The old verb “The apple doesn’t fall far from the tree” takes a hit when it comes to wealthy younger investors.
In of above-average returns, high-net-worth millennials and Gen Z Americans prefer alternative investments over traditional investments.
A Bank of America study found this to be the case for 72% of investors aged 21 to 43 compared to just 28% of investors 44 years and older. Should you consider alternative investments too.
Table of ContentsRise of Alternative Investments Among Younger Generations Types of Alternative Investments Millennials and Gen Z Are MakingCryptocurrencies and Blockchain AssetsSee All 10 ItemsRise of Alternative Investments Among Younger GenerationsSeveral factors contribute to younger investors taking alternative investments.
After the 2008 global financial meltdown, low interest rates offered little return in savings accounts and on bonds as Gen Z Americans worked through grade school and millennials were finding their way into the workplace.
This compelled those to look for alternatives.
These younger investors also grew up surrounded by advancing nology and online platforms that have opened everyone’s access to investments once considered the domain of institutional investors.
Comfort and ease navigating their digital world coupled with skepticism getting high returns from traditional assets caused younger individuals to begin seeking out alternative investments.
The allure of cryptocurrency and blockchain along with increased access to financial education also helped drive younger generations to pursue investments beyond stocks, bonds and cash.
Millennials and Gen Zers also want more than just high returns.
Holding tight to the values of sustainability and ethics, many young investors seek out companies that measure the impact of their environmental, social and governance (ESG) decisions.
Through ESG, young investors align earning high returns with their social and environmental concerns.
Types of Alternative Investments Millennials and Gen Z Are MakingHere’s a look at five alternative investments that younger generations are buying and that you might want to add to your investment portfolio.
Cryptocurrencies and Blockchain AssetsCryptocurrency and blockchain nology launched as the oldest millennials were moving into better earning years and younger millennials and their Gen Z counterparts were discovering the world around them.
Unsurprisingly, they embraced this nology. Cryptocurrencies, such as Bitcoin and ethereum, are a subgroup of digital assets that have emerged from blockchain nology for investors to pursue.
Other digital assets include NFTs (non-fungible tokens) and other tokens, such as utility tokens, security tokens and governance tokens.
Memecoins — Dogecoin and Shiba Inu are — are digital assets and a type of cryptocurrency. While they are often created for fun or as a joke, they have captured the interest of investors.
Digital assets are minted on a blockchain, a ledger that tracks ownership information. In these assets offers the potential for quick, high returns.
However, cryptocurrencies and other blockchain assets are highly volatile and lack regulatory certainty.
Real Estate (Fractional Ownership and REITs)Investors have long sought wealth through buying residential and commercial perties.
Younger investors are leveraging the nology of online platforms and virtual and augmented reality to invest in real estate in alternative ways.
Fractional ownership and real estate investment trusts (REITs) are ways to invest in real estate without a huge capital outlay or the need to manage the perty independently.
Real estate crowdfunding allows you to pool your money with others to fund jects or buy a fraction of a vacation or rental. Or much you buy stock, you can buy into an REIT.
This company owns and manages residential and commercial perties and ders some of its fits as dividends to investors.
You can also invest in virtual real estate – digital perties in the metaverse bought with cryptocurrency and represented by NFTs as a deed.
As with physical real estate, you can buy, hold and develop virtual real estate.
Collectibles and TangiblesCollectibles are tangible assets, such as fine art, luxury watches, trading cards, sneakers, coins, vintage cars and more.
Because of their historical or cultural value, collectibles once mostly appealed to ultra-high-net-worth individuals. However, high-end collectibles have become accessible to many through nology.
Other collectibles have gained value from drawing the attention of investors. In collectibles may fall among your diversification strategies.
However, there are plenty of reasons to apach collectibles with caution:IlliquidityChallenges valuing itemsMarket volatilityTransaction costsStorage and maintenance costsFraud risksTax implicationsCollectibles can be added to your portfolio to spread out risk, but don’t rely on most collectibles to fund your retirement.
Precious MetalsAn interesting data point from Bank of America’s study is that 45% of younger investors own gold and another 45% showed interest in in the yellow precious metal.
Precious metals, such as gold, silver, platinum and palladium, are alternative investments with intrinsic value.
Historically, they have held their value during economic downturns when stocks have dropped.
Some believe that individuals between 21 and 43 are putting their money in precious metals because they grew up through the recession caused by the bursting of the dot-com bubble in 2000 and the Great Recession of 2008.
Precious metals have also become more accessible and usable for young investors. Tokenizing real-world assets (RWA) allows ownership of precious metals to be represented on the blockchain.
This has allowed investors to buy, sell and trade assets easily or use the tokenized precious metal as collateral for lending and borrowing among individuals and small es.
Startups and Private Equity (via Apps and Platforms)Millennials and the Gen Z crowd are comfortable with taking risks. They also look for purpose in their investments.
In startups and through private equity is high risk with high potential and mobile apps and online platforms now vide easier access to es and lower the barrier to.
Through crowdfunding apps and platforms, you can contribute to jects, startups or es with a large pool of other investors, possibly receiving rewards or discounted ducts or gaining access to company s before its initial public offering (IPO).
Some platforms require you to be an accredited investor — worth at least $1 million or earning $200,000 per year. Motivations and Behavioral TrendsThe financial landscape is changing.
The habits of millennials and Gen Z Americans are signs of what’s to come. The rise of cryptocurrency was a shot across the bow of traditional financial systems. Investors are changing.
They are looking for fast, high returns and have a higher risk tolerance.
They are educating themselves through the internet and social media and accessing various investments through mobile apps and online platforms. Ready to Consider Alternative Investments.
Younger investors are leading the change in habits in the United States and abroad. Advancing nology and changing attitudes are driving alternative into the main.
You may consider joining the movement to buy alternative investments. Frequently Asked Questions QWhat are alternative investments.
AAlternative investments are a broad grouping of assets that aren’t traditional investments such as stocks, bonds and cash.
They include private equity, real estate, precious metals, collectibles, cryptocurrency and more. They typically have a low correlation to stocks and the potential for higher returns.
QWhy are younger generations branching out from traditional investments. AMany younger investors have turned to alternative investments in of above-average returns, flexibility and diversification.
They are skeptical that traditional stocks, bonds and cash equivalents can vide high returns, tend to have a higher tolerance for risk and seek investments that align with their values.
QDo alternative investments vide higher returns. ACompared to traditional investments, alternative investments, such as private equity and venture capital, have the potential to generate high returns.
However, alternative investments also carry higher risks. Sarah EdwardsSarah Edwards is a finance writer passionate helping people learn more what’s needed to achieve their financial goals.
She has nearly a decade of writing experience focused on budgeting, investment strategies, retirement and industry trends. Her work has been published on NerdWallet and FinImpact.