(Image credit: Getty Images)
2026 is turning out to be a volatile year for the equities market. While all three main benchmarks finished January in positive territory, broader risk-off sentiment toward artificial intelligence (AI) stocks and concerns about inflation and the economy have weighed on sentiment.
More worrisome of late is the escalating conflict in the Middle East, which has oil prices trading at their highest level in four years. While the bull market is still intact, the recent sell-off has the stock market teetering near correction territory.
And the bond market isn’t looking much better. Indeed, rising oil prices have fueled inflation worries and pushed back rate-cut expectations to 2027. As such, 2-year and 10-year Treasury yields recently hit their highest levels since last summer.
Article continues below
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.
Profit and prosper with the best of expert advice – straight to your e-mail.
So, where should investors worried about returns in the stock and bond markets turn? One answer is alternative investments.
Though sometimes unconventional, alternative investments can provide uncorrelated returns, allowing investors to look beyond the typical stock-and-bond portfolio mix. If used correctly, alternative assets can amplify returns and provide stability.
“In times of heightened inflation risk and spikes in cross correlations, alternative investments can be attractive additions for portfolios,” say Manulife John Hancock Investments Co-Chief Investment Strategists Emily Roland and Matt Miskin.
But rather than picking one alternative investment, the strategists suggest a “multi-alternative strategy,” that “can diversify the exposure helping investors mitigate concentration risk to one strategy or alternative asset class. This enables investors to hold alternatives throughout a markets cycle with less volatility.”
With that in mind, we took a look at five leading alternative investments and the role they can each play in a diversified portfolio.
1. Commodities
(Image credit: Getty Images)
Commodities are raw materials and the ultimate hard asset with real-world value. While these building blocks of the global economy aren’t particularly complex and lack the innovative appeal of next-gen technology, they boast durable value. That makes them an appealing alternative investment in times of uncertainty.
Investors seeking commodity exposure can buy precious metals such as gold or silver in the form of coins or bars, but also via exchange-traded products, including the SPDR Gold Shares (GLD) or the iShares Silver Trust (SLV).
Commodity ETFs also provide access to alternative investments that are less practical for most folks to buy and store, including grains and fossil fuels.
Broad-based funds, such as the Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC), hold a bit of everything and give investors exposure to this alternative asset class in one position.
2. Real estate
(Image credit: Getty Images)
There’s an old saying that goes, “Buy land, they aren’t making any more of it.” This sums up the idea of real estate as an alternative investment, given there’s a firm floor underneath it.
Investment properties can also generate consistent income from rent, regardless of whether they’re residential, industrial or commercial.
The big hurdle for most folks, however, is coming up with the cash to buy another piece of property. Even a second home is a stretch for many families, and the idea of buying an office building outright is even less realistic. Thankfully, exchange-traded funds such as the Vanguard Real Estate ETF (VNQ) offer an indirect way to gain exposure to real estate.
If you’re not convinced that publicly traded real estate companies are much of an alternative investment, there are also platforms such as Fundrise, RealtyMogul and CrowdStreet that manage billions in investor assets and offer exposure to building projects that may otherwise be out of reach.
3. Cryptocurrency
(Image credit: Getty Images)
With a market value of more than $1 trillion, bitcoin is the most popular crypto asset by a wide margin. However, there are several other cryptocurrencies with significant scale, including ethereum, BNB (formerly Binance Coin) and solana.
The fact that crypto is uncorrelated is both a blessing and a curse. Indeed, these digital assets offer the potential for explosive speculative growth, but also carry significant risk, including the possibility of total loss.
For those interested in gaining crypto exposure, bitcoin is the simplest place to start. Exchange-traded products such as the iShares Bitcoin Trust (IBIT) hold bitcoin and function similarly to the other alternative asset funds on this list.
Investors can also hold cryptocurrencies directly in a digital wallet, in an experience that falls outside the traditional investing system. Keep in mind, however, that many crypto advocates flock to this marketplace precisely because of this detachment from Wall Street. That means fewer traditional protections and less transparency for some crypto assets, so buyer beware.
4. Private equity
(Image credit: Getty Images)
There is perhaps no asset more glamorous than private equity, where a select group of investors acquires, restructures or shares in the profits of mature companies that aren’t traded on Wall Street.
Having a smaller group of owners with a more substantive stake can be appealing both for the profit potential and the ability to manage the investment privately with a long-term goal – and without scrutiny from millions of shareholders.
Unfortunately, “real” private equity funds, including those operated by trillion-dollar private equity icon Blackstone (BX), often require minimum investments in the seven or even eight figures. That’s not accessible for most of us.
However, there are increasingly more options for smaller investors looking to get a piece of this lucrative market, including platforms such as Nasdaq Private Market that allow access to private shares of firms otherwise unavailable on Wall Street.
Private equity investments are more opaque thanks to their exclusivity, which makes them harder to value and sell. This asset class certainly has its appeal, but the fundamental advantage of publicly traded stocks is a transparent and liquid market. Be aware of the risks – and the potential rewards – in private equity given its exclusive nature.
Collectible cards and toys
(Image credit: Getty Images)
Think sports cards or action figures are just kids’ stuff? Consider that in February, YouTuber Logan Paul sold a Pokémon card for over $16 million at auction.
If you didn’t hold on to collectible cards or rare toys from childhood, don’t kick yourself. There’s a robust secondary market for many collectibles, with forums such as PriceCharting and TCGPlayer that help track pricing and returns over time.
There’s also a growing ecosystem that grades the quality of these items to objectively assess condition and value, including PSA and CGC.
And in addition to diversifying your portfolio beyond the stock market, there’s something to be said for investing in Barbie dolls or Nintendo games because of nostalgia. Scouring thrift stores or Facebook Marketplace for deals can be fun and profitable.
While not as liquid as stocks and bonds, even mid-sized cities tend to have businesses that cater to toy collectors looking to buy and sell, along with numerous online options.
Toys can often be fads, of course, and the epic Beanie Babies bubble some 25 years ago proves that. Still, if you’re looking to have fun with your alternative investments, take a look at toys, collectible cards and similar products.
