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Out of the Ordinary Investment Ideas Can Yield Profitable Results

Out of the Ordinary Investment Ideas Can Yield Profitable Results

This past years have been without a doubt some of the most uncertain one when it came to investing. Retail investors have easily been the most affected of course, in some cases even struggling to make a decent return. It is because of these circumstances that some “alternative” investment opportunities are gaining popularity, mainly due to the above-average returns that they yield. Let’s take a look at a few of them.

1. Weather Derivatives

Weather derivatives are perhaps some of the “strangest” investments out there. Derivatives are future contracts and weather derivatives usually trade on goods that have no value on themselves. However, variable and severe weather conditions can affect some goods, which is why companies and investors have been giving more importance to weather derivatives as of late.

Bad weather can disrupt a business. In fact, the CME Group has stated that no less than one in three businesses across the globe is affected by weather. From amusement parks to restaurants and urgent deliveries, all of these depend on good weather, which is why weather derivatives are so important.

2. Artists Bonds

Some artists have had their royalties gathered up and securitized. The first one o do this was the famous singer David Bowie, so the product still bears his name: Bowie Bonds. That said, it many might not consider artists’ bonds to be of much value, specially nowadays that almost anyone can pirate any artist’s songs or films, for which bondholders receive nothing of course.

3. Catastrophe Bonds

Catastrophe bonds behave in a similar fashion to weather bonds, except that the effects of different types of catastrophes on companies’ products or operations can be absolutely devastating. These bonds are issued by insurance companies usually when they are in need of cash flow. And since the probability of occurrence of a catastrophe is extremely low, those funds are almost always secured. The most “common” catastrophes that can occur are hurricanes, floods and earthquakes.

As mentioned, it is not common for a catastrophe to occur, but issuing these bondsa llows insurance companies to secure the necessary funds in case the worst happens. Likewise, they provide investors with high returns, although it is worth mentioning that they can lose their entire principal in the event of a catastrophe.

4. Peer to Peer (P2P)

Thanks to the arrival of the Internet,  people can now make investments online, and one of the most popular ways to do it is to help people with personal loans to refinance their debt and thus improve their financial situation. This is called a Peer-to-Peer lending service, which allows people to invest amounts of money (starting from as little as $25) in other people’s loans who have previously applied for on the site. The rate and amount that one can deposit will of course be heavily influenced by the applicant’s credit record.

Naturally, high yields in peer to peer personal loans can be obtained almost exclusively by building a risky portfolio of small loans. Safer portfolios can also be built by investing in people with good credit history, but their return will be far more moderate.