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In general we invest in financial products, house, land, gold etc. However there are many other alternative investment options which one can think of. Alternative investment options are equally lucrative and rewarding though associated risk are different. Let us look at these alternative investment options.

Real Estate Investment

Direct investment in real estate is when one purchase/invest in physical house property. However, there could be investment in real estate sector by some other methods like,

a) Real Estate Mutual Funds: a real estate mutual fund typically invests in securities of companies which own property (commercial, residential, agricultural or land). Some of the popular real estate funds in India are-

  • Aditya Birla Real Estate Fund
  • HDFC Property Fund
  • ICICI Pru India Opportunities Real Estate Fund
  • Everstone Horizon Realty Fund
  • Birla Sun Life Global Real Estate Fund
  • Secura India Real Estate Fund

These funds are suited to individuals looking at long-term gains, in the range of 3 to 5 years.

b) REIT (Real Estate Investment Trust): A REIT typically consists of a number of members/investors who pool resources to purchase and develop a property. The profit earned is distributed to members/investors as dividend. In fact, a real estate mutual fund can also invest in REIT to offer benefits to investors. There are currently 3 (three) REIT in India. Once the REIT market matures slightly more in India, this will be one of the best ways to invest in this sector.

c) Shares of Real Estate Companies: This is also a decent alternative of investing in real estate sector. Buying shares of companies engaged in real estate business at discounted price can help accumulate over a long period to create corpus for buying house property.

Invest in bullion

When we talk of investment in bullion it primarily means investment in Gold & Silver. A bullion market is a market through which buyers and sellers trade gold and silver as well as associated derivatives. Beyond using the bullion market to invest in gold and silver, there are also exchange-traded funds (ETFs), Sovereign gold bonds, which offers more flexibility beyond the physical commodities.

Investment in commodities

Many physical raw commodities like cotton, oil, gas, corn, wheat, oranges and uranium are needed by large manufacturing companies in running their businesses. Therefore investing in them during harvesting season is a lucrative investing option. Here are four basic ways to invest in commodities.

  • Invest directly in the commodity by physically buying a commodity.
  • Invest in futures contracts.
  • Invest in commodity stocks.
  • Invest in commodity ETFs and mutual funds.

There are 6 (Six) exchanges through which investment in commodities can be done.

  • Multi Commodity Exchange (MCX)
  • National Commodity and Derivatives Exchange (NCDEX)
  • Indian Commodity Exchange (ICEX)
  • ACE Derivatives Exchange (ACE)
  • National Multi Commodity Exchange (NMCE)
  • Universal Commodity Exchange(UCX)

Currently, National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) are also offering commodity trading.

Currency Trading

Everybody knows about stocks and equity trading. But, there is a high-potential market by way of currency trading.  The currency market helps investors take positions on different currencies. Investors around the world use currency futures contract for trades. Currency futures allow investors to buy or sell a currency at a future date, at a previously fixed price.

Currency futures are traded on platforms offered by exchanges like the NSEBSE and MCX-SX. You need to open a forex trading account with a broker to do trading in the live currency market. There are two main types of currency market. The first one is the spot market or cash market. The second one is the futures market where currency futures are traded. In the Indian currency market, futures are the preferred way of doing trades.

The currency trade is always between a pair of currencies. Unlike in equity or stock market where you buy a share of one company, currency trading in India will involve taking a position on a currency pair. For instance, the EUR/USD rate represents the number of US dollar one Euro can buy. If you think the Euro will increase in value against the US dollar, you buy Euros with US dollars. When the exchange rate rises, you sell the Euros back, and you book profit.

Investment in arts & painting

Art is a good investment. If you own a painting of a well-known artist backed by a good gallery, chances are it will see a slight appreciation over five-seven years. But real appreciation will happen over 10-12 years. Things to remember while investing in art,

  • Art is not for trading, invest for the long term.
  • Not all pieces done by a renowned artist are master pieces. An expert can only recognize masterpiece.
  • Buy art that you like.
  • Research the artist you want to buy and his work.
  • Art does not give you any additional income like interest or dividend.

Generally, oil on canvas is perhaps the most expensive form of painting. The next is an acrylic on canvas, followed by an acrylic on paper. A water colour on paper painting would be cheaper, while charcoal on paper would cost the least.

Art should not form more than 5% of your total investments.

Investment in coins

The art of collecting coins and paper money can also give handsome returns comparable to traditional investments. It does not require large corpus to enter the numismatics market. As more collectors are getting interested and the supply is comparatively less, it can be a very good investment channel for investors who are looking for longterm gains. But those looking for high returns in the short-term, should avoid putting their money in coins. Moreover, if you have chosen to invest in ancient coins which are mostly in either of silver, gold or copper, you are sure to get a price for the precious metal at least in case you are in a hurry to liquidate.

You can buy your collection from auction houses or coin dealers. The best place to buy commemorative coins would be directly from Government owned mints. Mints at Mumbai and Kolkata sell commemorative coins. Whenever a new commemorative coin is issued, the mints offer bookings to the public.

Investment in coins can coexist or supplement your traditional portfolio of stocks, bonds, mutual funds, etc. However, it is important to remember that coins can give substantial returns only in the long-term.

Crypto currency

This is the latest trend in alternative investment basket.

cryptocurrency (or “crypto”) is a digital currency that can be used to buy goods and services in a limited way. It is maintained in an online ledger with strong cryptography to secure online transactions. Much of the interest in these unregulated currencies is to trade for profit, with speculators at times driving prices skyward.

To invest in crypto currencies you first need to create a wallet with one of the numerous exchanges available online. Then participate in Trading to buy. Otherwise, you can invest in Initial Coin Offering (ICO) carried out by different companies time to time. You can hold different types of crypto currencies like Bitcoin, Ethereum, Binance Coin, Tether etc. in your wallet. As the price appreciate for these coins one can sale the coins and book profit. Cryptocurrency is an incredibly speculative and volatile buy. Stock trading of established companies is generally less risky than investing in cryptocurrencies such as Bitcoin. To know more about cryto currencies you can read my blog post

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