

Less regulations means that hedge fund entities can invest in more intricate projects and asset types. Hedge funds invest in anything from real estate and private companies to derivatives and currencies. 

Hedge fund accounts tend to have high minimum investment requirements, which is why they’re only accessible by accredited investors.

3. Private Equity

Private equity funds are pooled investment vehicles (like a mutual fund or hedge fund), and their investment objective is to acquire controlling stakes in public or private companies. 

The fund usually aims to restructure the company and provide capital for accelerated growth.

Different private equity strategies have unique riskreward characteristics. 

However, to turn a profit, a private equity fund will usually liquidate its stake either by selling to another company or taking a portfolio company public in an initial public offering (IPO.) 

As an accredited investor, you’ll have more opportunities to participate in this form of investment than non-accredited investors (who may sometimes do so, but with restrictions.) 

4. Venture Capital

Venture capital (VC) funds provide capital for startups and small businesses in exchange for a share of company ownership. You can invest in venture capital funds as an accredited investor through VC firms or online marketplaces.

Venture capital funding is a popular financial source for new companies with a short working history. This is especially true if they have minimal access to other debt instruments like bank loans. 

Like private equity firms, venture capital funds can lend technical or management skills, though VC investors usually stay invested longer than private equity. While the investment risk can be significantly higher, the possibility of huge returns is also enticing. 

5. Merchant Cash Advances

A merchant cash advance (MCA) is a short-term loan typically ranging between 3-12 months, exchanged for a percentage of future sales — and is only available to accredited investors.

Because it is a short-term loan, you won’t have to wait years for your investment to mature. Additionally, MCA returns have the potential to be substantially higher than those garnered from standard high yield investments in a public market.

6. Crowdfunding

Crowdfunding is the process of raising a fund (typically via an online crowdfunding platform) for a company, project, or product. 

This allows like-minded investors to pool resources and finance lucrative but previously inaccessible investments without depositing massive upfront sums. 

Examples of crowdfunding projects include equities, commercial real estate, or multifamily housing — and are easily accessible whether you’re an accredited or non-accredited investor.

7. Collectible Art

If you’re an art collector or art connoisseur, fine art could be a fitting alternative investment for you. 

An online fine art investment company could make investing in art easier, and it doesn’t matter if you’re an accredited investor or not. 

Collectible art is a relatively illiquid investment class, and costs are high. However, the value tied to the exclusivity and age of a piece can potentially offset those factors. You may see very profitable returns, especially for the work of celebrated artists. 

8. Real Estate

Real estate is one of the most accessible alternative investment asset classes open to all types of investors. There are typically three ways in which you can invest in real estate:

• Rental properties: Obtaining real estate rental properties is an excellent investment strategy to secure a regular passive income, as long as you don’t mind the occasional maintenance and repairs.
• REIT (Real Estate Investment Trust):A REIT provides the means to invest in various real estate holdings, minus the hassle of property management. Investors receive dividends from the REITs' taxable income. Bear in mind that this real estate investment dividend is considered a traditional taxable income by the IRS.
• Crowdfunding: This allows investment in real estate assets (previously only available to institutional investors) at lower minimum investment requirements. This is done via private debt or equity of both residential and commercial real estate properties. 

9. Non-fungible tokens (NFTs)

NFTs are an emerging crypto asset class. These are digital assets that you’d keep on the blockchain and represent your unique ownership of a real-world object (both tangible and intangible.) 

NFTs have limitless tokenization possibilities and applications. For example, Twitter co-founder Jack Dorsey sold his first-ever tweet as an NFT for over $2.4 million.

The NFT market has seen impressive volume gains in the last few years since NFTs are relatively new. This makes them an attractive alternative investment for any investor to explore.

10. Cryptocurrency

The last ten years have seen cryptocurrencies rise from non-existence to an investment asset class with a market valuation of about $2 trillion. 

Cryptocurrencies are said to store a value immune to the inflation and depreciation of conventional (fiat) currencies often seen during economic distress. This makes them an interesting alternative investment for hedging against such situations. 

However, investing in cryptocurrencies poses significant risks with the rapid swings in this asset class. So, if you’re an investor with no crypto investment experience, it’s better to start with a small percentage of your overall portfolio. 

11. Natural Resources & Commodities

The natural resources asset class includes: 

• Commodities: This asset class (including  gold, oil, and rubber) often does well against weakened currencies. 
• Farmland and forests: This offers income streams based on the sale of agricultural commodities, trees, and wood.  

Investors can invest in commodity pools through derivatives like futures and options, and you don’t need to be an accredited investor to access this asset class.

However, individual commodities can be notoriously volatile and should be part of a diversified portfolio of commodity pools and other alternative or traditional investments.

Next, let’s see what the pros and cons of alternative investments are.

Benefits And Disadvantages Of Alternative Investing

All investments come with some form of risk. 

To ensure your chosen alternate asset class aligns with your investment goals, you need to be aware of the benefits and disadvantages associated with alternative investments. 

1. Benefits

Here are some of the main benefits:

• Low stock market correlations: An economic crisis could place the stock market under pressure. However, alternative assets like fine wine aren't affected by the stock market and usually remain stable. The Liv-Ex Fine Wine 50, for example, outperformed major equity markets in the first quarter of 2022. Check out the Vinovest websitefor specific information on wine investment.
• More opportunities for profit: Alternative markets can be less efficient, so opportunities to make a profit may be more prevalent. An example would be the volatile swings in the crypto market, which a savvy investor can leverage to make a profitable sale.
• Hedge against inflation: Some alternative investments, such as gold or real estate, are great inflation hedges (unlike traditional investment classes that are directly affected by the stock market performance and the economic environment.)
• Can be enriching: Alternative investing may be enriching if the subject matter is one you’re interested in or knowledgeable about.
• Higher returns: While some alternative investments are considered riskier, they also offer potentially higher returns than traditional investments.  

2. Disadvantages

Here are a few of the downsides that come with alternative investing:

• Higher investment sums: Alternative investments have high minimum investment requirements, which makes them more suitable for accredited and institutional investors. 
• Significant risks: Sometimes, the greater risks (that can be hidden) tied to an alternative investment may not be worth the potential return.
• Lack of regulation and transparency: Not all alternative assets are registered with the SEC, so they aren’t regulated. 
• Can be illiquid: Some alternatives are considered an illiquid investmentas many aren’t on the public market, making them harder to sell. 
• Difficult valuation: Without actual market values, the valuation of some alternative assets can be complex as it’ll be subjective. 

What else should you consider when investing?

5 Smart Investing Strategies For Any Investor

Whether you’re more inclined toward traditional investments or find alternative assets a fascinating way to increase income, always keep these 5 smart investing principles in mind:

• Don’t time the market, as you could miss some of the best trading days
• Diversify your asset allocation
• Select investments appropriate to your situation
• Review dollar-cost averaging 
• Rebalance your portfolio to reflect your investment goals better

Alternative Investments For A Balanced Portfolio

Before diving into building an alternative investment portfolio, make sure you do your due diligence as you would for any traditional investment. 

Go through the prospectus so you’ll know the stated investment objectives and have all the specific information needed. 

If you want to invest in an asset that appreciates well over time in a less volatile market, fine wine might just be the thing. Fine wine has a low investment risk, and it’s also one of the few assets you can drink if you’re done investing, putting the term “liquid” in a new light. 

So, drop into the Vinovest website, and start your fine wine investment journey today.