For families and individuals of significant means, portfolio construction transcends simple asset allocation. It becomes an exercise in long-term stewardship and legacy preservation. While traditional equities and fixed income remain foundational, high-net-worth investors increasingly utilize alternative investments to navigate complex market cycles and protect multi-generational wealth. These assets offer unique strategic advantages, including:
- Access to investment choices not as broadly available to the general public, with the potential for superior returns
- Portfolio diversification, as the returns from alternative investments may not be correlated with the general performance of the financial markets
- Mitigating taxes with tax-deferred or tax-exempt strategies
- Generating more income
However, with the potential for superior returns comes the potential for larger risks. The possible downsides of an alternative investment include:
- Potential losses of principal
- Higher fees and higher minimum investments
- Potential for greater volatility
- Lack of transparency and difficult valuations, as the investments are not listed in open markets and the methods used are not publicly disclosed
- Longer holding periods and illiquidity—there can be lock-up periods and complex rules for disposition of the investment.
With those pros and cons in mind, here are three types of alternative investments you might consider for your portfolio.
Private equity
Privately held companies are a critical component of the economy, employing a large share of the workforce and providing substantial goods and services. Private equity funds make it possible to invest in these nonpublic companies.
Strategically, private equity is approached through three primary lenses. First is venture and growth capital, allowing families to support emerging innovators or scale-stage companies. The second is investment in established private enterprises, which provides exposure to resilient, high-performing companies with proven cash flows. The third involves buyout and control positions, where majority ownership allows for active influence over corporate governance, operational restructuring and long-term value creation. This level of involvement is particularly attractive to principals who view their capital as a tool for strategic impact.
Demand for private equity investments has been strong, with investors seeking market-beating performance. Globally, the private equity industry oversees some $8 trillion in assets under management. Investors who have a long time horizon, who have ready access to other resources for their immediate financial needs and who are comfortable with relatively complex investment structures are candidates for private equity investments.
Commodities
Commodities are the raw materials essential for the production of goods. In the energy sector, that may mean oil, gas or coal; for agriculture, corn, pork, beef or orange juice; for minerals, gold, silver, copper or rare earth metals. While investors do not take possession of most commodities, the exception is precious metals, such as gold and silver, which may be owned outright. That approach raises questions of storage fees, insurance and liquidity. The more usual approach to investing in commodities is to enter into a futures contract that is tied to a commodity price. The contracts are normally settled for cash rather than possession of the commodity. Alternatively, there are commodity-based mutual funds, ETFs and exchange-traded notes for investors to consider.
In general, commodities are considered to be good hedges against inflation. The record of gold prices does not entirely support this viewpoint. During the burst of inflation from 1975 to 1980, gold was indeed a fantastic hedge, rising over 200% while the consumer price index (CPI) grew about 40%. However, the price of gold lagged over the next two decades, while the CPI grew modestly. More recently, gold is again taking the lead. In periods of economic uncertainty, gold has outperformed.
Real estate
As with commodities, an investor may own real estate directly or indirectly. Real estate has the potential for steady income, capital appreciation and diversification away from stocks. If rents can be raised over the years, real estate offers an inflation hedge.
The indirect approach to owning property is shares in a real estate investment trust (REIT) or a REIT ETF. This approach offers better liquidity and less complexity than direct ownership. The structure of REITs creates special tax considerations, with the result that the dividends tend to be higher than equity investments. Dividends are taxed as ordinary income.
REITs may invest in commercial properties (office towers, shopping malls), residential properties (apartment buildings, student housing) or healthcare facilities (hospitals, medical facilities). Publicly traded REITs have about $2.5 trillion in assets.
REITs are sensitive to interest rate changes. Occupancy rates are critical to maintaining the expected dividend payments. If a REIT has a geographic or industry focus, that adds another dimension of potential risk in an economic downturn.
Shares of publicly traded REITs can be bought and sold just as stocks are. REIT shares that are not publicly traded may have holding periods and early redemption fees. Shares in REITs may be held in an IRA or a Roth IRA, allowing for tax-deferred or tax-free growth.
Ultimately, alternative investments should be evaluated through the lens of a comprehensive financial plan designed to help you achieve your specific goals and objectives. Within the broader context of portfolio construction—whether you are seeking enhanced returns, broader diversification or a targeted risk hedge—aligning these assets with your overall strategy is essential. Meet with an Arvest Wealth Management Client Advisor to explore these opportunities and navigate these complexities with confidence.
This content has been prepared by The Merrill Anderson Company and is intended as a general guideline.
© 2026 M.A. Co. All rights reserved.
Arvest and its associates do not provide tax or legal advice. The information presented here is not intended as, and should not be considered, tax or legal advice. Consult your tax and legal advisors accordingly.
