Alternative investments are wooing individual investors, especially young people

Put your money in an index fund? And then what? Wait around for 50 YEARS?? That’s still one of the most common ways to invest, but there are others. Alternative investments that historically were reserved for rich people or sophisticated investors have recently attracted more retail investors—especially young ones. But like Pokémon card and private credit payouts, nontraditional investments can present big risks for the uninitiated.

Follow the money: Alternative investments, or alternatives, can include a wide range of assets like crypto, meme stocks, real estate, and collectibles as well as private, pre-IPO stocks. And high-net-worth investors aged 21 to 45 are flocking to them:

• About 67% of Gen Z and millennial investors believe that stocks and bonds can’t deliver above-average returns anymore, according to this year’s Bank of America Private Bank Study of Wealthy Americans.
• Younger generations’ distrust of traditional institutions plays another big factor in the rise of alternatives, according to the study’s 2025 results.
• Nearly 20% of millennials’ investment portfolios consist of alternatives, compared with Gen X’s 11% and boomers’ 6%, according to Goldman Sachs data.

High risk, maybe high reward

Banks and retail trading platforms have scrambled to offer wealthy, younger clients a smorgasbord of new investment options like private equity, real estate, and credit. But the line between the “democratization of investing” and straight-up gambling has never been blurrier with the rise of meme stocks and private-market investments that lock your money in during times of turbulence.

There’s a reason these investments were once reserved for teams of institutional investors with deep pockets and time to comb through the fine print: The potential big wins often come with a higher possibility of major losses and less transparency.

So, why are alternatives now courting everyone else? Their traditional investors (massive endowments, hedge funds, and pensions) already have about a fifth of their portfolios invested in the asset class, so it’s unlikely they’ll want to toss more money towards alts. Meanwhile, individuals have just 7% of their portfolios allocated to alternatives with plenty of room to grow, according to the 2024 Bank of America Survey.—MM