Buy-and-Hold vs. Income Streams in Alternative Investing: What’s the Difference?

September 26, 2023
7 min read

There are two key strategies when it comes to investing in alternative assets: buy-and-hold and income streams. Both offer opportunities to invest outside of traditional asset classes, but they differ in investment philosophy and expected outcomes.

When referring to buy-and-hold investments, we mean the long-term investment strategies where investors acquire securities with the intention of holding them for an extended period. Real estate, private equity and artwork are often associated with this type of approach, as the primary objective is to have capital appreciate over time.

This strategy aims for investors to benefit from the potential growth and value appreciation of the asset. A patient mindset is vital, as it may take several years for the investment to yield a favorable return. Like traditional markets, investors also need to do their due diligence to ensure their investment(s) have strong fundamentals, growth potential and the ability to weather market volatility.

On the other hand, alternative investment income streams focus on providing investors with regular cash flow in addition to potential capital appreciation. Cash flow is emphasized, however, as these investment vehicles are designed for investors seeking a steady stream of income overtime. Some examples of alternative investment income streams include rental properties and music royalties.

The distinguishing feature of income stream options is their ability to generate ongoing cash flow, which can either supplement or even fully replace traditional income sources. Investors seeking regular cash distributions and ways to diversify their income streams may be more attracted to this approach. However, it’s also essential to carefully assess the risks and potential returns with this type of investment, as income streams can and likely will fluctuate based upon market conditions and underlying asset performance.

In the alternative asset space, options are nearly endless. With so many available avenues, investors have the opportunity to seek long-term wealth accumulation through buy-and-hold securities, or add a steady, regular income through investment streams. By understanding the nuances of each approach and what goes into creating a successful outcome, investors can create strategies that align with their specific goals and better diversify their portfolios.  

To learn more about how Templum can power primary offerings and secondary markets for alternative assets, reach out today.