4 mins
April 25, 2022

The Value of Investing in Alternative Assets

The Value of Investing in Alternative Assets

Plus, one unique investment that could massively reduce your W-2 tax bill

Alternative investments outside of conventional stocks and bonds can provide valuable wealth building opportunities, especially for Accredited Investors.

Common alternative investments include private equity, venture capital, hedge funds, art and other collectibles, and more. If you’re looking for a way to diversify your portfolio, hedge against inflation, or earn higher returns on your investments with assets that aren’t correlated to the stock market, then these asset classes may be a strong option for you. 

In this article, you’ll receive an overview of the benefits of alternative investments, and we’ll also highlight one strategic investment that can help you pay less taxes on your W-2 income while receiving consistent returns. 

3 Reasons to Invest in Alternative Assets

Alternative assets are not all created equally, and it’s important to evaluate each investment on its own terms to see if it fits with your goals and expectations. That said, here are a few common benefits of investing in assets besides stocks and bonds.

1. Diversification can decrease your risk during stock market downturns

If all of your investments are tied to stocks and bonds, you’ll be more heavily impacted by market crashes and downturns. Many alternative assets are not closely correlated with the stock and bond markets, so investing in them can help you diversify your portfolio and protect yourself during the inevitable ebbs and flows of the stock market.

2. Alternative assets can serve as inflation hedges

Certain alternative assets, especially hard assets like real estate and commodities, are effective tools for protecting your portfolio against inflation. These assets are likely to keep or increase their value in the midst of inflation, unlike cash and most stocks.

3. Alternative assets may deliver higher returns

Though each investment is different, the right alternative investments will often yield higher returns than most stocks and bonds. 

Reduce Your Taxes with Strategic Alternative Investments

Most investors know that the right investments can help them build generational wealth, but unless you’re also focused on building a tax-efficient strategy, you’ll end up giving more and more money to the government the more you earn. 

It’s time to start investing like the ultra-wealthy and looking for those investments that can produce consistent cash flow and are able to reduce your taxable liability, including your active (W-2) income.

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Alternative real assets provide passive income and tax benefits. Because these assets have passive income, the losses that are associated with the investments are passive losses. Barring a couple of special exceptions, active and passive income/losses don’t mix. 

There is, however, one asset class that provides significant tax advantages that other asset classes simply do not offer: the energy sector. As the government is working hard to incentivize cleaner energy, they are offering major tax advantages to those who invest in companies and products that directly provide solutions to those clean energy goals. This provides a unique opportunity for high net worth individuals looking to reduce their taxable income while also generating passive income. 

Let’s look at one opportunity in particular.  

Carbon Capture and Sequestration Tax Advantages

As a result of the current tax laws and rules around bonus depreciation, when you invest in equipment that is related to the Carbon Capture process, up to 100% of your investment can be deductible against your earned income in the first year. 

Keep in mind that these massive tax advantages are not the only benefit, as you’ll also receive predictable income in the form of traditional investment returns. 

At First Generation Capital Partners, we’ve invested more than $3 million in Carbon Capture technology and have seen incredible results for our clients. This year, we’re looking to invest even more so we can help more investors benefit from these major tax benefits.

To learn more about the benefits of investing in Carbon Capture, download out our free guide. And if you’re ready to take the next step toward paying less taxes by investing in Carbon Capture, contact us today.

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April 25, 2022
Billy Keels