Diversification is the best protection of your investments against unexpected market swings. This is one of the key reasons you should consider before putting your money in any asset.
Do you remember the Great Recession? It caused the collapse of share prices and cut yields on bonds. In the same timeframe, the price of gold increased from $800 per troy ounce (31 grams) to $1,000. The investors who put money in gold enjoyed a decent return. If those who invested in securities and bonds had diversified their portfolio with gold, they would have hedged against losses.
Today, we have so many traditional options to choose from — bonds, stocks, ETFs, etc. Along with them, there are alternative online assets that might bring you even better returns. Let’s consider the best and the most popular ways to invest your money.
1| Peer-to-Peer Lending
This type of lending enables people to borrow money from private investors directly, bypassing banks and other intermediaries. Upon joining the pool of private investors, P2P lenders allow you to invest money in non-bank companies that give loans. In other words, you purchase a fraction of loans from these companies and get the interest on your loans.
There is a number of peer-to-peer lending companies you can choose from — Lending Club, Prosper, Zopa, Bondora, and many more. They are usually FCA-regulated or work on the basis of the same principles. These companies manage credits, collect payments, and provide you with investment returns. When it comes to investors, they put their money in the platform to fund the loans that borrowers are applying for. Then, they make money on the interest rates when a borrower pays back.
There are a few advantages of this alternative investment. You can set the interest rates as high as you wish and control the usage of your money. The drawback is the risk of nonpayment. Unfortunately, it happens. Another concern is that a P2P lending system is a new form of business, which hasn’t been tested in terms of economic decline.
Cryptocurrency is a new phenomenon in general. No doubt, you’ve heard about Bitcoin at least once by this time. It’s the first cryptocurrency that was launched in 2009. Since then the cryptocurrency market has grown tremendously in terms of trading volumes and prices. In December 2017, for example, 1 Bitcoin was worth over $20,000! Imagine how enthusiastic the early investors were, especially those who bought the cryptocurrency at its infancy for less than $1. Just like stocks, cryptocurrencies are traded on special platforms called cryptocurrency exchanges.
The current number of cryptocurrencies is huge (2,551 different coins). The most popular are Bitcoin, Ethereum, Bitcoin Cash, Monero, Litecoin, Dash. The capitalization of the market is $254 billion (as of September 2, 2019), but it’s expected to double and even triple eventually as more industries accept cryptocurrency.
There are many skeptics, who claim that “cryptocurrency is useless” and that “the dollar runs the world”. However, no asset can bring you such ROI as cryptocurrency can. Still, the asset price is very volatile and can crash overnight just as well.
If you are patient, ready to learn about cryptocurrency and willing to take risks, this alternative investment asset can generate lucrative gains.
3| Own Online Business
Have you ever considered launching your own online business? Probably, if you think of your idea/project as an alternative investment, you will get the ball rolling.
Investing in your own business could become the best choice that would pay off several-fold. Moreover, it can be a steady source of income. On the other hand, any business can fail. As a result, it will cost you much money, time and effort spent. Still, you’ll never know if you don’t try.
Starting a blog, online coaching or teaching doesn’t require huge investments. If you make it a part-time business, you will earn extra cash in addition to the salary from a regular job.
4| Equity Crowdfunding
If starting your own business seems burdensome and risky to you, you can try equity crowdfunding. It will help you get the feeling of owning a business without putting too much effort into its launch.
Startups and small companies that are looking for funds sell their stocks on crowdfunding platforms. You will find numerous sites that allow you to invest in small businesses — Seedinvest, Netcapital, and AngelList to name a few.
Obviously, if you venture into buying shares, your investment return will depend on the success of a startup. There is a number of equity crowdfunding success stories like that of PonoMusic. The company has managed to raise over $4 million on the Crowdfunder equity site. The minimum investment sum on such platforms can be as low as $100.
Of course, this is not the full list of online investment alternatives. With the rise of the Internet, the virtual assets ecosystem has seen a boost across many niches.
One such niche, where virtual assets have gained much popularity, is gaming. In 2006, a player nicknamed Ailin Graef became the first real-life dollar millionaire due to popular 3D virtual world Second Life. Having collected the virtual assets in the form of real estate, the player turned her $9.95 investment into $1 million in the form of Linden dollars ($1 = 272 Linden dollars, the currency used in the virtual world). This isn’t the only story.
The key benefit of investing in alternative assets is diversification. Such assets are less correlated with traditional stocks and bonds. Moreover, the alternative investment industry is steadily growing and is expected to hit $14 trillion by 2023. So, don’t lose the chance to get yields.
Alex Hayes is a financial expert in lending who writes in-depth articles about all things related to finance and loans.