I was thinking about my lack of risk tolerance the other week and I thought to myself that I can’t be alone. I am only 30 but in the 12 years since I have become an adult I have seen 9/11, the dot-com crash, housing crash, credit crunch, unemployment rate nearly double, Euro Crisis, commodity correction, and I am sure a few other issues I can’t think of right now. It didn’t take me long to find out that I am not alone.
Some excerpts from a Forbes article/study from late 2011,
- 40% of Gen Y investors are reported as agreeing with the statement, “I will never feel comfortable investing in the stock market”
- 52% of them liquidated a portion of their portfolio in 2010 or 2011 due to market concerns
- They have thirty or forty years before they need the money but they are using reactive short-term strategies rather than implementing proactive long-term strategies
- The average Gen Y investor has 30% of their assets in cash,
Options to Invest in Other Than The Stock Market
Some investment opportunities that do not include the stock market:
- Rental Property – There is no shortage of information on the topic of real estate investments. I hope to buy my first piece of rental property in the next few years.
- Starting or Buying a Business – Talk about non-specific, but most of the businesses in America have little direct involvement with the stock market. I recently professed a business I’d like to own day.
- Guaranteed Insurance Based Investments – I think insurance based investments like annuities or guaranteed protection products like whole life will become more and more popular as this generation of non-risk takers become older. These types of investments may or may not be tied to the market in terms of the actual investment (see: fixed annuities vs variable annuities for example). One must also consider that the insurance company might be providing you with a guarantee but they are investing in this list as well as “the market.”
- CDs – I questioned whether to put certificates of deposit on the list since it is a cash equivalent investment, but they usually provide more of a return than a savings account.
- Debt products – Whether we are talking about corporate debt, sovereign debt, or even asset back debt they are can be owned with little connection to the “stock market.”
What other alternatives are out there?