how to invest in alternative investments
getting started with investing in alternative investments is very different based on the asset you re working with some may require substantial capital and research others may simply require a few clicks of a mouse button very broadly speaking here s how to get started with several types of alternatives as most alternative investments incur a transaction or processing fee be mindful of maintenance or one time fees when pursuing alternatives tax implications of alternative investmentsbecause they represent an entirely different asset class compared to stocks and bonds many alternative investment industries have different tax rules in addition consider how different alternatives may have different income streams i e capital gain on the sale of a rental property in addition to rent revenue some alternative investments such as collectibles and art may not offer the same tax deductions as traditional investments like stocks and bonds in addition collectibles such as art or coins are explicitly defined by the irs as a collectible and net capital gains are subject to a maximum 28 tax rate 7the alternative investment industry is expected to grow to 24 5 trillion in assets under management by 2028 8cryptocurrency and other digital asset tax rules continue to evolve digital assets such as virtual currency cryptocurrency stablecoins and non fungible tokens may incur taxable transactions when selling the asset for fiat exchanging the asset for goods or services or exchanging the asset for another digital asset in addition whereas fluctuations in the value of the u s dollar would not incur a taxable event fluctuations in the value of digital assets often result in capital gains or losses 97some alternative investments such as real estate and certain types of energy investments may offer tax deferred or tax free investing options this may include 1031 exchanges and opportunity zone investments where investors can use proceeds from the sale of an alternative asset to invest in a similar or specific asset with those proceeds to avoid taxes 1011as you embark on your alternative investment journey consider talking with a financial advisor in addition to a tax advisor to best understand how to protect your asset and ensure maximum efficiency in protecting returns read about investopedia s 10 rules of investing by picking up a copy of our special issue print edition 