I used to think that the only way to invest my money was by buying shares in the stock market. However, there are different types of investments you can make. By researching companies and industries, we invest our money into what we think can provide a great return in the future. The stock market is glorified as a money-making machine. We hear about people who are able to make millions when buying a stock at the right time. We see movies like the Wolf of Wall Street or the Big Short, which makes trading look simple and easy.
What Are the 4 Types of Investments?
The reality is that the stock market isn’t free money. Despite the narrative, it takes time and research to do well as an investor. Remember, time in the market beats timing the market. Most people are better off buying shares in an S&P 500 ETF and locking that money in for decades. Investing has become such a diversified world with the advancement in technology.
Stocks are just a small part of investing these days. We’re here to let you know about your other options! You can trade ETFs, mutual funds, bonds, and annuities just to name 4 different types of investments. You can even think outside the box.
NFTs are becoming more and more popular. In fact, Tom Brady started a company that does NFTs for athletes. Instead of collecting signed balls, we could see a new revolution within investing.
The Traditional Investments
Stocks: Any conversation about investing has to begin with stocks. Like I said earlier, I used to think stocks were the only way to invest. The beautiful thing about the stock market is that you can be any type of investor you want.
You can be a long-term investor and passively manage your portfolio. You can be a short-term investor or swing trader, and watch the charts for potential setups and trends.
Invest in only ETFs, and let your money and compound interest work for you. Trade options contracts and use technical analysis to predict how a stock will perform.
Of course the ‘danger’ with the stock market is that things outside of your control can affect your investments. Many retail investors found this out during the Reddit short squeeze events earlier this year.
Market manipulation is under the microscope now, and some investors are looking for alternative places to invest their money.
There is no such thing as zero risk in the stock market, but in the long run, it can be one of the most powerful compounders of money in the world. However, these different types of investments can help you earn money in different ways.
Many believe that real estate is actually the safest investment you can make with your money. The concept of real estate dates back centuries to when owning land was a symbol of wealth and authority. These days, real estate can be used for your own personal living quarters, rented out to tenants, or even used on digital platforms such as Airbnb.
The idea is the same though: owning real estate and land provides a steady income and return on investment. You can always sell your property or land and make a profit off of it as well.
As the world becomes more populated, the scarcity of land will continue to drive up its value. Property owners will always hold a certain amount of power over those who do not.
In terms of investing in real estate, there are all types of different ways to do so. If you are risk-averse and prefer a more stable investment, then real estate is probably a better route than the stock market.
Digital Real Estate: Pardon me? How can real estate be digital? This is actually an all-encompassing term that is gaining popularity amongst investors. The traditional definition of digital real estate is meant to describe domains and URLs that you can buy and sell. Literally, digital property online.
But now, with the advancement of blockchain technology, you can actually purchase virtual plots of land in the Metaverse. I know, it is difficult to wrap your mind around, but people are actually investing in digital land. What will come of these virtual plots? That is really up to how large the Metaverse grows in the future, and that is a whole different discussion for another day! Let’s check out some other different types of investments.
Different Types of Investments That Are Traditionally Outside of the Box
Foreign Exchange: Add Forex trading to different types of investments. I’ll admit I don’t actually know much about foreign exchange investing, other than the fact that you are looking to trade one currency for another. It’s more of a system of arbitrage, but successful Forex traders are able to make a lot of money. Technical analysis is used to determine trends in the currency charts. So it does have a lot in common with trading stocks. Forex trading definitely has a learning curve, and most likely isn’t for the average investor!
Artwork: Art investing is making a digital comeback right now but there’s still a multi-billion dollar global market for real artwork. Much of the allure around owning a unique piece of art is the scarcity of it. Owning a one of a kind piece is as much a status symbol as a nice car or expensive watch. Art investing is something that’s generally for the social elite and the wealthiest. If most people had millions of dollars to drop on art, they’d likely spend it on something else. But for those that enjoy art, there’s nothing quite like owning an original piece and watching the value of that investment go up.
Sports Cards/Memorabilia: Collecting sports cards was a major part of my childhood. When I got older, I was surprised at how many people collect them as an investment. The reasoning makes sense: the older the cards get, the rarer it is to find them in mint condition. Like with art, it all leads back to the concept of scarcity. These days, sports cards include autographs, pieces of memorabilia, and almost always come in limited serial numbered prints. For the die-hard sports fans out there, a mint condition rookie card is our version of a rare piece of artwork.
Cryptocurrencies: Over the past couple of years, cryptocurrencies have surged into the mainstream discussion of investing. Cryptos like Bitcoin, Ethereum, and DogeCoin have become just as well known as blue-chip stocks.
With that being said, there is still a small amount of investors that actually dabble in cryptos. Some say they are too inherently risky, while others do not quite understand the technology behind them.
Cryptocurrencies have become so popular that countries like El Salvador have actually adopted Bitcoin as a legal tender. There has been plenty of controversy surrounding cryptos, including blatant manipulation by celebrities or public figures.
Cryptocurrencies can be inherently risky due to the fact that they are not regulated by an agency like the SEC. The total combined market cap of all cryptos is close to $3 trillion now, so suffice to say most of them are not going anywhere.
Cryptos are receiving institutional support as well from companies like PayPal, Square, and Tesla. Big banks are also adding crypto trading to their brokerage accounts, and a large number of eCommerce platforms now allow payments with cryptos.
Some analysts predict a near-term price target of $100,000 for Bitcoin, while Ark Invest’s Cathie Wood anticipates its price could eventually rise to $500,000 over the next five years. Different coins lead to different types of investments.
One of the major buzzwords for 2021, NFTs or Non-Fungible Tokens are one of the hottest new ways to invest. This is the digital renaissance of art investing, right down to the scarcity and uniqueness of each NFT. These NFTs are actually built right into blockchains, which are the framework for the utility of certain cryptocurrencies like Ethereum or Solana. The blockchain provides a unique digital fingerprint for everything that is recorded on it. It acts as a digital ledger and can therefore guarantee that something is completely one of a kind.
NFTs come in all shapes and sizes. From NBA TopShots to JPG illustrations, NFTs are now a multi-billion dollar market. There is some controversy with NFTs though, as many claim that they are an easy way for criminals to launder money. This is especially true as most purchases and transactions are made anonymously. Still, there is some legitimate momentum behind NFTs, and it will be interesting to see how this industry evolves over time, once the hysteria has died down.
Conclusion on Different Types of Investments
As you can see, there are different types of investments you can make, so don’t just limit yourself to the stock market. With the advancement in technology, it is becoming easier than ever to diversify your investment portfolio and add in some non-traditional forms of investing. The blockchain could end up being a gamechanger for investors. Not only has it provided tokens like Bitcoin and Ethereum to invest in, but it has opened the door to digitally prove how unique something is. In the future, we could all be walking around museums looking at JPGs of cats rather than paintings or sculptures! There is more opportunity to be an investor today than ever before, so take this chance to look beyond stocks and see what else is out there!