With the recent stock market turmoil, now’s the time to talk about incorporating new investments into your portfolio.

Investing in the short term might not produce the form of reliable returns that were produced in the last decade. The Bursa market has been surprisingly strong even though the country faces instability over the second wave of the coronavirus pandemic.

Whether or not investors use risk mitigation solutions, one of the better ways to protect against that outcome is by going outside traditional portfolio allocations.

Unstable financial markets are generating prospects for alternatives that can serve as a valuable counterweight to more conventional investment declines.

There may be no official definition of alternative investments, but a simple reason could be that, beyond conventional portfolio allocations of stocks, bonds, and cash, they are all investments. That leaves a very wide field of possibilities.

For every investor, not all investment alternatives are acceptable. They are also the most desirable and most appropriate for more mature and financially savvy investors, considering their specific risk-return profile and complex investment features.

In addition to meeting minimum investment and suitability criteria, investors should also assess the time-span of their investments, investment goals and ability to tolerate uncertainty cycles before evaluating alternative allocations.

1. Discretionary Managed Portfolios

Discretionary managed portfolios are not a hedge fund, but rather an actively managed investment platform that, where possible, seeks to outperform the general market using investment strategies.

Commonly, managed portfolios use a combination of FinTech and human analysts. Some people do compare them with robo advisors but they don’t quite fit into digital wealth managers that are fully digitised or based on algorithms alone.

For instance, when the stock market is in a downturn, parts of your portfolio will be hedged against downside risks which may include switching to less risky sectors, holding even more cash or even cutting down equities exposure significantly.

During periods of market disruptions, the strategy is designed to minimise losses.

2. Precious metals

Gold, silver, platinum, and palladium primarily comprise precious metals. Gold is the simplest to invest in although silver has been rising rapidly.

This includes coins and bars of gold bullion, exchanged gold exchange funds (ETFs), gold mining stocks and gold funds (primarily stocks of gold-mining companies).

Gold-mining stocks are more speculative, and when the price of gold increases exponentially, they can have enormous upside potential while also declaring dividends.

On the other hand, gold mining-stocks may be slightly riskier than the metal itself.

For the average investor, you can look to invest in a gold ETF, like the iShares Gold Trust, invest via a gold app like HelloGold, or invest in a gold portfolio through an investment company.

3. Trading

If you’re familiar with day trading, its longer-term cousin is swing trading. Instead of trading on the same day, you use technical analysis to earn profits over multiple days or weeks.

The basic idea is to become acquainted with the market movements of widely traded stocks, to buy when they are on the low end of their range and to sell when you can book a profit.

When buy-and-hold methods appear to be breaking down, it has the potential to deliver returns.

In recent years, options trading has become much more common among ordinary investors.

Instead of focusing solely on buy-and-hold strategies, it provides an opportunity to make substantial returns with relatively short-term investments.

One of the main benefits of options is that it provides an opportunity to profit from both stock price increases and losses. Before going live with real cash, you can practice trading options with paper money.

4. Watches

Luxury watches command enormous prices. Consider these factors if you’re looking for a watch that could grow in value over time:

• Brand: Rolex, Patek Philippe and Omega are more likely to be sought after.
• Exclusivity: Look for a watch with limited production. The lower the supply, the higher the demand – and the more valuable the watch will likely be.
• Association: Watches associated with a celebrity (like Paul Newman) or a story (like the Omega Speedmaster Moonwatch, which has been worn on all six moon landings) are more likely to be of interest to buyers.
• Design: Watches with complicated movements tend to be more sought after. Those with unique designs or shapes are also more likely to be valuable

You’ll find several dealers selling luxury watches in Malaysia, so make sure to compare prices before you make the purchase. You can check out online sites, visit a pawn shop or antique shop but you’ll need a good eye to spot a fake.

5. Ground rents

Investors trying to produce property income also look at the landlord route and incorporate a rental property portfolio to try to generate income from monthly rental payments.

Ground rents are an alternative investment worth looking at if you want to produce an income.

Request for properties capable of producing a decent yield has helped drive up valuations and consequently compressed yields, which is why some value may be provided by the lesser-known route of ground rent investments.

Ground rentals should not be confused with fees for service charges, which are based on land maintenance.

Ground rentals are fees owed to the freeholder of a property sold on a leasehold basis and the default rate on these payments is understandably low because the leaseholder fears losing his property.

This is an additional attraction and a possible win/win situation since you would produce a daily income, but you may take ownership of the property and even benefit from seeking a new leaseholder if the leaseholder fails to pay.

Since default rates have traditionally been poor, it is best to focus on the income-generating potential provided by ground rents as an alternative investment strategy.

This article first appeared in MyPF. Follow MyPF to simplify and grow your personal finances on Facebook and Instagram.