For most of the last century, the main types of alternative investments belonged to a club you couldn't join. Pension funds bought timberland. Endowments bought private equity. Family offices bought art, music catalogs, and entire office towers. Everyone else bought stocks, bonds, and a savings account, and was told that was diversification.
That arrangement is breaking down. New platforms, new regulations, and new marketplaces have pulled asset classes once reserved for institutions within reach of individual investors, sometimes for as little as $10. The question is no longer whether you can access alternatives; it's which ones deserve your capital.
That question matters more than it used to. The investors who learned in 2022 that stocks and bonds can fall together (the textbook said they wouldn't) have been hunting for assets that march to a different drummer ever since. Some alternatives deliver exactly that. Others just deliver illiquidity dressed up as sophistication.
This guide walks through the different types of alternative investments, how each one actually makes money, where the risks hide, and how to get in. No category gets a free pass, including the one our marketplace sells.
What Makes an Investment "Alternative"?
Alternative investments are asset classes that aren't stocks, bonds, or cash. Everything outside the traditional three falls in the bucket. A rental duplex. A stake in a buyout fund. A bar of gold. The royalties to a hit song.
What unites them isn't what they are; it's how they behave. The CFA Institute notes that alternatives tend to share a few traits: lower correlation with public markets, less liquidity, longer holding periods, and a need for specialized knowledge to value them properly. In plain terms, they don't move when the S&P moves, you can't always sell them tomorrow, and you have to know what you're buying.
For decades, those traits kept individuals out. Today, most of the barriers have fallen. Here's the landscape.
The Main Types of Alternative Investments
What are the different types of alternative investments available today? Eight categories cover most of the territory.
Real Estate
Real estate is the gateway alternative, the one most investors try first. Returns come from two sources: rental income while you hold and price appreciation when you sell. Access runs the full spectrum, from direct ownership (with all the leaky roofs and midnight tenant calls that entails) to publicly traded REITs to crowdfunding platforms that pool small investments into large properties.
That range means real estate can be either a part-time job or a line item in a brokerage account, depending on the route you pick. The risks are familiar but real: leverage cuts both ways, property is expensive to exit quickly, and rising interest rates can crush valuations, as 2022 and 2023 reminded everyone who forgot.
Private Equity
Private equity means buying ownership in companies that don't trade on public exchanges. It comes in three main types: venture capital backs startups, growth equity funds expand companies, and buyout funds acquire mature businesses outright, often with borrowed money.
Returns can be substantial, but the price of admission is steep. Traditional funds typically require six- or seven-figure minimums, accredited investor status, and lock-up periods that can stretch a decade. Your money goes in, the door closes, and you wait.
Hedge Funds
Hedge funds pool capital and chase returns through strategies that ordinary funds can't access: short selling, leverage, derivatives, and global macro bets.
The classic fee structure, often called "2 and 20," charges 2% of assets annually plus 20% of profits, which means the manager wins even in years when you don't. Nearly all hedge funds require accredited investor status, and many of the best are closed to new money entirely. For most individual investors, this category remains more discussed than owned.
Commodities and Precious Metals
Commodities include oil, grain, copper, and the perennial favorite, gold. Returns come purely from price movement, and that's the catch: a bar of gold pays no rent, no dividend, no royalty. It just sits there, waiting for someone to pay more for it than you did.
Access is easy through ETFs and futures, or you can hold physical metal if you enjoy paying for storage and insurance. Commodities can hedge inflation, but their prices swing hard, and an asset with no income has no floor.
Private Credit
Private credit means lending money directly to companies, stepping into the role banks retreated from after 2008. The asset class has grown to roughly $1.8 trillion.
Investors earn interest, often at floating rates above what public bonds pay, in exchange for taking on credit risk and giving up liquidity. It suits income-focused investors who can leave money parked for years. But when borrowers stumble, there's no exchange to sell on and no easy exit.
Collectibles and Art
This includes art, wine, rare cars, watches, trading cards: assets you can hang on a wall or lock in a cellar. Returns depend entirely on appreciation, and appreciation depends on taste, which is a polite way of saying valuations are subjective.
Platforms like Masterworks have opened fractional access to blue-chip paintings, lowering an entry price that once started in the millions. The risks are stubborn: no income, thin markets, high transaction costs, and the permanent possibility that the next generation simply doesn't want what this one collected.
Cryptocurrency and Digital Assets
Crypto is the most accessible alternative ever created and one of the most volatile. Anyone with a phone can buy Bitcoin in minutes, no accreditation, no minimums, no lock-ups. The trade-off is price action that can erase half a position in a quarter and a regulatory landscape that continues to shift under investors' feet.
Some allocate a small slice as a speculative bet on a new monetary technology. Treating it as a stable store of value requires a stronger stomach than most portfolios should ask for.
Royalties and Intellectual Property
Royalties are paid to the owner every time a piece of intellectual property is used: a song streamed, a book sold, a patent licensed. The owner created (or bought) the asset once, and the checks keep arriving.
That structure produces something rare among alternatives: genuinely passive income paired with low correlation to public markets, because people don't stop streaming music when the Fed raises rates. Music royalties have benefited from a recorded music market that has grown for 11 consecutive years, including downturns.
Marketplaces like Royalty Exchange list these assets with verified income history, making intellectual property one of the few alternatives that combines accessibility, income, and independence from the stock ticker.
How Alternative Investments Compare on Key Factors
Eight asset classes, four questions. Here's how the types of alternative investments stack up where it counts.
Income vs. Appreciation Only
Real estate, private credit, and royalties pay you while you hold them. Commodities, collectibles, crypto, and most private equity pay nothing until you sell. Hedge funds vary by strategy.
An asset that produces income can survive a bad market, because the checks keep arriving while you wait. An asset that only appreciates needs the market to cooperate, and markets are under no obligation to do so on your schedule.
Liquidity
Crypto trades around the clock. REITs and commodity ETFs trade daily on public exchanges. Nearly everything else gets slow: weeks for collectibles and royalties, months for direct real estate, years for private equity and many hedge funds.
Illiquidity isn't automatically bad; it's part of why some alternatives pay a premium. But it means you should know your exit before you enter, not after.
Minimum investment. The range is enormous:
- Crypto and real estate crowdfunding: As little as $10
- Fractional art and music royalties: Hundreds to a few thousand dollars
- Hedge funds and private credit funds: Often $100,000 or more
- Traditional private equity: Frequently $250,000 and up
Correlation to Public Markets
This is where the marketing and the math part ways. Gold and royalties historically move with little regard for stocks. Real estate and private equity correlate more than their brochures suggest, since the same economy drives both, and the lower volatility they report often comes from valuing assets quarterly rather than by the second.
Crypto, despite its origin story, has often sold off right alongside tech stocks. For more on why this single factor can make or break a diversification strategy, see this guide to non-correlated assets.
Who Should Consider Alternative Investments?
Honest answer: not everyone. Here's how to tell.
Liquidity Needs
Money you might need within a year has no business in most alternatives. If a job loss or a roof repair would force a sale, stay liquid. Selling an illiquid asset under pressure is how good investments become bad stories.
Time Horizon
Alternatives reward patience. Private equity wants a decade. Royalties and real estate want at least several years for income to compound. Short horizons and illiquid assets make a bad marriage, and the divorce is expensive.
Risk Tolerance
Illiquidity is its own risk, separate from price risk. Some investors can hold an asset they can't sell without losing sleep. Others can't. Know which one you are before the test arrives, because the market will administer it eventually.
Portfolio Size
Alternatives work best as complements, not as cores.
- An investor still building an emergency fund and basic index exposure should finish that job first; no royalty stream or rental property fixes a portfolio without a foundation.
- An investor with that foundation in place and capital seeking diversification is the one alternatives were made for. Many advisors suggest keeping alternatives to a minority slice of a portfolio, and that's sensible guidance for most people.
If you check those boxes, allocating to alternatives can reduce portfolio swings and add return streams that stocks and bonds can't provide. If you don't, there's no shame in waiting until you do.
How Individual Investors Can Access Alternative Investments
A decade ago, this section would have been short and discouraging. Today, access has been rebuilt from the ground up, mostly by platforms that figured out how to slice large assets into small pieces and by regulators who let them.
The top types of alternative investments each have an open door now, though some doors open wider than others:
- Real estate: Public REITs through any brokerage, or crowdfunding platforms like Fundrise, which accepts non-accredited investors starting at $10.
- Private equity and venture capital: Still the hardest category. Most funds require accredited investor status, generally $200,000 in annual income or $1 million in net worth excluding your home, though some interval funds and venture vehicles now accept smaller checks.
- Hedge funds: Accredited investors only, almost without exception. Liquid-alternative mutual funds mimic some strategies for everyone else, with mixed results.
- Commodities: ETFs through any brokerage. No accreditation, no minimums beyond a share price.
- Private credit: A growing number of funds and platforms serve individuals, though many still require accreditation and most impose lock-ups.
- Art and collectibles: Fractional platforms like Masterworks have lowered entry costs to the thousands, making them accessible to non-accredited investors.
- Crypto: Any exchange, any amount, today.
- Music royalties: Marketplaces like Royalty Exchange run open auctions where individual investors bid directly on royalty streams, no accreditation required for most listings.
The pattern is clear. The wall between institutional and individual investors didn't come down everywhere, but it came down in enough places that a serious individual investor can now build a real alternatives allocation.
Why Music Royalties Stand Out as an Alternative Investment
Run every asset class above through the same two filters: does it pay income, and does it ignore the stock market? Most fail one test. Gold ignores stocks but pays nothing. Private credit pays well but lends to the same economy that drives equities. Few assets pass both.
Music royalties pass both. The income arrives because people stream, license, and perform songs, activity that has proven remarkably indifferent to market conditions. The global recorded music market grew 7.4% in 2020, in the middle of a pandemic that shut down half the world economy.
By 2025 it had reached $31.7 billion, an all-time high and the eleventh straight year of growth, according to IFPI's Global Music Report. Recessions, rate hikes, elections: the streams kept coming. That is what a hot investment with structural tailwinds looks like.
Why Not Just Buy a Fund?
Institutions noticed years ago, which is why billions have flowed into music investment funds. Blackstone, pensions, and private equity firms now compete for song catalogs the way they once competed for office parks. But funds come with fund problems:
- Six- and seven-figure minimums
- Management fees that compound against you
- Opacity about which catalogs are actually earning
How Royalty Exchange Works
Royalty Exchange exists so individual investors don't need a fund to participate. The model is direct: catalog owners list royalty streams, the marketplace verifies the income history on every listing, and investors bid in open auctions where every offer is visible.
Entry points start in the low thousands rather than the institutional six figures. There are no ongoing management fees eating the yield. You own the royalty stream itself, not a slice of someone else's portfolio, and the statements come to you.
The Track Record
The track record backs it up. Royalty Exchange has completed more than 2,000 transactions, brokering over $200 million in royalty deals for a marketplace of more than 30,000 registered investors. Every listing shows the asset's actual earnings history before you bid, which is more than most non-correlated assets can offer.
Alternatives earn their place in a portfolio by behaving differently when it matters. Music royalties do that, and they pay you while they do it. Few asset classes can make both claims with a decade of receipts to back them up.
See for yourself: browse the current listings and look at the numbers behind each one.
