Why Consider Alternative Investments?

In a world of rapid change, traditional investment strategies don’t always provide the stability or growth that investors desire. While traditional stock portfolios can provide tremendous diversification and liquidity, I believe that alternative investments can also play an important role in our portfolio construction. These assets — which include real estate, commodities, private equity, infrastructure, and even hedge funds — can offer non-correlated diversification, potential for higher returns, and a buffer against volatility in mainstream markets.

Advantages and Challenges of Alternatives

Alternative investments offer several advantages.

• They can help reduce the overall portfolio risk because they often behave differently than traditional markets and have different business cycles that drive their value.
• Real assets like real estate and commodities tend to hold their value during periods of rising prices and provide a level of protection against inflation.
• Other alternatives can generate steady income, like rental income from real estate or dividends from infrastructure investments. They also offer access to new areas of growth, including private markets and niche sectors that may not be available through public exchanges.

That said, alternative investments aren’t without challenges. They tend to be less liquid than traditional assets, which means it may take longer to access your funds. They can also be more complex and require careful research and specialized knowledge (seek advice as necessary from an investment professional). Some may only be available to accredited or high-net-worth investors.

Where Does Crypto Fit?

Cryptocurrencies are an example of a more recent alternative investment. Despite their murky beginnings, they are slowly becoming increasingly accepted by institutions and are viewed by many as having potential for huge returns. However, their volatility, regulatory uncertainty and lack of intrinsic value still pose challenges. See my article https://labinsky.com/should-you-be-investing-in-cryptocurrencies/ for FAQs on the subject.

Gold and Silver: Do They Have a Place in Your Portfolio?

The focus of one of the most significant alternative asset investments is precious metals — particularly gold and silver. Historically, these metals have played an important role as stores of value and hedges against uncertainty. But are they still relevant today? And if so, how much of your portfolio should be allocated to them?

Gold has long been viewed as a safe haven, especially during periods of economic instability or when confidence in global currencies declines. Over the last year gold has performed incredibly strongly — up approximately 40% and hitting multiple record highs! This surge was driven by a weaker U.S. dollar, rising global tensions, and speculation around tariffs and trade. Price increases have been fueled by central bank buying, increased demand from emerging markets, and ongoing fears around currency devaluation. Gold also surged during the 2008 financial crisis and again in early 2020, reinforcing its reputation as a safe haven asset during times of systemic risk.

Silver, while often referred to as “poor man’s gold,” carries its own unique investment thesis. In addition to its role as a precious metal, silver is also an essential industrial commodity. Its use in solar panels, electric vehicles, and other emerging technologies makes it particularly sensitive to economic cycles. This dual nature means silver can sometimes offer stronger percentage gains than gold — but also higher volatility. Silver  tends to move more sharply — both up and down — and may track economic conditions more closely than gold.

A Balanced Approach for Investors

While the case for precious metals is clear in the current climate, it’s important to keep perspective. Gold and silver don’t produce income, unlike stocks or bonds, and their prices can be influenced by speculation as much as fundamentals. These assets also tend to underperform during periods of stable inflation and strong economic growth. For these reasons, a balanced approach is essential.

Exposure to precious metals can be achieved in several ways: directly through physical bullion, via exchange-traded funds (ETFs), or through mining stocks. Each of these comes with different levels of risk, cost, and liquidity. Keep in mind that precious metals may also be taxed differently depending on how they’re held, which is especially relevant for Israeli investors.

American investors in Israel should also consider how precious metals fit within the broader context of their shekel vs. dollar exposure. Hedging through gold and silver is one strategy, but local investments with global earnings — or shekel-denominated assets — can also provide a hedge against currency risk.

For many investors, especially those seeking long-term growth and a portfolio that’s less tied to the ups and downs of public markets, alternative investments and especially precious metals can be a valuable addition.