Most advisors and investors are stuck in the traditional mindset of picking stocks and bonds to cover their basic 60/40 investment portfolio split. However, the investment world is evolving and investors will have to adapt to keep up with the times. At a recent conference, I had the chance to sit and chat with legendary investor Jim Rogers about alternative investments and exchange-traded funds, and he suggested that advisors should begin to look into investment opportunities based on physical assets.

When asked about the best advice for financial advisors, Rogers stated, "I would learn more about real assets."

He believes that the most important challenge is to learn about commodities because real assets will be the place to be over the next 10 years.

"Commodities are just an unknown asset class at the moment," Rogers said. "A huge amount of money will come into commodities the next decade as people learn about supply shortages. Very few people are invested in real assets."

It is time to start thinking about alternative strategies to help maximize potential gains. Rogers points out that commodities are a finite resource and the fundamentals speak for themselves. For instance, the major oil fields are in decline and there haven't been many new mines opened.

"If the global economy gets better, commodities will do well because of shortages," he noted. "The supply of commodities has been in decline for over 20 years. I want to own real assets. I want to invest in companies that produce real goods. Shortages are getting worse, not better."

Previously, the commodities market was typically relegated to institutional investors or active traders with commodities accounts. However, luckily for retail investors, anyone can now easily access the commodities prices through exchange-traded products.

"Exchange-traded products are convenient for commodities. I always buy exchange-traded products and it's terrific," Rogers extolled.

Physically Backed Gold And Silver
After pulling back to $1,550 from almost $2,000 per ounce, gold presents a buying opportunity. Global governments have enacted extremely loose monetary policies and unprecedented fiscal stimulus measures. Consequently, all that free-floating cash will eventually come to bite currencies in the back.

"Governments print money - that's all they know. So own real assets like silver and you'll survive," Rogers argued.

The investment guru remains bullish on gold, projecting prices to go well over $2,000 an ounce, but he has noted that corrections between 30% and 40% are normal.

"Gold is up 11 years in a row. Gold is consolidating now, a well-deserved consolidation," Rogers added. "I own gold, I'm not selling gold. If gold goes down, I'll buy more."

Investors interested in physical assets may consider looking at precious metals ETFs. Currently, only precious metals ETFs are physically backed since it is much easier to gather and store the bullion in vaults, as compared to hoarding the necessary volumes required for other commodity assets. The metal bars are secured in vaults located in London or Zurich, depending on the ETF. Accordingly, each share of a physically backed ETF traded on an exchange represents a partial ownership of the physical precious metal bullion owned within the fund. Investing in a physically backed ETF provides the exposure to the underlying commodity without the costs of monitoring and storing the metal yourself.

The SPDR Gold Trust (GLD) is the largest gold ETF and second largest U.S.-listed ETF, with $65.3 billion in assets and an expense ratio of 0.40%. The iShares Gold Trust (IAU) has $9.2 billion in assets, with a 0.25% expense ratio. If you are interested in the poor man's gold, the iShares Silver Trust (SLV) is the largest silver ETF with $8.5 billion in assets and a 0.50% expense ratio. Alternatively, the ETFS Silver Trust (SIVR) has $482 million in assets and a 0.30% expense ratio.

It should also be noted that if a physically backed ETF is held for over a year, the ETF acts like any physical precious metal holding and is taxed as a collectible. However, if the fund is held for under a year, it is taxed as capital gains. Regardless, potential investors should still consult their tax experts.

ETFs With Exposure To The Futures Market
If you want to take on the full gamut of commodities, you will have to look into the futures market. Thankfully, exchange-traded products also offer indirect exposure to commodities prices. Rogers is also no stranger to futures-based funds.

"I own commodity ETFs and ETNs that are futures-based," he commented.

The majority of commodity ETFs deal in futures contracts traded on the commodities exchange as it is an easy method to gain the necessary exposure to the underlying commodity. Since the funds don't act like farmers or physical traders, the futures contracts are typically settled or swapped for cash before they mature to prevent the ETFs from taking physical delivery of the commodity.

However, potential investors should be aware that by settling in cash, futures-based ETFs will come with a time component that could affect the fund. For instance, when the front month contract costs more than a contract that is about to mature, the futures contract is said to be in a state of "contango," where rolling contracts to avoid physical delivery will cause a negative return. On the other hand, if the later dated contracts cost less than the current spot price, the market is in a state of "backwardation" where rolling contracts would provide a nice boost to the fund.

Futures-based ETFs are taxed as parternships - the costs of the fund are spread among all the owners at the end of the tax year, regardless of the time it was bought or sold through the year. Come tax season, investors may also have to fill out a K-1 tax form.

Meet Your Energy Needs
If you are interested in trading the short-term outlook on energy or the long-term prospect of dwindling oil fields, there are oil futures related ETFs available.

The United States Oil Fund (USO), which has an expense ratio of 0.65%, follows West Texas Intermediate crude while the United States Brent Oil Fund (BNO), which has an expense ratio of 0.91%, offers exposure to North Sea Brent crude oil.

However, with the USO fund, investors may be exposed to contango and witness the ETF fall short of actual spot price movements. On the other hand, the United States 12 Month Oil Fund (USL) ladders 12 months' worth of futures contracts in an attempt to mitigate the effects of contango and backwardation, providing a more stable reflection of the underlying oil prices. USL has an expense ratio of 0.85%.

After natural gas dipped below $2 per million British thermal units, the commodity made a strong rebound as traders tried to get in on the cheap and the summer heat effect on electricity usage. Rogers also noted he would rather own natural gas at these prices than shorting the commodity as we are closer to the bottom than the top in the natural gas market.

Investors considering natural gas tend to focus on the United States Natural Gas Fund (UNG), which has a 0.85% expense ratio, the largest natural gas ETF. Again, this ETF has been exposed to the ongoing contango in the natural gas market, which has led to the fund's performance on top of the declining prices. Potential investors may also take a look at the United States 12 Month Natural Gas Fund (UNL), which ladders 12 months' worth of natural gas futures to diminish the effects of contango and backwardation. UNL has an expense ratio of 0.86%.

Farmers: The Dying Breed
Additionally, Rogers touches upon agricultural products and how we are running out of suppliers. He points out that the average age of a farmer in the U.S. is 58, whereas in Japan it is closer to 66.

"We're running out of farmers," Rogers said.

Meanwhile on the demand side, the world population is expected to add another 2 billion to 4 billion people in less than 50 years. Along with the growing middle-class in the emerging markets, food demand is on the rise.

Investors trying to capitalize on the short-term cyclical aspects or the growing number of mouths to feed may consider broad agriculture funds like the PowerShares DB Agriculture Fund (DBA), ELEMENTS Rogers International Commodity Agriculture ETN (RJA) or iPath Dow Jones-UBS Agriculture ETN (JJA). The PowerShares offering tracks a basket of soft commodity grains and cattle product futures, with an expense ratio of 0.85%. RJA and JJA, which both have a 0.75% expense ratio, also track broad baskets of agriculture futures, but the two are structured as exchange-traded notes. ETNs are unsecured debt securities issued by large banks. As such, ETNs are subject to the credit risk of the issuer.

Alternative investments are another tool to help advisors and investors diversify and capture potentially lucrative opportunities. One should not be limited by the traditional asset allocation model. Instead, people should branch out to cover the various market options available, and real assets can be one step toward the right direction.