Are new-generation investors choosing alternative investments? Are traditional assets alone not enough?

What Exactly Is Alternative Investment?

Alternative investment simply refers to investing in assets other than listed stocks and bonds. This includes a variety of assets such as gold, crude oil, cryptocurrencies, art, startup stocks, and more. It is characterized by low correlation with traditional investment products, which can be advantageous for portfolio diversification and risk spreading.

However, alternative investment products tend to be less regulated and less liquid. But with proper strategies, they can be fields capable of generating substantial returns.

Features and Risks to Watch Out for in Alternative Investments

For the new generation of investors considering alternative investments, it is essential to first understand the inherent risks of this asset class.

High Volatility and Uncertainty Are Fundamental

Cryptocurrencies, commodities, and startup stocks experience much greater price fluctuations than traditional assets. High-volume cryptocurrencies like Bitcoin and Ethereum are suitable for short-term trading but often show unpredictable movements.

Lack of Liquidity Can Be a Major Obstacle

Unlisted company stocks are extremely difficult to sell. Even if the company’s valuation is high, failure to go public renders the stocks meaningless. Collectibles and art also require considerable time to sell. If demand drops sharply due to changing trends, selling may become impossible.

Information Barriers Block Investors

While listed companies disclose information publicly, unlisted companies and crypto projects often lack transparency. This exposes uninformed investors to significant loss risks.

High Fees and Entry Barriers

Fragmented investments and crowdfunding have lowered entry barriers, but fees remain relatively high. Ultimately, using these services does not eliminate the original risks.

Practical Advantages of Alternative Investments

Despite these risks, why are new generation investors paying attention to alternative investments?

A Powerful Tool for Portfolio Diversification

Alternative assets have low correlation with stocks and bonds, making them effective for risk spreading. During market downturns, defensive assets like gold provide stable income.

Potential for Higher Returns Than Traditional Investments

Successful startup investments or crowdfunding can yield significant profits. Especially attractive is the ability to buy at low prices during early stages.

An Essential Strategy in the Inflation Era

During inflation, commodity prices tend to rise together. Alternative investments like P2P lending offer stable income even in low-interest environments.

Opportunities to Lead Trends

Investors who quickly grasp emerging assets like cryptocurrencies, NFTs, and fractional investments have experienced high returns. As the Financial Services Commission is pushing for the institutionalization of fractional investment platforms by 2025, more diverse opportunities are expected to emerge.

Analysis of Major Alternative Asset Types

Commodities: Masters of Inflation Hedge

Gold, crude oil, agricultural products, and metals tend to rise with inflation. They can be traded via futures and ETFs, making them suitable for portfolio diversification. However, they are sensitive to global events and exhibit high volatility.

Unlisted Company Stocks: Temptation of High Returns and Risks

Investing early at low cost in startups offers advantages, but liquidity is extremely low, and failure to go public can render all assets worthless.

Cryptocurrencies: Main Focus for New Investors

Bitcoin and Ethereum have high trading volumes, liquidity, and volatility. Bitcoin is popular as a ‘digital gold’ for long-term holding, but irrational price swings and scam projects pose risks.

Collectibles and Luxury Goods: Expert Judgment Required

Art, antiques, rare coins, vintage wines, and classic cars can generate profits from hundreds of thousands to billions of won. However, discerning quality is paramount, and reselling for profit may involve legal issues.

Fractional Investment: Greater Accessibility but Caution Needed

Investing small amounts in large assets like real estate, art, or music copyrights is possible. But high fees and potential legal disputes over ownership are concerns.

Crowdfunding: Dual Appeal of Rewards and Returns

Participate in movies, games, and new product development to receive tangible rewards. Projects with profit targets can offer high returns, but they often have long repayment periods and high risks.

Investment Traps Beginners Should Avoid

Start Small, Like a Savings Account

Investing large sums just because prices are soaring can lead to huge losses in a short time. It’s wise to start with small amounts to understand asset movements and gradually increase.

Never Be Swayed by Crowd Psychology

Investing solely because ‘everyone is investing in NFTs’ is risky. Without objective and rational analysis, even short-term gains can lead to long-term losses.

Investing Without Knowledge Is Gambling

You must acquire expert-level knowledge about cryptocurrencies, collectibles, and other assets. It’s also important to understand differences among platforms and services.

Emotional Control Determines Profits

In volatile assets, rushing to follow price surges or cutting losses prematurely can be costly. Use stop-loss and take-profit orders to eliminate emotional decision-making.

Building a Long-Term Alternative Investment Strategy

Objectively Assess Your Current Financial Situation

Not everyone is suited for alternative investments. If you prefer stability, investing in risky assets solely for high returns can cause severe stress.

Set Clear Investment Goals First

If short-term high yields are your goal, unlisted company investments are unsuitable. For stability, gold is better than cryptocurrencies.

Diversify Your Portfolio

Include not only alternative assets like cryptocurrencies and precious metals but also stocks, bonds, and cash. The more assets with low correlation, the easier risk management becomes.

Repeat Learning and Adjustment

Trends in alternative investments constantly change. Continuously learn about your assets and adjust your strategies as needed.

Conclusion: Starting Smart with Alternative Investments

Alternative investments offer strengths such as portfolio diversification, high returns, and inflation hedging. At the same time, they carry fundamental risks like high volatility, low liquidity, and information asymmetry.

For the new generation of investors, it’s crucial not only to see the appeal but also to recognize hidden risks. Sufficient information gathering, starting small, controlling emotions, and setting clear goals are the first steps toward successful alternative investing. Choosing reliable platforms is also essential. With patience, a long-term perspective, and a sound investment mindset, alternative investments can become a powerful means of asset growth.