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If you’re going to make a run for the riches, you could well do it in sneakers — investing in them, that is.
The Bank of America’s 2024 Study of Wealthy Americans shows that millennials and Gen Zers with at least $3 million to invest are three times more likely to opt for alternative investments than older generations. In other words, they’ve shunned stocks to stock up on art, collectibles and crypto.
In all, 83% of wealthy young Americans ages 21 to 43 own or are interested in an art collection compared to 40% of the wealthy overall. They’re investing in “blue chip art,” said Drew Watson, Bank of America’s Head of Art Services, in a Bloomberg interview.
“The fastest-growing segment of the art market is still post-World War II and contemporary art”, Watson added.
The question is, do strategies like this paint a picture of financial gain? Let’s explore the world of alternative investments.
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A (financial) appreciation of collectibles
With art and vintage items, the appeal is obvious.
After all, which is more fun? Owning 1,500 shares of General Motors, (worth about $68,000) or snagging a GM throwback like a 1960 Chevy Corvette that currently fetches an average of $69,200?
As for whether a collectible-based strategy can build wealth, there’s no way to know definitively.
As with crypto, hitting the jackpot on a sought-after item is often a matter of luck and timing, a tricky proposition at best.
In spite of risky returns on collectibles, young Americans appear to be onto something when it comes to their interest in art.
Fine art is one investment that consistently outperforms the stock market over the long term. In fact, according to a report in Fortune magazine, contemporary art outperformed the S&P 500 with a compound annual growth rate of 12.6% between 1995 and 2022.
Many investors consider it an asset reserved for the top 1%, but that’s no longer the case: Masterworks is making elite art investments accessible and hassle-free.
Masterworks is a top platform for retail and accredited investors to purchase fractional shares of blue-chip artwork by iconic artists like Picasso, Banksy and Basquiat.
Once you join the Masterworks community of more than 280,000 members, you can browse through their extensive portfolio and choose how many shares you’d like to buy of the works you like — and Masterworks takes care of all the details. When the firm sells a piece you’ve invested in, you get a return from any net proceeds.
For comparison, let’s return to those sneakers: You could cash in big time or get ripped off, depending on whether you’re buying or selling, knowledgable or gullible.
Nike Air Jordans are especially coveted, and an eBay seller is currently asking $1 million for a pair of Jordan 1 retros. These multicolor beauts fetched $135 when released in 2010, but another pair recently sold on StockX for $1,281.
The lesson is clear: Be careful of those who would sell you their sole.
Wealth beliefs across the generations
One characteristic that the Gen Zers, millennials and baby boomers surveyed by BofA share, almost to the percentage point, centers on viewing their financial security as good or excellent: 75% for ages 21-43 versus 78% for those 44 and up.
The sharp divergence comes, then, with how the generations have chosen to build wealth. There’s distrust among millennials and Gen Z with the tried-and-true route, as 72% believe it’s “no longer possible to achieve above-average investment returns by investing solely in traditional stocks and bonds,” according to the survey. Only 28% of those aged 44 and older agreed with this statement.
Read more: Rich, young Americans are ditching the stormy stock market — here are the alternative assets they’re banking on instead
More alternatives to the stormy stock market
Investing in collectible items isn’t the only approach to take in building up your wealth. Other assets like gold and real estate create potential for consistent returns.
Real estate
Both residential and commercial real estate has long been a solid choice for investors looking to diversify and add stability to their portfolios. Since having a place to live is essential, real estate remains a stable, relevant asset.
With much lower upfront costs, new platforms are helping eager investors gain access to the housing market by removing financial barriers that previously kept them on the sidelines.
For instance, Cityfunds lets you invest from hot housing markets in major cities like Austin, Dallas, Miami, Tampa, Denver, Phoenix, and Nashville via owner-occupied residential properties.
They secure an interest in a home’s future value in exchange for cash. As homes’ values appreciate, so does the value of Cityfunds equity investment alongside the homeowner.
So, you can invest in portfolios of owner-occupied properties for as little as $500 and gain access to a $20 trillion home equity market without the hassle of dealing with high home prices, an expensive mortgage, or the extra work of being a landlord.
If you’re an accredited investor, you’re not limited to residential real estate. Commercial real estate is another example of a reliable income stream — and you don’t need to invest an arm and a leg to tap in. For example, First National Realty Partners specializes in grocery-anchored commercial real estate properties with historically strong return potential.
FNRP has developed relationships with the nation’s largest essential-needs brands, including Kroger, Walmart and Whole Foods, and provides insights into the best properties both on and off-market.
You can even invest through a Roth IRA — meaning, you’ll receive tax-free payments and distributions.
FNRP offers “white-glove” service to their investors, so you can engage with their experts, explore available deals and easily make an allocation, all in one personalized portal.
Gold
Gold is a great potential alternative because, unlike the U.S. dollar, which has lost 98% of its purchasing power since 1971, gold has remained more stable over time.
Many investors turn to “safe haven” assets like gold during economic and geopolitical instability to preserve their wealth. The enthusiasm of investors has indeed propelled the price of gold to record levels in recent years.
You can get a piece of this golden action by opening a gold IRA — a type of individual retirement account that allows you to invest in gold and other precious metals in physical forms — with the help of American Hartford Gold
One of the country’s most trusted precious metals companies – with an A+ rating from the Better Business Bureau – American Hartford Gold has helped thousands of clients protect their retirement.
If you want to learn more about whether this alternative investment is right for you, you can sign up to receive a free investor kit and up to $15,000 in free silver on qualifying purchases.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.