An alternative investment refers to an investment in an asset that is not a publicly traded security such as stocks, bonds, mutual funds, and ETFs.
Since alternative investments are not highly correlated with publicly traded investments they do not often increase or decrease in value along with public market movement.
Most alternative assets are not publicly traded so they tend to be illiquid. This makes them better suited for a longer-term investment horizon such as retirement investing.
And since the IRS allows you to use tax-advantaged retirement funds to invest in alternative assets, appreciation compounds tax-free. The account type most commonly used for this is known as a "self-directed IRA".
There are only a handful of investments not allowed by the IRS in an IRA. Whle not an exhaustive list, below are some of the more common types of alternative investments.