Several significant trends in investor behavior are becoming apparent as 2022 draws a close. Amid record inflation in most developed nations, a worldwide supply chain crisis, an ongoing recession in the U.S., and a roller-coaster stock market, young adults are finding new ways to invest. With recent increases in the average price of single-family homes, millions of potential first-time buyers have been priced out of the market. The lucky few Gen Y and Gen Z professionals who can afford to purchase houses opt for the possible minor dwellings. As Q4 begins, working adults of all ages are exploring affordable ways to add real estate as a chance to diversify their portfolios.
Hard Assets to Fight Inflation
When 2023 begins, cryptocurrency, gold, and silver will likely join fractional real estate shares as some of the hottest investments of the young decade. Other trends lining up to lead the way in the new year include a continued shift toward social trading, hard assets like fine art and wine, direct purchase of a financial interest in startup companies, and equity index funds. Millennials and Gen Z consumers are no longer happy with blue chip portfolios and paper assets that degrade quickly during record setting in inflationary economies and times. The upcoming holiday shopping season will reveal much about current consumer confidence, the state of the recession, and what the first months of 2023 might look like ahead.
Fractional Real Estate Ownership
One of the most common ways people of all ages add a property to their portfolios is through real estate investment shares. One reason fractional ownership in real estate is becoming more popular is for the simple reason of affordability. For building wealth in the 2020s, the real property remains the top choice for people in all income brackets. The recession of 2022 has only served to embed the trend within long-term consumer behavior. Equity markets in all developed nations are reaching volatility levels not seen for at least two decades.
Inflation in the U.S. and elsewhere broke through the double-digit barrier in Q2 and showed no signs of abating. Gen Z and Millennials find it tough to come up with down payments for overpriced homes in most markets. The result is a surge in the popularity of crowdfunding and shared property ownership arrangements. One preferred method for cash-strapped young professionals and others to acquire real estate is via fractional ownership models. This incremental way of adding hard, high-quality assets to a portfolio will continue well into 2023 and beyond, even if the economy miraculously turns around between now and next year.
Already, prospective home buyers are practicing a phenomenon in which first-time purchasers shop for the smallest and lowest-cost properties on the market. The fresh buzz-term in residential real estate is instant downsizing, where first-time home buyers opt for common square foot properties and smaller fixer-upper houses to side-step soaring prices and record inflation.
Bitcoin (BTC) is the chief player in the cryptocurrency segment, an asset class known for high price volatility and substantial potential returns and risks. Gen Y and Z consumers are among the first to add significant amounts of crypto to their financial holdings. In addition to buying massive amounts of BTC and other altcoins, like Ethereum and Cardano, young consumers seek high returns through crypto staking. The practice of staking involves leaving cryptocurrency balances in online accounts so they can earn interest. Compared to traditional banks, crypto can pay high rates on staked deposits. Annual returns of 20% are not uncommon, although the current fluctuating market where we’ve seen massive amounts of profits wiped away can keep some potential investors out.
Gold and Silver
Young adults don’t view gold and other precious metals as older investors do. In 2022, however, Gen Y and Z professionals are adding the yellow metal to their retirement portfolios as the economy sours and inflation eats away at cash and low-interest financial instruments. A large contingent of people under 40 is socking gold and silver bullion into self-directed IRAs.
Wine and Art
Due to crowdfunding and fractional ownership, fine art and investment-grade wines are breaking through to the mainstream. People of all ages, particularly those under 30, are jumping on the bandwagon of alternative asset diversification. For a small sum, individuals can purchase a fractional share of an expensive work of art or a percentage of a case of pricey wine. For many Millennials and Gen Z, the appeal of wine and art combines higher-than-average potential returns and the ease of buying their stakes via online transactions.
Social and Robo Investing
Online brokerage firms have been making headway in 2022 by offering multiple social and automated buying and selling. For a small additional fee, standard account holders can sign up to replicate the trades of an expert. In addition to copy trading, firms offer fully-robotic systems where clients can set specific rules for entering and exiting trades. The set it and forget it option continues to attract new customers to online brokers as 2022 enters its final months.
ETFs and Index Funds
While exchange-traded and index funds don’t pay near the ROI of most alternative, post-modern investing opportunities, there’s still a strong propensity for younger earners to add these more traditional assets to portfolios, retirement accounts, and other personal asset funds. While many wait for the stock market to drop precipitously toward the end of 2022, there’s been a considerable capital influx toward short-index funds, which are betting on a significant downturn in the coming months.
There’s never been more interest in direct investment in startup and micro businesses. Ironically, as the economic climate worsens, it’s easier for owners of new enterprises to source capital from angels and other individuals who want to purchase a stake in a potentially high-growth organization. Why are Gen Y and Z consumers opting for this wealth-building path? Apparently, with banks, savings and loans, and the traditional equities markets offering low or high-risk returns, the idea of plunking cash into a micro company or newly-formed business makes much more sense.