Where can you get returns in this climate?


With interest rates at ultra-lows what are your investment alternatives?

If your savings are sitting in a bank account and accruing next to nothing in returns, you’re likely better off to put your money into an alternative investment. But where should you be invested in 2021: bitcoin, bricks and mortar, gold bullion or buying shares?


Bitcoin and cryptocurrency 

Early investors in Bitcoin enjoyed a nine million per cent rate of return. Bitcoin is now at an all time high and whilst gold has traditionally done well in this type of environment we are now seeing capital flows towards Bitcoin while the USD is low.

PROS:

  • PayPal now allows customers to use cryptocurrencies.
  • Limited Bitcoin supply: only 21 million Bitcoin will be created.
  • Growing demand for digital borderless currencies.

CONS:

  • The sector is largely unregulated, volatile and not easy to navigate. 
  • It's easy enough to buy crypto, but less easy to sell it. 
  • Currency exchanges are frequently targeted by hackers.

Property portfolios

Property investors are looking to pounce soon, according to a 2020 Property Investment Sentiment Survey. During the pandemic, investors were deterred by rental reductions and job instability in the renter sector. But as we emerge from lockdowns around the nation, low lending rates are helping investors reenter the market. 

PROS:

  • It’s never been cheaper to borrow funds.
  • Australian property is less volatile than the share market today.

CONS:

  • Inner city apartments are still exposed to rental reductions.
  • Insufficient deposit? Lenders mortgage insurance can cost thousands.
  • As an asset, direct property holdings can be somewhat illiquid.
  • Great uncertainty exists when it comes to Commercial properties, with the slowing economy and people working from home being the major contributing factors.



Gold bullion; the fear metal

Gold is a long-term form of wealth protection of your money. It can’t be devalued by central banks. Relatively speaking, it’s a finite resource. Though it may seem strange to hold your wealth in physical rock, many do.

PROS:

  • Gold is a quality hedge against a down market.
  • It will still have value if paper currency inflates.
  • Investing in the physical rock can be a simple process with the emergence of Gold Bullion Exchange Traded Funds that are available on a securities exchange, such as the Australian Securities Exchange (ASX).

CONS:

  • Gold has a lousy historical long term return, compared with stocks or bonds.
  • It only earns you money when you sell it.



Share markets and smartphones

A dramatic spike in everyday Australians trading stocks on their smartphone has occurred during 2020. 

While the economy has taken a battering, for some shares (equities) have extra appeal. After all, the potential long term rewards are often the envy of every other investment category… but then there’s the risk to consider. 

PROS:

  • Stocks are easy to buy: through an adviser, a platform or account.
  • ASX200 is on a 12-month forward price earnings multiple of around 20 times.
  • A successful covid vaccine rollout will likely cause a spike in the share market.

CONS:

  • With greater returns comes greater risk. You can lose your entire investment. 
  • It takes time to understand the market, stocks and keep up with company developments. 
  • While about $32 billion of fresh capital was raised during covid in Australia, that figure was almost matched by the value of asset write-offs and impairments across the market.



Other options

These are only four in a wide universe of alternative investment opportunities. Other options include mortgage offset accounts and defensive strategies such as investment grade fixed returns… but we can discuss the suitability of those to your circumstances in person. 

It's important to have an investment strategy that can withstand and recover from market shocks, economic downturns and low interest rates. A Wealth Market Financial Adviser will help you develop and execute an investment strategy that suits your scenario today and plans for tomorrow. 




Disclaimer:
Within this article, Wealth Market Pty Ltd ABN 56 128 350 112, AFSL 482898 (Wealth Market) is not providing advice in relation to financial products or investments. Before making a decision about any of these matters, we strongly recommend that you seek the services of a qualified financial adviser who is able to take into account your individual circumstances. While due care and attention has been exercised in the preparation of this information, Wealth Market gives no representation or warranty (express or implied) as to its accuracy, completeness or reliability. The information presented in this update is not intended to be a complete statement or summary of the matters to which reference is made in this update.