According to multiple sources, the average millennial has just $8,000 in their savings account. However, considering that the term millennial encompasses an age range of 19 to 39, this figure can differ wildly. Millennials are technically anyone born between 1982 and 2002. This would make up roughly 81 million Americans.
Millennials are also known as being one of the most ambitious generations, constantly looking for ways to double their money through the likes of investing. But with an average savings account of $8000; investing for millennials could be a struggle, they're not exactly going to start their own hedge funds with that.
There is a solution. Alternative investment is a growing market that allow smaller investors the chance to make money in a less traditional way. The global market for alternative investments is set to reach $23.21 trillion by 2026 and shows no sign of slowing.
So what are these alternative investments for millennials? And, what makes an alternative investment? Let's take a look.
What Is An Alternative Investment?
According to the CFA institute, "Alternative investments are supplemental strategies to traditional long-only positions in stocks, bonds, and cash. Alternative investments include investments in five main categories: hedge funds, private equity, natural resources, real estate, and infrastructure."
Which essentially means, they're investments that aren't buying a stock, bond or holding cash in a savings account. Investments such as buying and holding a whiskey barrel, collectible watches, NFTs and even investing in digital real estate or physical real estate are all forms of alternative investments.
But, what is it that makes alternative investments so popular? Why is it popular with millennials?
Investing For Millennials: Why Are Alternative Investments So Popular?
At its most basic, alternative investments are a way for investors to diversify their portfolio, which spreads their risk exposure across multiple, low correlation asset classes. Alternative investments began rising in popularity, post 2008 financial crash.
Some alternative investments are cheaper, more accessible and provide faster returns, therefore, more attractive than traditional investing. Alternative investments include:
- Commodities – materials such as grains, metals, or basic materials
- Hedge funds - pooled funds that speculate using credit or borrowed capita
- Derivatives – futures or options contracts, including carbon credits and foreign exchange
- Collectables– fine art, wine, stamps, classic cars, coins, antiques, jewelry, or other tangible assets with strong fan-bases willing to pay a premium
- Real Estate– directly or through tax efficient pooled investments such as Real Estate Investment Trusts (REITS)
- Insurance risk – bonds linked to events that lead to insurance losses, such as natural disasters
Considering that most millennials are always looking for a to make an extra few bucks from their side hustle, alternative investing could be their lucky break to start compounding their money. You'll also find that younger generations invest in a way that is more socially responsible than older generations.
So, let's take a dive into five alternative investments for millennials.
Five Alternative Investments For Millennials
Diversifying your portfolio into the alternative markets will spread your risk exposure as investors, allow you to save for retirement and build an extra source of income. These alternative investments require less capital, time and effort than traditional investing.
Parcl Real Estate Investing
Ever wanted to invest in real estate without physically owning the property? Or trade a location like you would a cryptocurrency? Parcl is here to make that dream a reality. Real estate investing with Parcl is made easier, cheaper and faster than traditionally buying and holding real estate with thanks to innovative web3 technology.
Would you like to know how this works? Check out this quick explainer video:
Buying and selling NFTs has become a popular side hustle in 2021/22 after many people made millions of dollars from simple 'blockchain profile pictures' and obscure digital 'art'.
NFTs aren't just images on a screen, they're collectibles, and can be videos, digital land, gaming items and much more. You can even use NFTs as a way to verify ownership of an asset such as real estate as all information is stored on the blockchain, making it impossible to alter.
If you want to learn more about NFTs and how to use them to invest in real estate, check out our article: How NFTs will shape the future of Real Estate.
Buying & Selling Watches
Many of us have a friend who's insanely obsessed with collecting watches, and somehow makes a profit from a watch they've been holding for over ten years.
Surprisingly, many people make this their side hustle and regularly buy and sell luxury watches. The good news is that you don't need too much money to get started. You can start for as little as a few hundred dollars.
Making a profit is mainly down to supply and demand, if a watch you buy gets discontinued, chances are the value will increase. The same for most asset classes.
Here are a few tips on how to make a profit on your luxury watches:
- Build connections to procure luxury watches.
- Focus your watch-buying with one salesperson.
- Make sure you don’t go overboard.
If you want to read more about how to make a profit from buying and selling watches, check out this great article: How To Buy And Sell Luxury Watches For A Profit.
We've all heard the stories of teenagers making some serious monthly income by reselling popular sneakers. You might be wondering, the money made would merely be pocket change for your 30-year-old millennials, and you'd be right, that is, if you're clearing millions per year.
Because sneaker reselling isn't just a school-yard hustle, it can be a lucrative income raking some big players millions of dollars each year. Although you can make a huge amount per month, it's not easy.
One of the most well known, successful sneaker resellers is Benjamin Kapelushnik, who started reselling in 2013 and slowly became world renowned selling to celebrities like DJ Khalid. He also goes by the name Benjamin Kickz and owns the sneaker marketplace Sneaker Don.
Check out this interesting beginners guide on sneaker reselling: HOW TO RESELL SNEAKERS: YOUR SIMPLE GUIDE TO BIG PROFITS FLIPPING SHOES.
If you're new to the world of trading, you're probably pretty confused right now. According to Investopedia: "The term derivative refers to a type of financial contract whose value is dependent on an underlying asset, group of assets, or benchmark."
In basic terms, a derivative allows someone to buy into an asset without actually owning the physical asset. You're essentially investing in the price of that asset, you can either go long or short with a derivative which means you're either betting for (long) the asset price to go up, or betting against (short) the asset price to go down.
For many people, buying stocks can be costly and take too long to return a profit. Therefore, if you're looking to invest in the same stocks but cheaper, and faster. Derivative trading might be for you, you don't make a profit from owning the stock but the change in price is what you profit from.
You can learn more about derivatives here: What Is a Derivative?
There is new form of derivative, they're known as synthetics and they essentially allow an investor to buy and sell anything, whether it be physical or digital. You could even trade the price of certain memes, the value of a celebrity and even the carbon footprint of a particular city.
You're most likely very confused, good thing we have a whole article dedicated to synthetic assets.