The notion of investing for the future has gained popularity over recent years. Many people, millennials in specific, are following the trending investment strategies today. Diversification is a great quality to have when it comes to investing. Different opportunities offer different amounts of growth when investing, which is a great reason to diversify your capital investments. Before investing in anything, it is always advised to do extensive research and consider the opinion of a financial advisor, who will assess your financial needs and help you with investment decisions.
Stock Market
Perhaps the most popular investment strategy is investing in the stock market. Stocks, also known as equities, are shares or part ownership of a particular publicly traded company. As a shareholder, you can watch the value of a company increase while enjoying the profit from each share you own. Aside from investing in already-famous and successful companies, sometimes bigger opportunities are presented when investing in a new and upcoming company with potential for growth. Stocks and ETF’s have offered the most growth potential compared to bonds and short-term investments. When saving for retirement or future goals, stocks are an excellent option. Additionally, when investing in the stock market, shareholders can ride out periods of stock market drops. Many take advantage of the down period by “buying low”. In the stock market, the best investment is always to buy low and sell high. Since the stock market statistically performs the same way, it should typically rise back up after a decline. This is also why stocks should be invested in for the long term. Appropriate diversification of an investor’s portfolio should be based on their financial situation, and risk tolerance.
Cons
It usually takes time and knowledge to analyze a stock’s pattern and stock ratings. If you pick the wrong stock, you risk losing a significant amount of your portfolio. Volatility makes stocks riskier than investing in bonds. Since prices of stocks can be swayed by investors’ reaction, stocks generally don’t make good short-term investments.
Cryptocurrency
These are digital currencies generated using encryption technology. Much like stocks, the prices of these digital currencies heavily depends on the reaction received by the investors who buy and sell them. The more people that invest in them, the higher the price of a cryptocurrency. Bitcoin is the most popular digital currency today, also being the most expensive at just over $6,000 each. Although the opinion of them is equally decided, there are many reasons to consider cryptocurrencies. One of the main reasons it has gained strong global appeal is the fact that it is not regulated by the government. This is why many consider cryptocurrencies to be the way of the future. Many world leaders have also approved the use of cryptocurrencies as a legal tender. This is creating a trading revolution, as cryptocurrency can be traded publicly on many markets, with Robinhood introducing trading of the digital currency earlier this year. However, much like the stock market, clever investors need to know how to predict the right time to buy and sell.
Cons
Not all financial regulators have embraced the idea. Due to huge daily swings of the price of cryptocurrencies, some are doubting the real value of these digital currencies. Additionally, many new coins have emerged. This makes it difficult to truly identify the most valuable ones for the future.
Real Estate
Perhaps the only investment with almost a guaranteed return is real estate. Many have began to add real estate into their investment portfolios for many reasons. If a property is rented to tenants, this can become a passive income. The value of real estate properties have almost always risen over the years, allowing the owner to sell at a later time for a pleasing profit. Real estate investors also receive tax incentives if the property’s value depreciates over time. Although it may seem like a win-win situation to invest in real estate, there are some disadvantages as well associated with it.
Cons
Aside from needing to take on a mortgage to purchase property, real estate investors also must deal with maintenance issues and their tenants. Real estate property is also not a liquid asset, meaning it can not be turned into cash rapidly in times of an emergency.
Gold
Many people, especially the younger audience, are investing in gold for diversity reasons. Gold often acts as a rescue asset, as it becomes more recognizable during hard financial times. Although it is a competitor to stocks, gold can be a great diversifier because of its low similarities with other assets like stocks.
Cons
Since gold is not a company where the price is dependent on performance, many consider it to be just a piece of solid that simply just sits there. Also, gold only earns the investor money when they sell it. It is also worthless during hard times, with a history of sub-par returns.
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