If you're looking to achieve financial independence, then investing should be an important part of your game plan. Smart investing is what grows wealth, which is what gives us the freedom to not worry about the future. The profits realized can lead to passive income, ensuring an early retirement, a more comfortable life, or both.
The majority of people look to achieve these goals through traditional investments in stocks and bonds, but these are far from being the only options for building wealth. Especially today, with the rise of digital investment platforms, prospective investors have many alternatives that could be perceived as having lower risk or greater potential.
If you've heard the old adage "don't put all your eggs in one basket" then you'll understand the importance of diversification. While most farmers specialize in one or two crops, they're also likely to farm many others. This is done because if one single crop fails, they'll still be able to make an income from the ones that don't. Diversification enables a farmer to hedge against negative market forces, inclement weather that may damage one kind of crop, and other forces beyond their control.
Alternative investments should be made for the same reason. While the stock market performs well traditionally, some investors have lost thousands and even millions of dollars by getting in at the wrong time.
Diversification is a smart strategy that's followed by all institutional investors and pension funds, and generally involves acquiring a mixture of traditional investments and assets to hedge against different kinds of risks.
You might think that most alternative investment opportunities are off the table for individual investors, especially those who don't have much of a nest egg, but the reality is far from different. In fact, there are many opportunities for individuals to diversify, even if they're only able to do so with a few hundred dollars
Historically, real estate has always been a great asset. Starting in the 1930s, when the U.S. government began subsidizing mortgages for the first time, millions of Americans have built their wealth through homeownership, leading to the creation of the American Dream.
The trick is fairly simple. You buy a home and then just wait for its value to appreciate. Then, once you've grown old and wrinkly and the kids have fled the nest, you sell up and buy something smaller and cheaper, leaving you with a nice cash pile for your retirement.
That's no longer an option for many. Sky high home prices have ensured that homeownership is now out of reach to many Americans. Fortunately, investing in real estate is still possible through real estate investment trusts, or REITs, through platforms like Streitwise. More recently, we've seen the rise of crowdfunding platforms like Groundfloor, where people can purchase just a fraction of a home and generate a passive income from that.
This is a relatively new industry that's essentially venture capital funding done on a much smaller scale. It's aimed at entrepreneurs who have a business idea that's not big enough to appeal to traditional venture capitalists. Instead, they can raise money from individuals through crowdfunding sites like Gofundme, Republic and SeedInvest, where people invest only small amounts of money in exchange for an equity share in the new business.
Such platforms provide both accredited and non-accredited investors the chance to purchase equity in new startups at an affordable price. The potential upside of this kind of investment is high, but beware that it comes with an added risk profile. For this reason, crowdfunding startups should only make up a fraction of your investment portfolio.
These days you're unlikely to become the next "Bitcoin millionaire" if you're just getting started in cryptocurrencies. It's not clear if there will ever be another meteoric bull run like in the past. Instead, the smart bets in crypto are those that are placed on some of the more interesting crypto projects seeking funding from their communities.
Investors will probably be wary of traditional ICOs given the proliferation of scams in the crypto industry, so it's good to know there are some much safer options available these days. For instance, the Web3 metaverse startup Peer has created a new concept called the ICX – which is a crowdfunding model that's designed to reassure investors that their money is going toward serious projects.
The ICX is similar to an IPO in that investors are rewarded with early access to the project's tokens. The main difference is that, with the ICX, all projects are carefully vetted to ensure that they're not just some pie in the sky idea. Rather, they must already have created a viable product and business model, and possess some kind of IP moat in the form of a patented or patent-pending technology. Peer's due diligence also extends to checking out the background of the founding teams to ensure they are legitimate.
Wealthy people have been collecting art for centuries and it remains one of the best alternative investments for those looking to diversify. Of course, an original masterpiece from someone like Picasso or Rembrandt is well beyond the means of most individual investors, especially those who're just getting started out building their nest egg. It's possible to instead buy art from up and coming artists who may or may not make it big, but this kind of investment is fraught with risk.
Luckily there's an alternative. Just like with real estate, fractional ownership of art is now a thing. With platforms like Masterworks, it's possible to buy a small share of the paintings of renowned masters such as Jean-Michel Basquiat and Andy Warhol, to name just a few.
The wine industry is a novel investment opportunity that's being driven by the fact that it's only available in finite quantities. As more people enjoy drinking wine produced by the world's top vintners, some vintage bottles have shown excellent potential for investors.
The challenge of investing in wine is that you'll also need to have somewhere to store those bottles. Wine needs to be stored in the right conditions or it could quickly spoil. Luckily, investors don't have to worry themselves with these logistical details any more as it's now possible to buy a fraction of sought-after bottles through platforms like Vint and Vinovest. The concept is similar to the fractional ownership in real estate and art, with the companies taking care of the storage and the investors sharing in the potential profits.
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Disclaimer: Analytics Insight does not provide financial advice or guidance. Also note that the cryptocurrencies mentioned/listed on the website could potentially be scams, i.e. designed to induce you to invest financial resources that may be lost forever and not be recoverable once investments are made. You are responsible for conducting your own research (DYOR) before making any investments. Read more here.