Nowadays, people are looking for a way to protect their assets, so that they’d have means of securing funds fast in case of an emergency. If you’ve ever considered investing in something to secure your funds, people undoubtedly recommended stocks and bonds as a safe way to place your investments. Cash, stocks and bonds are a traditional way for investors to invest their capital and gain profit. Rightfully so, especially because these investments are liquid and can be turned into quick cash.
However, even the stock market can be quite volatile, since it reflects upon global economy. That being said, every time the global economy is in crisis, the stock market goes down as well. Needless to say, people are still recovering from the 2007-2008 global economic crisis and are looking for a more stable way to secure their investments.
That’s where alternative investments come into play. These investments consist of assets that aren’t cash, bonds or stocks, and even though they tend to be more liquid than standard investments, they also provide a more stable option for your investments. Here are a few alternative money saving strategies.
Investing in gold
Gold has always been highly sought-after and has maintained its value to this day. The main reason gold is so highly sought-after is because it’s a crisis commodity, as well as a hedge against global instability and inflation. Investing in gold preserves your wealth and nets your profits in the long run, because the real value of paper money decreases overtime. For instance, if you invested a $100 into gold back in 1971, today you’d have around $3,000, whereas if you kept the $100 you’d still have that much today.
However, the $100 from 1971 would only keep 17% of its original purchasing power today, due to inflation. Moreover, gold is a good investment not only because of its monetary capabilities but because of its cultural value as well. There’s always a high demand for gold in countries such as China and India. Gold plays a vital role in wedding ceremonies in India, while China considers gold a traditional way of saving money.
Investing in silver
Even though silver has less value than gold, it’s still considered one of the most valuable and highly sought-after precious metals, that is both a commodity and a form of money. Just like gold, silver has its inherent value that acts as a portfolio diversification technique to lessen the risks from geopolitical and monetary instability, while also acting as a hedge against a long-term threat of inflation. Silver is more affordable than gold, which makes it a more tangible investment. That means that investors can accumulate more silver than gold for dollar spent.
For example, a $1000 investment can get investors nearly 50 ounces of silver, while for that money they can’t even get an ounce of gold. Furthermore, silver has additional properties that make it so popular. For instance, silver as a metal, has thermal and conductivity properties, it’s resistant to corrosion and also has malleability qualities. That’s why silver finds its use in industrial, medical, telecommunication and energy industries and technologies.
Investing in real estate
Buying and selling real estate properties is another alternative way of investing capital and a part of a diversified portfolio technique. Since properties are constantly in high demand, investing in real estate can prove to be a great investment long-term. By purchasing your own property, you become a landlord and you gain leverage by receiving appreciation from the property and rental income.
Rent is a quite predictable income, but there are other benefits to investing in real estate, such as stability and tax return i.e. the tax deduction on mortgage interest. Moreover, to reduce the risks, you can always partner up with other real estate investors to help manage multiple properties and share resources. However, you should be aware of the risks that may undervalue your investment, such as additional expenses for repairs, maintenance, utilities and taxes.
Investing in venture capital
Venture capital is a subset of private equity that consists of financing small emerging companies and startups that have high growth potential. Basically, you fund a startup or an early-stage company that lacks the finances to develop their business, in exchange for part of their equity or an ownership stake, making you a stakeholder of the company.
Once the company you’ve invested in becomes successful, you can gain a substantial return on investment after liquidity becomes successful as well. However, there’s a risk that a company you’ve funded could fail, which would make you lose your investment, but venture capital is a calculated risk that you should carefully consider before making an investment. Companies, such as Google, Facebook and Twitter were a result of a successful venture capital investment.
With the constant threat of yet another global economic crisis, investors are looking for a safer and more stable way to secure their investments and their assets. Even though alternative investments offer less correlation and more liquidity than traditional investments, they are becoming quite appealing to both small and large investors.
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Writer: David Webb
Disclaimer: All investing can potentially be risky. Investing or borrowing can lead into financial losses. All content on Bay Street Blog are solely for educational purposes. All other information are obtained from credible and authoritative references. Bay Street Blog is not responsible for any financial losses from the information provided. When investing or borrowing, always consult with an industry professional.