The Benefits of Alternative Investments 

When it comes to investing, most people think of traditional options such as stocks and bonds. However, there is a separate category of alternative investments that can offer unique benefits to investors. In this article, we'll detail what alternative investments are, why they can be beneficial, and how to get started investing in them. 

What Are Alternative Investments? 

Alternative investments are investments that fall outside the traditional stock and bond market. They can include a range of assets, such as real estate, private equity, commodities, art, collectibles, wildlife, and more. Alternative investments can offer investors the potential for diversification and potentially higher returns than traditional investments. 

Why Consider Alternative Investments? 

There are several reasons why an investor might consider alternative investments. First and foremost, alternative investments can provide diversification benefits. By investing in a variety of asset classes, an investor can potentially reduce their overall risk exposure. The old adage of “don’t put all your eggs in one basket” rings true here.  

Secondly, alternative investments can offer higher returns than traditional investments. For example, investing in private equity can offer potentially higher returns than investing in publicly traded stocks. If you listen to this week's podcast (listen here), you will hear that cash-on-cash return can be upwards of 20%! 

Finally, alternative investments can provide tax benefits that are not available with traditional investments. For example, investing in conservation efforts and wildlife-based industries can provide significant tax benefits. Be sure to reach out to Chris or Nate if you have questions about these tax benefits.  

Tax Benefits of Alternative Investments 

One specific example of alternative investments that can offer tax benefits is investing in wildlife. By investing in conservation efforts, eco-tourism, and wildlife-based industries, investors can make a positive impact on the environment while potentially generating attractive returns. Wildlife investments can offer several tax benefits, including the ability to deduct up to 50% of your adjusted gross income (AGI) for charitable contributions related to conservation. 

Investing in land conservation can also provide significant tax benefits. Under the Conservation Easement Tax Deduction program, investors can claim a charitable deduction for the value of the conservation easement placed on their property. This deduction can be up to 50% of their AGI for the year of the gift, with any excess carried forward for up to 15 years. 

How to Get Started with Alternative Investments 

Investing in alternative investments requires a different approach than traditional investing. It's essential to conduct thorough research and understand the risks involved. Working with Chris or Nate, who are both financial professionals who specialize in alternative investments, can help mitigate these risks and find the best opportunities for your portfolio.  

In addition, investors must be prepared to commit capital for a longer time frame than traditional investments. Many alternative investments require longer holding periods before they can be liquidated, which can impact liquidity.  

Conclusion 

Alternative investments can offer a variety of benefits to investors, including diversification, higher returns, and tax advantages. However, investors must be prepared to do their research, understand the risks involved, and work with an investment professional to find the best opportunities for their portfolio. By taking these steps, investors can potentially reap the benefits of alternative investments and achieve their financial goals. 
 
As we further develop the content within Teaching Tax Flow, members will have access to the course focused on alternative investments, so make sure to continually check your dashboard and email from our team. Teaching Tax Flow is your one-stop shop for all things taxes, investments, and financial knowledge.