19 Investments Better Than Bitcoin
Bitcoin, the digital currency that can be transferred from user to user, remains an investment craze — but there are plenty of people hesitant to jump on the bandwagon, or unclear about what cryptocurrency even is. The skepticism and confusion may be justified: Cryptocurrency's history has been a rollercoaster ride, with setbacks including repeated hacking of exchanges where it's traded; one exchange shut down altogether. Seeking an alternative to this uncertain investment? We tapped business and financial experts across the country for suggestions.
A low-cost, stock index fund that mirrors the performance of the broader stock market has long been a sound investment choice, says Robert Johnson, professor of finance at Creighton University's Heider College of Business. "While not a sexy choice, over the long run, this strategy allows investors to build wealth," Johnson says, noting the average annual return for large capitalization common stocks: about 10.2 percent.
One of the best investments in general is real estate, says Daniela Andreevska, of real estate analytics site Mashvisor. "It's very low risk compared to other types of investments. Because you purchase tangible assets, it is very hard to just lose everything in real estate investing. Even if the housing market temporarily crashes, it will come back." Before investing, however, conduct a careful market analysis — particularly if intending to use property as an investment you'll rent out. Consider all costs to ensure you'll end up with a positive cash flow.
Precious metals were alternative forms of money long before Bitcoin, says Lyn Alden, of Lyn Alden Investment Strategy. At an inflation-adjusted low price not seen since 2009, it may present a good buying opportunity for long-term investors. "As stocks have rallied for nine years, silver became unusually cheap," Alden says. "In addition, silver is cheap compared to gold. The gold-to-silver price ratio has averaged about 50 over the past century, meaning that it would take 50 ounces of silver to buy one ounce of gold. Currently, however, the ratio is over 80, because silver is so cheap." Silver can be be bought in physical form, or held with the iShares Silver Trust ETF (ticker: SLV).
Cable remains one of the best-positioned assets, says James Royal, an independent analyst focused on value-priced stocks. And when it comes to options in this industry, Royal is a big fan companies such as Charter Communications (CHTR), a provider of video and high-speed data services for consumers and businesses. "The high-speed data business is tremendously lucrative and earns very high margins, and unlike the video business, there's no content provider to pay," Royal says. "Customers are very sticky — meaning they don't leave, allowing the company to raise prices a few percent year after year. Meanwhile, the company is aggressively repurchasing its own stock because it's cheap." As more of the world moves into the internet, cable is a strong sound investment choice.
Investing in emerging markets, meaning business interests in developing economies such as Mexico or Colombia, China or India, are historically cheap, Alden says. But a strong dollar and the arrival of U.S. tariffs brought a large sell-off this summer, and that means "emerging markets haven't been this cheap since 2008, and prior to that around 2004," Alden says. "Both of those times were absolutely incredible buying opportunities for emerging market stocks, with strong returns in the following years." While historically volatile — on average experiencing a decline of more than 20 percent every two years — emerging markets are a compelling addition to a diversified portfolio if you're okay with some risk and see volatility as a chance to buy cheap.
Yes, this may sound boring, admits certified financial planner R.J. Weiss, but it remains a sound choice. "A 401(k) with an employer match is one of the best investments out there," says Weiss, who also blogs for The Ways to Wealth. "If you're not contributing up to your 40(1)k match, you're missing out on a guaranteed return that no other investment can provide."
You can invest with the goal of generating a measurable, beneficial social or environmental impact, as well as a financial return, says Dave Fanger, CEO of Swell Investing. "That means your money is accomplishing two things: building your financial future and securing the future of the planet," he says. "The idea is that companies solving enduring challenges like access to clean water and renewable energy present a market opportunity because they are poised for growth over the long term." Impact investing includes different industries and types of companies, from health care to renewable energy or consumer goods. Examples of impact companies include Mohawk Industries (MHK), which recycles 5.4 billion plastic bottles annually to make carpets, or Xylem (XYL), which makes pumps to efficiently move clean water from place to place.
Before sinking money in something as risky as Bitcoin, consider improving your safety net. While savings accounts don't provide a tremendous return, they have improved in recent years, and when your next life emergency comes along (car breaks down, pipes burst) you will be thankful you chose to set aside some extra cash. Some of the top interest rates for savings are offered by online accounts such as Synchrony Bank or Barclays Bank, both offering 1.9 percent.
Commercial real estate investment is a less labor-intensive alternative to buying a single-family home and renting it out yourself. Passive commercial real estate investments, such as investing in multifamily properties or commercial properties — often through REITs, or real estate investment trusts — present a more diversified and balanced approach. "You can be a limited partner investor, which will give you a 6 to 8 percent preferred rate of return with monthly or quarterly payouts that are backed by a hard asset," says Matthew Baltzell, a real estate analyst with Boardwalk Wealth.
Those looking for investments not tied to the stock market might consider agriculture, suggests Chris Rawley, CEO of Harvest Returns. "Over the long term, investments in U.S. farmland have outpaced the S&P 500 and other indices," says Rawley, adding that a growing population and consumer demand for protein make fractional ownership of farms and ranches a compelling opportunity. Crowdfunding now makes it possible to access private offerings available formerly only to institutional investors. Farmers around the world are seeking alternate sources of funding, and crowdfunding platforms make it easier to connect with them.
While there are downsides and risks to investing in small and micro-cap stocks (companies whose total stock value is much, much smaller than giants such as Google or Apple), there are also numerous advantages: for instance, a vast variety to choose from. In addition, these companies and stocks are often less complicated and easier to understand. Small-caps, meanwhile, have outperformed larger stocks over time. While small- and micro-cap companies are riskier, that means they also have more room for growth.
Biotech companies spring typically from an idea for a potential drug or medical treatment and often sell stock to fund research. While biotechs have great potential, investing in them comes with risk. "If you can find a company that has the next great drug, or even a modestly successful one, then you could do quite well," says Royal, the independent analyst. "But it takes a great deal of knowledge about the sector, and the market will buffet the stock up and down mercilessly while the drug is being developed."
Yet another investment for those who like to take a risk in exchange for a potential high return, options let holders buy or sell an asset at a specific price at a future date. The cost is typically far less than the asset represented, making options an easy way to gamble on which direction a stock or commodity will likely turn. "Options are arguably the most flexible of all investments. Investors can use options to benefit from downward or upward stock movements," Alden says. Understand the risks, though: "While some options are conservative and protective, other ones can lose all of their value very quickly. When it comes to options, it's important to know what you're getting into."
Bonds are typically a conservative investment; high-yield or non-investment grade bonds, also known as "junk" bonds, are a different story — they tend to pay higher yields because the companies borrowing money are shaky at best. The stakes are high, in that companies could default, leaving investors at a loss. But by some accounts, the right choices picking junk bonds can pay off. "In good times, junk bonds can potentially give investors better returns than investment-grade bonds because they offer higher interest rates," Alden says. "Investors should be aware that during economic downturns, junk bonds often fall substantially, just like stocks."
While marijuana remains entirely illegal in many states (it's still a Schedule I drug on the federal level), the legal recreational market is expanding rapidly. Countless companies are positioning themselves to take advantage. A handful of marijuana stocks have been doing well this year, increasing in value by double digits as recently as August. Some marijuana stocks to watch include Aphria (APHQF), CannaRoyalty (CNNRF) and Canopy Growth (CGC).
Startups can be a roller coaster ride and not typically the realm of novice investors, the faint of heart, or those who can't afford to lose some money if things go bad. But investing in the right startup can be lucrative. The examples of startups making it big include Facebook, Groupon, Twitter, and Instagram. The best way to get involved: Be an angel or venture capital investor.
Real estate and precious metals are real assets — those two examples are just the tip of the iceberg. Additional options include luxury and collectible goods. Think: wine, art, jewelry, rare coins and even baseball cards. You can buy directly or invest with a fund that focuses on such assets, such as an art investment fund. If you go it alone, though, you'd better know what you're doing.
A hedge fund is an investment partnership that typically involves a professional fund manager and a pool of investors, putting money into a variety of strategies and asset types. This type of investment is different from private equity and venture capital funds; a hedge fund invests in public equities. They also have increased liquidity — you can get your money out more easily.
Though a slightly different approach than other suggestions provided by advisers, it's a good one. "The investment with the highest return is yourself," says Shawn Breyer, of Breyer Home Buyers. "Whether you're trying to go back to school, learn how to build and scale a business … investing in yourself will give you the best return over your lifetime. Self-development builds a solid foundation that allows you to improve your life in all areas."
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