The golden days of cryptocurrencies seem like a distant memory. The all-time highs of 2021 have fizzled out, and we’re seeing crypto crashing at a rate we never saw coming.
The stock market in general has suffered a downturn, but it’s clear that crypto has been hit the hardest. The current economic situation is causing investors to stick with low-risk investments (something cryptocurrencies are not).
Is crypto over? No, crypto will have its day again. Like all investments, crypto must ride out fluctuating economic cycles. But for now, it’s not quite the sure-fire windfall we all hoped it was.
So, what is? Where should you invest your money while we navigate these tricky economic times? We have some ideas. Let’s try something a little less risky… for now.
Gold
Investing in gold has long been a great way to diversify your investment portfolio. Unlike stock investments, gold serves as a hedge against inflation. This is because the price of gold rises as cost-of-living increases. As the least volatile of precious metals, gold holds its value long-term and can provide a financial cushion during geopolitical and economic uncertainty.
While gold can be volatile in the short term, its value tends to rise when stock prices fall, which is why many view gold as a safe-haven investment.
What’s the risk?
Unlike stock investments, there is no fast-growth option with gold. It may take a long time for your gold to increase in value. When it comes to selling your gold, intermediaries must be carefully vetted to avoid any commission issues. Security will be your largest risk if you decide to invest in physical gold. Therefore, many investors opt for digital gold investments.
P2P Lending
P2P lending (peer-to-peer lending) is a system where an investor supplies a loan to a borrower via an official lending platform or managed fund. The idea is to earn money from interest charged over the loan term. Conducting P2P lending through a lending platform lowers the risk of your investment. The platform acts as an intermediary between the investor and borrower, assessing the borrower’s repayment capacity on your behalf.
At the end of the loan term, you’ll have your capital back plus the returns from interest charged on the loan.
What’s the risk?
It’s essential to do your due diligence with the lending platform. It must be a licensed financial service that discloses the lending risk of each borrower. However, borrower risk is the biggest risk in P2P lending. Despite credit checks and risk assessments, borrower circumstances can change, which may mean they cannot make repayments. If the lending platform goes out of business, it may not have the funds to compensate every investor.
Term Deposits
If you’re looking for a super low-risk investment, consider putting your money into a term deposit. A term deposit is an uncomplicated fixed-term investment. Unlike other investments, term deposits don’t require extensive knowledge to invest safely. It’s as simple as opening an account, deciding how much to deposit, and watching your savings grow.
How much interest you earn depends on the amount you deposit and the length of your term. Large investments for long periods will earn the most interest. The interest rate of a term deposit is more flexible and competitive than an everyday savings account.
What are the risks?
While your money is in a term deposit, it’s there to stay until the term ends. You won’t be able to add to or withdraw your funds. If you need money for an emergency, you will have to pay a fee to break your term. There is little to no chance that you will lose your capital as long as your financial institution remains in business.
Property
Few investments can withstand fluctuating economic cycles as property can. While short-term property investment (also known as ‘house flipping’) is best suited to strong economic times. If you want to lessen your risk, viewing property as a long-term investment is best. In the current climate, property will not make you a quick buck. But it’s a good time to buy, and your investment will still be there once we emerge from the economic downturn.
When the market picks up again, you’ll be glad you played the long game.
Keep in mind that investing in property is a bit of an art. Whether you invest in a residential or commercial property, ensure the building and location have the potential to increase in value.
What are the risks?
Property is not liquid like stock investments. You can’t pull your money out whenever you like. If you suddenly need funds for an emergency, you won’t be able to access them from your property. If you plan to rent out your property, ensure your rental price meets all your costs, such as mortgage repayments, insurance, property rates, and tax. Many landlords fail to calculate this correctly, leading them to suffer a loss until the property sells.
Dividend Stocks
Dividend stocks are generally less risky and more predictable than high-growth stocks. They pay their investors regularly, helping to cushion their volatility and hedge against inflation. Dividend stocks can offer a passive income stream as well as a total investment return. The profit you make depends on the amount you invest and the company you choose to invest with.
While investing in dividend stocks can be very safe, it shouldn’t be taken lightly. Investors will need to take the time to research and compare the risks and returns of different stocks. Stocks with stable companies are less prone to market volatility and often make a great long-term investment.
What are the risks?
The success of dividend stocks relies on their company’s performance. They can only be paid out of profits. If a company falls on hard times, its dividend stocks and your investment will suffer along with it. No company is immune to failure. If this happens, you may lose your investment altogether.
Stay Savvy During The Crypto Crash
As the economy takes a dive, cryptocurrencies are no longer centre stage in the investment market. Right now, our best bet is to find low-risk investment options to increase our wealth rather than look for get-rich-quick schemes.
Many investors update their portfolios in response to economic cycles. If you were once all-in on crypto, the good news is that there are plenty of investment options to suit the current climate.
