As we start off 2018, it is time for you to consider your investment goals and what you should do to meet them. In this article, we will have five alternative investment strategies that you can consider implementing to help you meet your goals.
For all investors, it is important to have a well-diversified investment portfolio which should include alternative investment.
Cryptocurrencies have been gaining traction in the past year with the price of bitcoins increasing over 15 times. Led by the strong growth of bitcoins, other cryptocurrencies such as Ethereum and Bitcoin Cash have been surging. Though the technology behind many of these cryptocurrencies is fascinating, investors will have to prepare themselves for the volatility in this asset class.
Other than buying the cryptocurrencies available in the market, many are now involving themselves in Initial Coin Offerings (ICOs). Here are six red flags for ICOs that you need to take note of.
Other than Bitcoin, here are five other top cryptocurrencies to invest in:
A fintech innovation, robo advisory gives investors a personalized touch to your investment portfolio. By answering a set of questionnaires, the system will determine your investment goals and risk appetite through the use of Artificial Intelligence. With the information provided, the system will generate an investment asset allocation strategy, and provide a selection of ETFs and unit trusts.
In addition, the system will be able to rebalance your portfolio based on the economic information it receives. This is optimal for busy investors who have no time to monitor their portfolio. A key selling point for most of the robo advisors is the low cost involved and well diversified portfolio.
Effective in allocating investment into various asset classes, it fails to take into other issues such as cashflow management and estate planning which is still done by a financial planner.
One of the pillars of alternative investment is foreign exchange (FX). A popular investment with investors, rewards for making the right investment can pay off strongly. Trades for forex (futures) are leveraged, hence, can amplify your potential reward or loss. You can choose to be long or short in a currency and against another currency which should fit your view towards the economy or investment strategies.
For trading of FX, most investors will deploy technical strategies which include:
- The Blade Runner Trade
- Daily Fibonacci Pivot Trade
- Bolly Band Bounce Trade
- Forex Dual Stochastic Trade
- Forex Overlapping Fibonacci Trade
It also works as a hedge for your investments in foreign currencies when you take the opposite position of your exposure.
Private Equity or Venture Capital Funds
Led by the boom in tech companies, popularity in private equity and venture capital funds have been increasing. In 2016, private equity deals in Asia Pacific alone was at US$ 92 billion according to reports from Bain & Co. The reported exit activity was at US$ 74 billion and had an average return that outperformed most asset classes.
However, investors will need to take note of the buy in amount of such funds. A good private equity or venture capital fund will have a minimum buy in which usually starts from US$500,000. Lock up period for the funds will be from 5 years to 10 years.
Notable private equity and venture capital funds will include:
- CVC Capital
- B Capital
- Golden Gate Ventures
- 500 Startups
As its name would suggest, crowdfunding is whereby a project or deal is funded by a pool of investors (the crowd). There are four main categories to Crowdfunding:
For product crowdfunding, startups will list their innovative or useful new concepts in hopes for backers. When the target reaches, the startup will begin production which products will be given to their backers. In essence, the fund raisers are selling their “idea” or “prototype” in hopes of backers who will commercialise their products.
Some major companies providing such services would be Kickstarter and Indiegogo.
For donation crowdfunding, people in need of money for various reasons will try to convince donors to donate to their cause. Some of the most notable funds raised will be for healthcare, education and political reasons.
A popular platform in Asia that provides donation crowdfunding services is Give.Asia
For equity crowdfunding, high growth startup companies will pitch their businesses and attract investors to invest in them as shareholders. This is akin to angel investing on a technology platform. A key point that in equity crowdfunding that investors will need to take note of will be a clear exit strategy as this will be the plan where you get to cash out your investment.
Debt crowdfunding is better known as Peer to Peer Lending (P2P Lending).There are two kinds of P2P Lending; lending funds to an individual or lending funds to a company. In Singapore and Malaysia, all operators in P2P Lending may only lend businesses. To investors, they will be providing loans to businesses in exchange for an interest rate and will be returned based on the schedule which is similar to how bonds work. Investors should be aware of the credit and default risks of the companies they lend to before taking the plunge.