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How Much of Your Portfolio Should you Diversify Into Alternative Investments?

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How Much of Your Portfolio Should you Diversify Into Alternative Investments?

Although traditional investments like stocks and bonds have proven successful over the long haul for most investors, they still hold considerable risk for the investor. The stock market can be volatile. If at any one point you have all or too much of your portfolio invested in one stock or sector and it tanks, you could be broke overnight.

Most investment advisors recommend that their clients diversify their stock holdings to include many different stocks in several different sectors. That way, even if a few stocks aren’t doing well, other stocks in the portfolio may perform better. But what happens when the entire stock market crashes or lodges itself in a sustained bear market? This is where the importance of alternative investing comes into play. 

What is an Alternative Investment?

Investments are broken down into two separate categories. The first category is known as traditional investments. Historically, stocks, bonds and cash are considered to be traditional investments. An alternative investment is considered anything besides that. Examples of alternative investments would include:

  • Real estate 
  • Precious metals
  • Cryptocurrency
  • Collectibles
  • Venture capital
  • Private equity
  • Hedge funds
  • Commodities 
  • Wine
  • Non-fungible tokens (NFTs) 

Why Should you Have Alternative Investments?

Alternative investments are also a great way to build wealth and passive income. This is especially true when it comes to real estate, which is perhaps the most traditional alternative investment. Many investors have created generational wealth for themselves through real estate ownership.

Many investors have gotten wealthy through other alternative investments. Venture capital and private equity can be incredibly lucrative. The same holds true for well-placed bets on commodities futures.

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Most recently, cryptocurrency has moved to the forefront of people’s thoughts when it comes to alternative investments. The rise and fall of cryptocurrencies like Bitcoin and Dogecoin has captivated the news, and many crypto investors have made a lot of money.

Aside from the upside, the single biggest reason you should consider alternative investments is that many of them do not perform in lock step with the stock market. For example, the price of real estate or gold or oil may fluctuate, but the value of these assets will not necessarily crater along with stocks in a bear market. While you buy different stocks to have a diverse portfolio, you can make your portfolio even more diverse when you include alternative investments. 

How Much of Your Portfolio Should you Diversify Into Alternative Investments?

This is a question that doesn’t have a single, set answer. If you’re talking about alternative investments to diversify your traditional investment portfolio, most investment advisors recommend that no more than 15% to 30% of your portfolio be devoted to alternative investments. This practice will leave enough alternative assets in your portfolio to profit off of them while not over-exposing you to a downturn in your chosen alternative investments. 

Some people have built entire portfolios of alternative assets. If you have professional experience or specific knowledge of an alternative investing field, you may take an inverse approach and concentrate 70% to 85% of your portfolio on your preferred alternative investments. Then you would diversify the other 15% to 30% in traditional investments. 

Which Alternative Investment is Right for You?

Picking which alternative investment is right for you is a personal choice. The alternative investments you feel most comfortable with will vary based on your risk tolerance, investment goals and the amount of capital you have to invest. The good news is that you can access a wide diversity of alternative offerings and new ways to participate in them.

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Where can I Find Alternative Investments?

If you’re thinking about real estate, you can start by looking for opportunities in your own area. However, if you live in an overheated real estate market with high prices, it may be too expensive to make a purchase. In this case, online real estate crowdfunding platforms like RealtyMogul, CrowdStreet and Arrived Homes, where you can buy equity in real estate investments at affordable prices, may work. 

If the idea of venture capital or buying into startups excites you, you can use platforms like StartEngine, WeFunder and Seed Invest. You can browse these platforms and find thousands of new startups in a variety of fields to invest in. 

In the case of real estate and venture capital/startup funding, if you don’t feel comfortable picking investments yourself, you don’t have to. The world of alternative investing features numerous real estate investment trusts (REITs) and even venture capital funds you can buy into. In those types of offerings, you invest the capital and the fund manager grows your wealth. 

Benzinga’s Favorite Alternative Investment Platforms

Best For

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Beginner real estate investors

get started securely through Fundrise’s website

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Best For

Beginner real estate investors

1 Minute Review

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Fundrise makes real estate investing affordable to investors. The easy-to-use crowdfunding platform gives you a fixed rate of return on top real estate properties in the U.S. 

Here’s why investing your money through Fundrise can improve your portfolio and earn you a reliable source of income.  

Best For

  • Non-accredited investors
  • Long-term real estate investors
  • Investors looking for affordable opportunities to invest in real estate

Pros

  • Open to non-accredited investors
  • Buy-ins as low as $10
  • Simple, multi-tiered system of investing
  • Low fee structure
  • Many IRA eligible offerings

Cons

  • Long hold periods
  • Lower returns compared to other platforms
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1 Minute Review

Have you ever dreamed of owning a Basquiat painting or one of Warhol’s pop art masterpieces? You can with Masterworks — even if you don’t have $1 million in the bank. 

Masterworks is a new platform that allows investors to own shares of famous works of art. Artwork is held in a climate-controlled, secure environment while Masterworks searches for an independent collector or buyer to sell at a profit. When a piece is sold, you’ll receive a share of the profits proportional to your initial investment.

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Investors will enjoy Masterworks’ easy-to-follow system and choice of famous art investments.

Best For

  • You want to diversify your portfolio with alternative, specifically art, investments
  • Earn returns up to 8-30%
  • You’re interested in investing in art

Pros

  • A dedicated art membership rep that will help you invest and answer questions
  • Clean, attractive, easy to use platform design

Cons

  • Requires a phone interview before you can invest
  • Fee can be confusing for new investors
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Best For

Diverse range of alternative assets

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Get started securely through Yieldstreet’s website

Best For

Diverse range of alternative assets

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1 Minute Review

Yieldstreet is an online investment platform that specializes in alternative investment offerings designed to generate passive income and wealth for investors. The platform offers a 1-stop shop for a range of alternative investments ranging from real estate to structured notes and even art collections.

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Best For

  • Accredited investors looking to diversify
  • Alternative investments to stocks and bonds
  • Investors looking for passive income

Pros

  • Easy-to-use platform
  • Carefully selected offerings
  • Excellent mobile app
  • Full spectrum of alternative offerings
  • Options for non-accredited investors

Cons

  • Majority of investments only open to accredited investors

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Best For

Accredited Investors

get started securely through CityVest’s website

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Disclosure: Must be accredited investing a minimum of $25,000.

Best For

Accredited Investors

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1 Minute Review

CityVest is a web-based real estate investment platform that was established to give small-to-medium-sized investors access to real estate investment opportunities that typically require 6-figure minimum investments. CityVest does this by pooling multiple investor contributions into 1 bundle large enough to satisfy the minimum investment requirements of the best institutional private equity real estate investment funds.

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  • Individual investors seeking access to institutional investments
  • Experienced investors looking to diversify their portfolio
  • Investors seeking investments with strong due diligence and screening

Pros

  • Access to high-performance institutional funds
  • High returns
  • Intense vetting of investment opportunities
  • Third-party due diligence on all funds
  • No registration needed to review investment opportunities
  • Quarterly distributions

Cons

  • Only available to accredited investors
  • Not a lot of investor control of fund options

1 Minute Review

Hedonova is an investment fund that holds a diversified portfolio of alternative investments. Hedonova’s founders set out to create a fund that gives sophisticated investors the benefits of a diversified fund while also placing solid bets on alternative investments like non-fungible tokens (NFTs), wine, cryptocurrencies and real estate.

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Hedonova’s fund is also unique because it’s available to investors all over the world and has a reasonable buy-in of only $5,000. If alternative investments strike your fancy, but you don’t know where to begin or don’t want to dive in too deep, Hedonova could offer the perfect combination of diversification and investor flexibility.

With feeder funds in Switzerland, Luxembourg, Singapore and India, European and Asian investors can invest locally while paying local taxes. 

Best For

  • Investors looking to diversify
  • Investors seeking a flexible offering with potential upside

Pros

  • A simple way to make alternative investments without prior expertise
  • Low minimum investment $5,000
  • Open to investors both inside and outside the U.S.
  • No hold period allowing investors to get in or out as they please

Cons

  • Hedonova is a mutual fund, not an investment platform, meaning there is only one investment option
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It’s Never too Late to Join the Alternative Investment Party

If you’ve been sitting on the sidelines waiting for an opportunity to get into alternative investments, there has never been a better time to get into the game. The rise of online investing platforms has created a diverse marketplace of investment offerings in almost every alternative investment sector. The only thing left for you to do is figure out what you want to get into and how you’re going to do it.

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Remember, even though you’re making alternative investments, the fundamentals of investing still remain the same. You always face  risk of loss, which means you need to conduct due diligence and make sure you are as familiar with the downside as the upside of your chosen investment. If you do that, you’ll be well on your way to adding quality alternative investments to your traditional investment portfolio.

Arrived Homes allows retail investors to buy shares of individual rental properties for as little as $100. Arrived Homes acquires properties in some of the fastest-growing rental markets in the country, then sells shares to individual investors who simply collect passive income while waiting for the property to appreciate in value over 5 to 7 years. When the time is right, Arrived Homes sells the property so investors can cash in on the equity they’ve gained over time. Offerings are available to non-accredited investors. Sign up for an account on Arrived Homes to browse available properties and add real estate to your portfolio today.

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Albania To Start Taxing Crypto-Related Income From 2023

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Albania To Start Taxing Crypto-Related Income From 2023

Authorities in Albania are finalizing regulations that will allow the taxation of income and profits from cryptocurrency investments. The government intends to begin imposing the levy in 2023, after adopting the necessary legislation which has been proposed for public consultations.

Albania Set to Impose Crypto Tax as Early as Next Year

The Albanian state should begin collecting taxes on income from crypto assets as of 2023 in accordance with a new income tax bill, the local English-language portal Exit News reported on Friday. The government also hopes to pass a number of other laws and bylaws this year in order to comprehensively regulate the matter.

The special tax legislation is currently open for public consultations. It introduces the concept of taxing crypto holdings and income derived from virtual assets. The latter have been defined as “a digital representation of a value that can be deposited, traded or transferred in digital form, and that can be used for payment or investment purposes or as a medium of exchange, including but not limited to cryptocurrencies.”

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However, the definition does not cover central bank digital currencies (CBDCs), the report notes. That’s despite a growing number of monetary authorities around the world developing a digital version of their national fiats. The list includes major powers such as the United States, the European Union, China, and the Russian Federation.

The Albanian law also defines cryptocurrency mining as an activity using computing power to confirm transactions and gain virtual assets in exchange. The extraction of cryptocurrencies has been a grey area although law enforcement has been going after illegal mining facilities in the country and pressed charges against some of their operators.

Under the new legislation, any income from crypto transactions or mining will be classified as corporate income when it’s received as a result of business activity. And when the beneficiaries are private individuals, they will have to pay capital gains tax of 15%.

Financial Watchdog Tasked to Expand Crypto Regulatory Framework

Earlier this month, the Albanian parliament ordered the Financial Supervisory Authority (AFSA) to prepare and adopt new regulations regarding cryptocurrencies by the end of 2022. Albanian law allows crypto trading platforms to legally work in the country but no licensed entities are currently operating in Albania, Exit News remarked.

Two years ago, Albania also adopted a law titled “Financial markets based on distributed ledger technology.” While many have welcomed the legislation, critics have questioned whether the small nation in South East Europe, still an EU hopeful, is capable of properly regulating its crypto sector to prevent it from being used for money laundering, something it’s struggling to achieve in the fiat space.

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The legislature referenced a recent report by the Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (Moneyval), which recommended additional steps regarding the risks associated with cryptocurrency. In November 2021, the AFSA approved its first two regulations implementing the crypto markets law, which introduced capital and licensing requirements for entities working with digital assets.

Do you expect Albania to adopt comprehensive regulations for its crypto space by the end of the year? Tell us in the comments section below.

Lubomir Tassev

Lubomir Tassev is a journalist from tech-savvy Eastern Europe who likes Hitchens’s quote: “Being a writer is what I am, rather than what I do.” Besides crypto, blockchain and fintech, international politics and economics are two other sources of inspiration.

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Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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NHL enters the NFT space partnering with Marketplace Sweet

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NHL enters the NFT space partnering with Marketplace Sweet Abdulrasaq Ariwoola · 42 seconds ago · 1 min read

The NHL partnership with Sweet will offer a variety of digital collectible experiences to its fans, tradable in the marketplace

1 min read

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Updated: June 25, 2022 at 3:59 am

Cover art/illustration via CryptoSlate

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The National Hockey League on Thursday announced its partnership with NFT Marketplace Sweet. This partnership will be the league’s first dive into digital collectibles.

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The partnership, of which the NHL’s players and Alumni’s association are part, will go live in October to mark the start of the 2022-2033 NHL season.

The NHL Marketplace

The NFT marketplace is expected to offer a range of experiences to NHL fans. Including digital collectibles that showcase historical moments, past and present season game highlights, and NHL stars top plays.

The marketplace will also feature gamified collection experiences, specialty packs, and 3D interactive trophy rooms where users can display their collections. Among these offerings there are also dynamic NFTs designed to change based on current team data.

Additionally, fans would be able to buy, sell, collect and trade the collectibles on the marketplace.

However, the announcement did not state which blockchain would host the marketplace.

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NFTs in the sporting space

The NHL  joins a long list of sporting institutions that have embraced digital collectibles.

In 2020, the NBA launched Top Shot NFTs, its digital collectibles marketplace, in partnership with DapperLabs. Likewise, the NFL launched its play and own NFT game while the MLB is to launch its NFT game soon.

However, the extreme sell-off in the crypto market has seen crypto companies pull out of sports deals. This is so as crypto companies strive to stay afloat as the severe sell-off continues in the market.

FTX recently pulled out of a partnership deal with Los Angeles Angels. Similarly, sources suggest a patch deal between NBA Washington Wizards and a crypto company has crashed.

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What Lido staking dominance may mean for Ethereum’s future

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What Lido staking dominance may mean for Ethereum’s future Abdulrasaq Ariwoola · 2 hours ago · 2 min read

The Ethereum community has raised fears of lido staking dominance leading to centralization. What does that mean for ETH 2.0?

2 min read

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Updated: June 25, 2022 at 3:33 am

Cover art/illustration via CryptoSlate

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Lido DAO token holders have commenced voting to determine whether the DeFi platform should reduce its staking pool. The vote is a follow-up to a governance proposal released on June 24.

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The voting process results from a month-long deliberation over Lido’s staking dominance and whether it should limit itself to curb potential centralization risks.

Lido currently holds 31% of all staked Ether on the Ethereum proof-of-stake blockchain, the Beacon chain. The staking dominance has raised fears within the Ethereum community, and critics fear it will threaten Ethereum’s decentralization.

The vote is expected to end on July 1, and the result will determine whether Lido will self-limit or not. Should the majority of voters vote in favor, another vote will take place on how the self-limiting process should work.

Concerns over stETH dominance

In the governance proposal, Lido stated that its staking dominance would give it more voting power once the Beacon chain goes live. As a platform that started to counter centralized exchanges, it argued that such centralized voting power poses an existential threat to the blockchain.

The Ethereum community has raised similar fears about the centralization of voting powers. The DeFi platform currently has around one-third of all staked Ether, which could give voting leverage once the transition to the Beacon chain is complete.

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Vitalik Buterin, the Ethereum co-founder, has argued that no single protocol should have a majority in staking ETH. He opined that such dominance, combined with Lido’s governance structure, is potentially a dangerous point of centralization.

Further, it stated the proposition is premised on the belief that other liquid staking protocols would also limit their exposure. This would effectively allow smaller protocols to meet the supply shortfall.

What Lido staking dominance means for ETH2.0

Ethereum’s transition to a PoS blockchain means it will rely on validators to validate transactions on the blockchain. Unlike a PoW blockchain that requires miners to expend excess energy to solve complex mathematical problems.

However, to operate a validator node, a user must deposit 32 ETH, which is a long shot for many users. Lido, on the other hand, as a staking service provider, allows users to bypass this requirement and earn staking rewards.

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According to data from Etherscan, roughly 12.6 million ETH is staked in the ETH2.0, which amounts to 10.6% of the circulating supply of ETH. Of the 12.6 million ETH staked, approximately 4.2 million have been staked through Lido by 73,369 stakers, making Lido the most used staking pool on Ethereum.

This means, should Ethereum transition to its PoS blockchain with Lido still having the lion’s share of the staking dominance, it would give the DeFi platform excessive influence over transaction verification which many warn could pose a risk. Some concerns include validator slashing, governance attacks, and smart contract exploits.

On the other hand, Lido’s staking dominance could help prevent a takeover by a centralized exchange and ensure the blockchain remains decentralized.

stETH remains depegged

The staked Ether, which is supposed to be pegged to ETH, remains depegged after a wave of massive sell-offs. Speculations have profused about the security of the token and whether its depegging could spell more chaos for the crypto ecosystem.

On June 16, Alameda Capital, one of the largest holders of stETH, dumped its stETH holdings, a massive $57 million. This is coupled with the continued financial troubles of Celsius and Three Arrows Capital, both large holders of stETH.

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As of the time of press, stETH has not gained parity with ETH and is trading at $1,173.

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