The rise of alternative investments vs traditional investments

One such alternative investment that has gained significant traction in recent years is peer-to-peer (P2P) lending. This blog explores the benefits of alternative investments, with a focus on P2P lending, and examines why these options might be superior to traditional investments for certain investors. 

What Are Alternative Investments?

Alternative investments encompass a broad range of assets that fall outside the realm of conventional investments. These include private equity, hedge funds, fractional real estate, invoice discounting, collectibles, and, increasingly, Peer to Peer lending. These investments often provide opportunities that are not available in traditional markets, offering a chance to diversify and potentially enhance returns.

How Alternative Investments Outshine Traditional Options:

1. Non-Market linked: One of the most significant advantages of alternative investments, is that they are generally non-market linked. This means that their performance does not directly correlate with the stock markets movements. This mitigates stock market volatility, giving protection against market downturns and providing stable and highly predictable returns.

2. Higher Potential Returns: Alternative investments, including P2P lending, often offer the potential for higher returns compared to traditional investments. This is particularly appealing in a low-interest-rate environment where returns on savings accounts, fixed deposits and bonds may be minimal.

3. Diversification: Alternative investments provide an excellent way to diversify a portfolio. Traditional investments are often correlated, meaning they tend to move in the same direction under certain economic conditions. Alternative assets, however, can offer non-correlated returns, reducing overall portfolio risk.

4. Inflation Hedge: Certain alternative investments, such as real estate and commodities, invoice discounting can serve as a hedge against inflation. As the cost of goods and services rises, the value of these tangible assets often increases, providing protection against inflationary pressures.

5. Innovative Financial Technologies: The rise of fintech has revolutionised the way alternative investments are managed and accessed. P2P lending platforms, robo-advisors, and blockchain technology have made it easier for investors to explore and manage alternative assets efficiently.

The Appeal of Peer-to-Peer Lending:

Peer-to-peer lending platforms connect borrowers directly with lenders, bypassing traditional financial institutions. This model offers several advantages for both parties:

1. Higher Returns: P2P lending platforms typically offer higher interest rates than traditional savings accounts, fixed deposits and bonds. Lenders can earn attractive returns by lending money to individuals or small businesses.

2. Diversification: P2P lending allows Lenders to diversify their portfolios by spreading their principal across various loans. This can help mitigate risk and improve overall portfolio performance.

3. Accessibility: P2P platforms are often more accessible than traditional investment vehicles. They provide opportunities for smaller investors to participate in the lending market with lower minimum investment requirements.

4. Transparency: Many P2P platforms offer detailed information about borrowers, enabling lenders to make informed decisions about the finances.

Conclusion: While traditional investments remain a cornerstone of many portfolios, the rise of alternative investments, particularly peer-to-peer lending, offers a compelling case for diversification and enhanced returns. Investors seeking to maximise their portfolio performance should consider exploring the myriad opportunities presented by alternative investments. By incorporating assets like P2P loans, private equity, and real estate into their investment strategies, they can achieve a more balanced and potentially more profitable investment approach.

As with any investment, it is essential to conduct thorough research and consider one’s risk tolerance and financial goals before diving into alternative assets. With the right approach, alternative investments can provide a valuable complement to traditional investment strategies, helping investors navigate the ever-changing financial landscape.

In the next article, we will cover the opportunities and risks associated with each of the alternative investment options. So stay tuned and watch this space for more.

​(This article is part of IndiaDotCom Pvt Lt’s sponsored feature, a paid publication programme. IDPL claims no editorial involvement and assumes no responsibility or liability for any errors or omissions in the content of the article.)