Chapter 3: Fixed Income and Alternative Investments
Property
Investing in properties is a great alternative to stocks, offering its own set of advantages and disadvantages. One of the main advantages is the ability to use much more leverage than with stocks, allowing you to control larger assets with less capital. Additionally, you can earn money through both rental income and property appreciation.
However, the disadvantages include the increased risk associated with leverage and the fact that stocks generally outperform property investments over time.
Despite these drawbacks, the primary appeal of property investing lies in the significant leverage you can access, potentially amplifying your returns.
Recources
Investing in resources is another alternative asset class. The most common resources are gold, silver, and oil, but there are also more advanced assets like beef and wheat.
The key advantage of investing in resources is that you can have assets with zero correlation to the stock market, offering an excellent way to diversify your portfolio.
However, the disadvantage is that investing in less common resources often requires purchasing a large quantity through futures contracts, which can necessitate a substantial portfolio.
Crypto
You've probably heard about the famous pizza story—the guy who spent 10,000 Bitcoin on pizza, which would be worth billions today. While Bitcoin is the most well-known, there are many other cryptocurrencies. Crypto offers some of the highest growth potential because it's such a new asset class.
However, the negatives include high risk and a correlation to the stock market, which limits its usefulness for diversification. At Wealthy Workers, we do not support investing in crypto. It's an asset not backed by real value and too volatile to function effectively as a currency. Nonetheless, we believe people should learn about it to avoid scams and make informed decisions.
Private equity
Private equity is an interesting field and one of the alternative investments that really stands apart from others. Private equity involves investing directly in companies without using a stock market broker. Essentially, it's like going to your local supermarket owner and offering $10,000 for a 10% stake in the company. Think of it like the TV show Shark Tank.
The advantages of private equity include extreme upside potential, direct involvement in the investment, and more control over the business. However, the downsides are significant: it carries extreme risk, and finding and getting into a suitable investment can be challenging.
