From Forbes: Five Alternative Investments To Watch In 2020

(Originally posted at Forbes.)

Investing should never be limited to the buying and selling of stocks, bonds, mutual funds and exchange-traded funds, or ETFs. To achieve genuine diversification, investors cannot ignore the fast-rising alternative investment sector.

Investors in alternatives deploy trillions of dollars globally, and in the decade ahead, alternatives are poised to take center stage in capital markets thanks to their appeal to sovereign and public pension funds. After analyzing global trends impacting the industry, I believe these five alternative investments are likely to perform particularly well in the coming years amid growing recession talk and high geopolitical tensions. But first, what are alternatives?

A Look At Alternatives

Broadly speaking, alternative investment assets encompass all investments outside the traditional classes of stocks, bonds and cash. Therefore, everything from luxury items, such as wine and fine art, to precious metals, private equity, commodities and real estate falls under the banner of alternatives.

Alternatives are legitimate investment vehicles that can pad your portfolio by adding true diversification. Their primary benefit is in redistributing risk, such that your returns aren’t correlated to stock market performance. Instead, alternatives provide a buffer against economic uncertainty and declines in the stock and bond market.

Alternatives operate much the same way as traditional stocks and bonds. The key to successfully investing in alternative assets is to start small and diversify across a wide variety of asset classes such that your returns are maximized and risk isn’t over-exposed to price volatility.

1. Precious Metals

Precious metals, such as gold and silver, have a lot going for them. They are tangible hedges against inflation, are highly liquid and store value safely over time. As “rescue assets,” precious metals can bail out your portfolio in times of economic downturn. With market sentiment uncertain and wide speculation of a looming recession in the year ahead, gold and silver are exceptional hedges against stock sell-offs. However, it’s important to note fees if you go the route of gold ETFs or mining stocks. To save on fees, investors can gain exposure to gold through direct physical purchasing.

2. Equity Crowdfunding

Just as owning a business can be considered an “alternative” investment, so too is owning a slice of someone else’s business. Today, a growing number of startups and fledgling businesses are selling shares of their company on crowdfunding platforms, such as AngelList and SeedInvest. And unlike Kickstarter, investing in seed-stage startups via equity crowdfunding platforms allows you to own a small part of the company.

Investing in equity crowdfunding presents a considerable degree of risk. In the event that the company flounders, so does your share in the firm. However, a company’s financial success can result in considerable gains for early-stage crowdfunding investors.

3. Cryptocurrencies

Speculation of stock market downturn and an impending global recession puts cryptocurrencies among the best alternative investments. Digital currencies are excellent stores of value that are untethered to stock performance and top indices like the Dow Jones or S&P 500.

If you see through the media frenzy and sensational headlines, you might have noticed that the regulatory environment for cryptocurrencies is maturing on a global scale. As the trading infrastructure improves, regulations standardize, and institutional and retail players drive adoption, I expect cryptocurrencies will perform well throughout the early 2020s.

4. Real Estate

Physical real estate remains one of the world’s leading millionaire-makers. Investing in real estate requires patience, skill and a little bit of luck, but it is a relatively safe investment vehicle that performs relatively well during all stages of the economic cycle. Major housing market corrections are comparatively rare, with only 7% of real estate market dips causing a decline in real prices of 20% or more.

5. Tax Liens

During recessions, many property owners default on their mortgage and fail to pay property taxes. To recoup their losses, many municipal governments sell tax liens at auction, which grants the right to collect the tax amount owed by the property owner plus interest. Buying tax liens can allow investors to collect recurring income from their property or potentially even own the home in the event of a foreclosure for a small fraction of its market cost.

What’s Driving The Alternatives Market?

The 2020s will see radical changes in the asset management landscape. PwC market analysts attribute alternatives’ rising tide to three major catalysts: the shift to individual retirement plans, the emergence of new sovereign investors and the increase in high-net-worth individuals from emerging markets. Consequently, the alternative asset market is forecast to reach as high as $15 trillion by the end of this year. For investors looking to capitalize on this burgeoning industry, alternative assets such as precious metals, cryptocurrencies, real estate, equity crowdfunding and tax liens could be good places to start.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

 

Why 2020 Looks To Be The Year Of Bitcoin & Business

More And More Enterprises Are Starting To Leverage Bitcoin Technology

Bitcoin is by far the most popular digital asset in the world, with it consistently maintaining nearly 70% dominance over the entire cryptocurrency market cap.

In 2019, we saw yet another year of explosive Bitcoin price increases and further adoption around the world.  Overall though, this has been the year of the institutional Bitcoin. We saw the birth of multiple Bitcoin products from the institutional trading world, such as Bakkt’s physically delivered Bitcoin futures, Fidelity Digital Assets Bitcoin custody solution and TD Ameritrade’s trading offerings.

It’s no wonder why.  In the ever-growing digital asset space, Bitcoin has the best available trading options for both spot and derivatives, it has the longest proven track record, and with that the largest pool of data.

So where does Bitcoin go from here?

The next step on Bitcoin’s path to world domination is in the business world.

As companies look to develop their payment systems and networks, more and more are turning to blockchain technology as a solution.  It offers faster and easier payments over secure networks, with processes built around smart contracts.

Until now, most of the business-based blockchain developments have been done on private and proprietary blockchain protocols, such as R3’s Corda and Hyperledger Fabric.  This allows businesses to customize their blockchain from the ground up, so in theory, they can provide themselves with top tier privacy, scalability, and transaction completion guarantees.  The downside is that developing your own blockchain from the ground up can be very costly, and consumes a great deal of time and personnel as well.

Is all of that really necessary anyway, when a proven network like Bitcoin already exists?  Development on top of the Bitcoin blockchain wasn’t seriously looked at as a credible option by most major businesses until this year when Microsoft announced their new plans this past May.  Their permissionless, Decentralized Identifier (DID) network, christened “ION”, is being designed to run completely on top of the Bitcoin blockchain.

This bold new direction from one of the world’s technology titans triggered a massive shift in the mindset of enterprise developers and is making the prospect of integrating Bitcoin into enterprise development more attractive by the day.  Companies such as Bitfury have already made huge strides with enterprise-focused blockchain solutions such as their blockchain as a service (BaaS), which uses Bitcoin as a base layer.

So what exactly makes Bitcoin such a great option for enterprise-ready development platforms?  The reasons are plentiful:

• Data integrity – Bitcoin is the most trusted and secure public blockchain.  It’s secured by 97 quintillion hashes per second, a mind-boggling number. It’s also a top priority of Bitcoin’s own developers, and they have shown to be extremely cautious and restrictive about making any changes that could possibly introduce new security issues and compromise the protocol.  It’s also easy to analyze the data with a number of easy-to-use blockchain explorers and surveillance tools available.
• Smart contracts – Back in 2010, opcodes were taken out of the Bitcoin that led to the prevention of smart contract implementation.  Recent developments have changed all of that though, with projects like Blockstream’s Liquid and the new RSK framework, Schnorr signatures, and Taproot will make smart contracts–like executions possible via sidechains.
• Reduced costs – With the Lightning Network now existing as a Layer 2 protocol on top of Bitcoin’s blockchain, transactions and payments are now cheaper and faster than ever without compromising security in the slightest.
• Increased transparency – A native feature of the Bitcoin blockchain.  The developers have stayed away from privacy features seen in other public protocols like MibmelWimble, STARKs, and ZK-snarks.  This is a positive, as these features can make transactions difficult to audit and verify, something business wouldn’t be happy about.

Development on top of the Bitcoin blockchain looks poised to accelerate in the coming year, helped by the critical first-mover advantage and the fact that Bitcoin’s developers aren’t being forced to solve growth issues such as the ones Ethereum and EOS are currently facing.  Add to that the fact that the security concerns that top executives have with the public nature of the blockchain can be solved in the Layer 2 areas. Finally, another blockchain concern, which is the interoperability Bitcoin networks, can be solved using Keep’s tBTC or an Interledger Protocol (ILP) bridge.

As we’ve seen, the Bitcoin protocol has a wide array of advantages of its competition, and that gap will only continue to increase as development speeds up.

What does this mean for the average investor?

As more and more businesses get involved in Bitcoin, it means more and more businesses will purchase Bitcoin.  Which, of course, will naturally lead to further increases in price.

With so many indicators pointing to an incoming bull market in the next few months, now is the ideal time to buy.  Not only are you getting in at a bargain-basement price with the potential for huge growth, but you’ll be protecting your assets as we head into a very uncertain and unpredictable 2020.  Don’t miss out on this opportunity. Act now and reap the benefits.

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