Alternative investments, no longer an option but a necessity?

In today’s rapidly changing global financial markets, the landscape of investing has definitely shifted. Investors who feel that stocks and bonds alone are no longer sufficient are increasing rapidly. Investment products that were once accessible only to a select few—such as cryptocurrencies, commodities, luxury goods, and crowdfunding—are now becoming everyday options. Here, we explore exactly what alternative investments are, what opportunities and traps they hide, and how successful investors approach them.

Why the Boom in Alternative Investments?

Simply put, alternative investments refer to assets outside the traditional categories of stocks and bonds.

Why have investors suddenly started paying attention to alternative investments? The reasons are clear. First, prolonged low interest rates have pushed the yields of safe assets like fixed deposits and bonds to their limits. Second, rising inflation concerns have highlighted the need for diversification. Third, technological advancements have lowered entry barriers, making these investments accessible to anyone. Against this backdrop, alternative investments are gaining attention as strategies to seek higher returns while diversifying portfolio risk.

Notable Alternative Investment Products to Watch

Cryptocurrencies: Volatile Future Assets

Led by Bitcoin and Ethereum, cryptocurrencies are no longer the domain of a small niche. High trading volumes mean high liquidity and numerous short-term profit opportunities. Bitcoin, in particular, is recognized as a “digital gold” and is used as a long-term store of value.

However, frequent irrational price fluctuations cannot be overlooked. Some projects are close to scams, and you could lose your investment overnight. Therefore, thorough research and cautious entry are essential.

Commodities: Hedge Against Inflation

Commodities like gold, crude oil, and agricultural products tend to rise in tandem with inflation. This is why commodity investments become popular during periods of high inflation. They can be easily traded via futures or ETFs and have low correlation with the stock market, making them advantageous for portfolio stabilization.

The downside is that rapid declines often occur due to supply and demand fluctuations, and they react sensitively to global issues. Recent geopolitical tensions have especially increased volatility.

Unlisted Company Stocks: High Returns, High Risks

There is an appeal in acquiring shares of promising startups at low prices early on. If successful, returns can multiply many times over. However, liquidity is extremely low compared to listed stocks, and you must wait for the company to go public to cash out. If the IPO fails, your entire investment could disappear.

Art and Collectibles: Expertise Required

Luxury watches, antiques, artworks, rare coins, vintage wines—these assets can generate returns ranging from hundreds of thousands to hundreds of millions of won. However, identifying and valuing them requires expert-level judgment. Inexperienced investors who jump in blindly may find their assets devalue immediately after purchase.

Fractional Investment: Greater Accessibility but Caution Needed

This method allows investing in assets like real estate, art, or music copyrights by dividing them into smaller units. While it lowers entry barriers, high fees and ownership issues can arise.

Crowdfunding: Investing in Interests

Multiple people pool funds to participate in film production, new product development, or gaming projects. Besides potential returns, investors can also get early access to products or services. However, risks are high, and it may take a long time before profits are realized.

Pros and Cons of Alternative Investments

Clear Advantages

Portfolio Stabilization

Alternative assets have low correlation with stocks and bonds. For example, gold or commodities may rise even when the stock market falls, helping to manage overall investment returns more stably.

High Return Potential

Achieving high yields is difficult with traditional deposits or stocks. Proper investment in unlisted stocks or emerging cryptocurrencies can yield returns of dozens of times.

Opportunity to Lead Trends

Investors who quickly identify and invest in new trends like cryptocurrencies, NFTs, or metaverse-related assets have earned significant profits. The ability to bet on future technological trends is highly attractive.

Unavoidable Risks

Extreme Volatility

Cryptocurrencies can fluctuate 20-30% in a single day. Commodities can surge or plummet based on news. Emotional decision-making in such environments can lead to substantial losses.

Low Liquidity

If there are no buyers, you cannot sell. Especially with unlisted stocks or some alternative assets, cashing out can take years.

Information Asymmetry

While listed companies disclose information transparently, unlisted firms or new projects often lack transparency. Approaching without expertise can lead to pitfalls.

High Fees and Barriers to Entry

Fractional investments and crowdfunding can involve hefty fees, and some alternative investments remain difficult to access altogether.

Strategies for Success in Alternative Investments

Step 1: Learn Properly Before Starting

Spend at least three months studying the asset before investing. For cryptocurrencies, understand blockchain basics, how Bitcoin is issued, and mining concepts. For luxury goods, learn about market prices, how to identify counterfeits, and transaction procedures.

Step 2: Assess Your Financial Status and Risk Tolerance

Not everyone is suited for alternative investments. Confirm you have sufficient emergency funds—(3~6 months of living expenses)—and no family support obligations. Also, evaluate your psychological capacity to withstand losses.

Step 3: Start Small

Limit initial investments to less than 5% of your portfolio. Learn how the assets move and gradually increase your exposure in a safe manner.

Step 4: Choose Trustworthy Platforms

Compare platforms carefully based on reliability, fees, withdrawal convenience, and customer support. Diversifying assets across 2-3 platforms rather than relying on just one is also advisable.

Step 5: Implement True Diversification

Do not build your entire portfolio solely on alternative investments. A balanced allocation—around 40% stocks, 30% bonds, 20% commodities/cryptocurrencies, and 10% cash—is wise. Holding assets with low correlation helps spread risk.

Psychological Strategies: Mindset Is Half the Battle

( Maintain a Long-Term Perspective

Especially with unlisted companies, look ahead 5-10 years. Avoid daily price checks and impatience.

) Stay Calm

Don’t sell everything just because cryptocurrencies drop 30% in a day. Act only when your pre-set stop-loss or take-profit prices are reached. Setting these orders in advance is also a good idea.

Don’t Be Swayed by Others’ Success

Avoid blindly following others’ claims like “I made a fortune from NFT investments these days.” Objective analysis and rational judgment are fundamental.

Continuous Learning and Strategy Adjustment

Keep studying even after investing. Market conditions change, and strategies should be adjusted accordingly. Stubbornness without reflection leads to losses.

Focus on Minimizing Losses

Aim for big profits but prioritize loss management first. Always ask yourself, “Can I withstand a 50% drop in this asset?”

Conclusion: The Choice of a Wise Investor

Alternative investments are no longer a matter of choice. In an era where low interest rates persist and inflation becomes a reality, understanding and gaining experience in alternative investments are essential for proper asset management.

However, high returns always come with high risks. Wise investors do not jump into new assets blindly. They study thoroughly, objectively assess their financial situation and risk appetite, and enter gradually under a systematic strategy.

Only when alternative investments are part of a balanced strategy that preserves and grows accumulated assets can their true value be realized.