A Beginner’s Guide to Alternative Investments
Technology continues to change the way people view and interact with the world.
One of those ways is how people invest their wealth. From cryptocurrencies to non-fungible tokens, these shiny alternative investments can be tempting to the risk-willing investor. But is it the right strategy for you? Let’s dig in.
At its core, money is a token or symbol built on trust, one that facilitates an exchange of one’s products or services for that token or symbol. Historically, that trust has been forged by virtue of the backing of government entities.
The 2008 financial crisis took down the global financial system. The libertarian cryptocurrency underground took notice. Their response to the world’s seemingly flawed centralized financial system: bitcoin.
Bitcoin runs over a network of computers that belong to many people, spread out across the globe, who are collectively charged with maintaining and validating its ledger of accounts. No government, no banks, no financial institutions, no intermediary—just like-minded people with computers, Gorrilla-glued together with a common purpose: to create an independent and decentralized financial system.
The mechanism for validating that ledger is something called blockchain. Blockchain is encrypted software, or an algorithm. Thousands of individual computer systems must all validate each transaction that occurs on the bitcoin blockchain ledger. Because that validation process is foolproof, which means it’s 100% accurate, it has slowly built trust in those who use it.
This trust in bitcoin represents a counterweight to the need for traditional currencies backed or guaranteed by a government entity and run by a complex labyrinth of financial partners that, together, represent the current global financial system.
Slowly, bitcoin has become a new token or symbol built on trust to facilitate an exchange of one’s products or services for that token or symbol. In other words, thanks to blockchain technology, cryptocurrencies, such as bitcoin, are quickly evolving from a crypto asset to a form of currency that can be used just like money.
How to Invest in Crypto
You can buy cryptocurrencies, such as bitcoin or ethereum, directly through PayPal or Cash App. Or you can use an exchange.
There are many cryptocurrency exchanges in the marketplace that trade cryptos; to name a few, Biance.US, Coinbase, Crypto.com, eToro, Gemini, Kraken, Robinhood Crypto, and TradeStation.
Lastly, you can invest in crypto-focused mutual funds or exchange-traded funds.
If you’re doing it yourself, you’ll have to do your homework regarding the types of cryptocurrencies you want to invest in, the exchange you want to use to manage your investing or the funds that focus on cryptocurrencies.
If you don’t have the time or interest to research, consider partnering with a certified financial planner or a financial adviser familiar with cryptocurrencies.
Cryptocurrencies are just one byproduct of blockchain. NFTs, or non-fungible tokens, are the latest crypto assets to emerge from this new technology.
The best way to view NFTs is to think of them as a sort of certificate of authenticity accompanying any originally created digital asset. Ownership of NFT-designated digital assets created by someone, such as artwork, music, videos or memes, can be validated as an original digital asset sold to you, by virtue of you owning that NFT-designated digital asset.
Because digital assets can be easily copied and exchanged, without being an NFT digital asset, why would anyone pay a premium for an NFT digital asset?
The answer is simple: A copy is not an “original,” just as a copy of an original painting is not an original. An original da Vinci painting is far more valuable than a copy.
The NFT authenticates that originality. When you own an NFT, you own an original.
How to Invest in NFTs
There are a number of marketplaces that allow you to trade in NFTs, such as Foundation, OpenSea, Rarible or SuperRare. These marketplaces charge a fee for NFT sales.
Ethical Investing is an investment strategy that is aligned to an investor’s ethics, values, morals, religious preference or environmental concerns. Typically, ethical investors buy mutual funds or exchange-traded funds that include companies that meet the investor’s ethical standards.
How to Get Started with Ethical Investing
In the investment world, ethical investments typically include:
- Impact investments – Includes stocks, mutual funds or exchange-traded funds focused on making a positive social or environmental impact on society.
- Socially responsible investments (SRI) – Includes stocks, mutual funds or exchange-traded funds focused on making a positive impact based upon specific religious, political, governance or personal values. These investments are also known as sustainable investments.
- Environmental social governance funds (ESG) – These are mutual funds or exchange-traded funds that are specifically designated an ESG fund because they set high standards for environmental, social or governance investing.
No single type of investment strategy works for everyone. It depends on your financial goals and history. If you don’t feel you have the time or energy to invest in research, consider leveraging the knowledge and experience of a financial adviser.
Reference to any products, service, processes, hypertext links to third parties or other data by trade name, trademark, manufacturer, supplier or otherwise does not necessarily constitute or imply its endorsement, sponsorship or recommendation by SUCCESS®. Product and service information are the sole responsibility of the author.
This article originally appeared in the May/June 2022 Issue of SUCCESS magazine. Photo by @bradneathery/Twenty20
Tom Corley is the author of the best-seller Rich Habits: The Daily Success Habits of Wealthy Individuals. He writes from Rich Habits Institute headquarters in New Jersey.
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