In recent years, interest rates have been at record lows. If you are leaving your money sitting in a bank account, then you are essentially losing money. To grow your cash over the medium to long term, you need to look at alternative investments.
Making the right investments now is the best way to plan for retirement. Plus, many millennials are working towards an earlier retirement than the generations before them. Movements such as FIRE (Financial Independence Retire Early) are helping millennials retire at ever earlier ages. Investing wisely as young as possible is essential to achieving these goals.
If you don’t want to retire early because you enjoy your work, that’s fine, too, of course! However, as millennials are expected to live longer than previous generations, it is wise to start building a fund now that can be used to care for you in your older years or passed onto future generations.
Or maybe you will decide to retire one day! Whatever you want to do, it’s important to have the option in the first place.
There is always a risk attached to investing, but the possible returns make it more than worthwhile. By diversifying into alternative investments, you reduce your risk exposure and have a chance at greater returns. Thanks to technology, the world of wealth has never been more accessible and exciting!
Risk vs Reward
Many millennials put off investing because they fear the risk. It is easier to leave the money sitting in a savings account where it can’t be lost. However, money that is left in a bank isn’t growing. Although you will still have the money, when you need it in future years it won’t be able to buy as much as it could buy today.
How can you get past this fear of losing it all?
First, it’s healthy to have this fear as it likely means you will be smarter about investing. This is good as you should always appropriately weigh all risks and invest in things that are right for you.
A key part of investing is the ability to balance the risk against the reward. For example, if you were 65 years old, it wouldn’t be smart to put everything you have into a high risk-fund as you could lose it all with no time to recover. However, if you are 30, it could be a good plan to invest part of your money into a high-risk fund. This is because, should the worst happen, you have plenty of time to recover those losses.
You can’t avoid all risks associated with investing but by making calculated decisions and investing your money across several investment plans you can mitigate your risk.
5 Alternative Investments For Millennials
The following sections will cover some diverse investment strategies. When considering what you want to do, keep these thoughts in mind:
- Remember to learn as much as you can – if you choose to invest in anything, then learn as much as you can about it. Thanks to the internet, it’s never been easier to find information about any topic.
- Take it slow – there is nothing wrong with starting small and increasing your investment as you gain confidence. You don’t have to go all in on the first investment!
- Be more open to risk – money deposited in a savings account may be safe but it’s not growing. Be open to taking some risks in order to profit in the future.
In 2019, the global peer to peer (p2p) lending market was worth an astonishing $67.93 billion and by 2027 it is expected to be worth $558.91 billion!
Despite low interest rates, investing in P2P is still a great way to boost yields and diversify your investment portfolio. Investing in P2P can see returns of up to 11% annually. You can also spread your investment across a diverse range of borrowers. Higher rated borrowers are lower risk, this means you can put part of your investment into low-risk borrowers and the rest into the higher risk pool to get higher returns.
Many investors start with $1000 a month and build up from there. When investing in P2P, you can spread that $1000 across multiple loans with a good mix of high and low risk.
Thanks to modern technology, you can easily utilize a P2P platform to make investments and diversify your portfolio. Like all investments, there is a risk involved but the rewards of P2P can be high even with some losses.
Robo investing uses automated services to manage your investment portfolio. Highly advanced software and algorithms can provide a pathway to profit. Robo investing is often easy to get started and cheaper than traditional investing thanks to lower fees.
One reason robo advisors have become increasingly popular is due to their ability to move in real time. Traditional advice is often delayed due to the need for a human to confirm the strategy. A robo advisor doesn’t have to wait and can make whatever adjustment is necessary immediately. This can mean a fund can earn better returns due to the ability to be more flexible with changes.
Fees for using robo advisors are typically spread over the year and are much lower than the cost of employing a human advisor. Lower fees mean you have more to invest!
When setting up your portfolio, the algorithm will recommend an investment strategy based on the details you provide. These will vary in risk and you always have the final choice about how much risk you are willing to take.
The purpose of robo investing is that it replaces the need for a human to manage the account. This means many processes are automated and your account will be managed seamlessly. Typical services include balancing your portfolio, financial planning tools like retirement calculators, and assistance on tax strategy.
All of this makes it worthwhile to include robo investing as part of your alternative investment portfolio.
Careful investing in real estate has long been considered a great way to build wealth. However, some people are finding that rather than renting out property, it is easier and more profitable to flip land.
Land flipping is a simple concept. You buy a piece of land ideally at no more than 35% of the market value. Next, you sell the land for up to 80% of the market value and make a tidy profit for yourself.
There are several reasons why you should seriously consider land flipping. First, the ROI is often 100% or more. This is an unheard-of ROI when talking about real estate but is very common in land flipping deals. There is always a constant supply of land that can be bought and sold. Unlike the housing market, which can fluctuate, available land for sale is steady.
It is also much cheaper to get started with buying land. Depending on where you live, a piece of land could cost as little as $1000, whereas the cheapest house to buy could be $35,000. That’s a big difference in startup costs.
If you invest in real estate, then you will have competition from other investors. This can cause prices to rise and reduces the availability of suitable investment properties. In comparison, land flipping doesn’t have as much competition and there is plenty of land available for development in the U.S.
As you already know, investments carry risk, but some are less risky than others. In an economic downturn, real estate investors can suffer if housing prices crash and property can be harder to sell if they need to cash out. Buying land doesn’t carry as much risk. Land prices generally don’t fall, so any land you buy could be sold for at least the price you paid. In most cases, you could still get cash back if you needed it without losing any of your investment.
Land flipping also means not having to deal with the additional problems and costs that real estate investors face, including finding and retaining quality tenants and house maintenance. You can simply buy and sell the land and pocket the profit!
If you think land flipping is for you, then make sure to consider the following. Land flipping will require effort on your part as you will need to put work into selling the land once you have bought it. Sometimes selling the land may take a few months. It is not a quick return, but it can be profitable.
Invest In Bitcoin
At the time of writing this article, one Bitcoin was worth $37,774, but this figure is changing constantly. Wealthy investors are buying more Bitcoin and other cryptocurrencies are becoming popular, too. It is estimated that by 2022, over three-quarters of high-net-worth individuals will be invested in a cryptocurrency.
Why is cryptocurrency an attractive investment?
One downside to low interest rates is that traditional currencies like the dollar aren’t worth as much. However, the value of Bitcoin and other cryptocurrencies is not affected by fluctuating interest rates. Also, thanks to being digital, they are not bound by any restrictions. Cryptocurrency can easily be traded globally making a bigger marketplace and bettering the chances of a return on your investment.
Good places to start with Bitcoin include Coinbase and CEX. Both sites make it easy to buy and sell cryptocurrency.
Investing in art is by no means a new idea. It’s been common practice by the mega rich to put tens of millions of their dollars into pieces of art. Increasingly, millennials are now the fastest growing group investing in art. Not quite tens of millions each, but in many cases, art investments of six figures are not uncommon.
As part of a wealth building strategy, investing in art can be a great way to build more wealth. It rarely depreciates in value and when the time comes to sell, it is often for a profit.
In 2019, the global art market was valued at over $67 billion. That is a huge market, and many high-net-worth millennials are getting their share.
Art flipping combined with technology like social media means there is a wider market to sell and buy from. You don’t have to visit local galleries. It is easy to get online and buy art that you like but that you know will have a good resale value. When you are ready to sell, you can simply go online and find a buyer using one of the many auction sites. Or you can simply find a buyer on social media!
When investing in art flipping you still need to exercise caution. Like all investments, there is a chance of a loss. Although many art pieces retain value, it is possible the value could drop. Always be mindful to invest only what you can afford. Sometimes you may also need to be prepared for the artwork to take a while to sell. Art flipping can be an investment for the long-term.
As a high-net-worth millennial, you have already worked hard to get to this stage. Now you just need to take that next step so that your money does the hard work for you in the future.
Investments are risky but by diversifying across different investment strategies you are minimizing that risk. Plus, the earlier you invest the more time you have to recover any losses should there be any.
Ultimately, leaving all your money stagnating in a bank account means it will be worth less in the future. To grow your wealth and build the future you want, you need to take some risk, however small, and start investing in one or more of these alternative investments.
Hey, I’m Chris. I have a degree in Business Economics from the University of Liverpool, own a small fast food business and run LifeUpswing.com. I will help you to make money, save money, and think about money in a way that will give you back your freedom. – Chris Panteli