Exploring Alternative Investments for Student Investors

Investing can seem daunting, especially for students who are often juggling classes, part-time jobs, and social lives. However, the earlier you start investing, the more time your money has to grow. While traditional investments like stocks and bonds are well-known, alternative investments can provide unique opportunities for students looking to diversify their portfolios. In this post, we will explore various alternative investment options that are accessible and suitable for student investors.

A student exploring alternative investment strategies.

Understanding Alternative Investments

Alternative investments refer to assets that fall outside the traditional categories of stocks, bonds, and cash. These can include real estate, commodities, cryptocurrencies, peer-to-peer lending, and more. For student investors, alternative investments can offer unique benefits, such as lower correlation with traditional markets and the potential for higher returns.

Why Consider Alternative Investments?

1. Diversification: By including alternative investments in your portfolio, you can reduce risk. Different asset classes often react differently to market conditions.

2. Potential for Higher Returns: Some alternative investments can yield higher returns compared to traditional investments, although they often come with increased risk.

3. Learning Opportunities: Engaging with alternative investments can provide valuable learning experiences and insights into different markets and sectors.

   
   

Types of Alternative Investments

Real Estate

Investing in real estate can be a great way for students to build wealth. While purchasing property outright may be out of reach, there are several ways to invest in real estate without a large capital outlay:

• Real Estate Investment Trusts (REITs): These are companies that own, operate, or finance income-producing real estate. Students can buy shares of REITs, allowing them to invest in real estate without directly owning property.

• Real Estate Crowdfunding: Platforms like Fundrise allow investors to pool their money to invest in real estate projects. This can be a more accessible way for students to get involved in real estate.

  
  

Peer-to-Peer Lending

Peer-to-peer (P2P) lending platforms connect borrowers with individual lenders. As a student investor, you can lend small amounts of money to individuals or small businesses in exchange for interest payments. Some popular P2P lending platforms include:

• LendingClub

• Prosper

  
  

While P2P lending can offer attractive returns, it’s essential to assess the risk of borrower defaults.

Cryptocurrencies

Cryptocurrencies have gained popularity in recent years, and they can be an exciting alternative investment for students. Bitcoin, Ethereum, and other cryptocurrencies can be purchased on various exchanges. Here are some points to consider:

• Volatility: Cryptocurrencies are known for their price volatility. While this can lead to significant gains, it can also result in substantial losses.

• Research: Before investing, students should thoroughly research the cryptocurrency market and understand the technology behind it.

  
  

Commodities

Investing in commodities like gold, silver, or oil can be another way to diversify your portfolio. Students can invest in commodities through:

• Exchange-Traded Funds (ETFs): These funds track the price of a commodity and can be traded like stocks.

• Futures Contracts: While more complex, futures contracts allow investors to buy or sell a commodity at a predetermined price in the future.

  
  

Collectibles

Collectibles, such as art, vintage cars, or rare coins, can also be considered alternative investments. While investing in collectibles can be risky and requires specialized knowledge, it can also be rewarding. Here are some tips for students interested in this area:

• Research: Understand the market and trends for the collectible you are interested in.

• Start Small: Begin with lower-value items to minimize risk.

  
  

How to Get Started with Alternative Investments

Set Clear Goals

Before diving into alternative investments, it’s crucial to set clear financial goals. Consider what you want to achieve with your investments, whether it’s saving for a specific purchase, building wealth, or preparing for future expenses.

Educate Yourself

Knowledge is power, especially in investing. Take the time to learn about different types of alternative investments, their risks, and potential returns. Online courses, books, and investment blogs can be valuable resources.

Start Small

As a student, you may not have a lot of capital to invest. Start with small amounts and gradually increase your investments as you become more comfortable and knowledgeable.

Use Investment Apps

Many investment apps cater to beginners and make it easy to invest in alternative assets. Look for platforms that offer low fees and user-friendly interfaces. Some popular options include:

• Robinhood: Great for trading stocks and ETFs.

• Acorns: Helps you invest spare change into diversified portfolios.

  
  

Risks and Considerations

While alternative investments can offer exciting opportunities, they also come with risks. Here are some factors to keep in mind:

• Market Volatility: Many alternative investments can be more volatile than traditional assets.

• Liquidity Risk: Some alternative investments may be harder to sell quickly, which can be a concern if you need access to cash.

• Lack of Regulation: Certain alternative investments, like cryptocurrencies, may not be as regulated as traditional investments, increasing the risk of fraud.

  
  

Conclusion

Alternative investments can be a valuable addition to a student investor's portfolio. By exploring options like real estate, peer-to-peer lending, cryptocurrencies, commodities, and collectibles, students can diversify their investments and potentially achieve higher returns.

As you embark on your investment journey, remember to set clear goals, educate yourself, and start small. The world of investing is vast, and with the right approach, you can build a strong financial future. Take the first step today and explore the exciting opportunities that alternative investments have to offer!