Unconventional Invesment Choices That Surpassed the Performance of the S&P 500
In the world of finance, taking calculated risks can lead to significant rewards. Here are seven investments that, despite their inherent risks, have demonstrated the potential to outperform the S&P 500 in terms of long-term growth.
1. **Private Equity:** Known for its complexity and illiquid nature, private equity investments can offer substantial returns, particularly for large institutional investors. For instance, CalPERS, America's biggest public pension fund, reported a strong return of about 14.3% in its private equity holdings in its latest fiscal year.
2. **Silver:** Often viewed as less valuable than gold, silver has shown impressive returns in recent years. Its use in various technologies like semiconductors and solar panels, as well as booming demand from industries like AI and electric vehicles, has contributed to its growth.
3. **Bitcoin:** Known for its volatility, Bitcoin has shown remarkable growth over the years. Despite being a high-risk, high-reward asset, it has attracted investors seeking exposure to the cryptocurrency market. In 2020 alone, Bitcoin had a significant surge, with gains over 300%, while the S&P 500 gained around 16%.
4. **Peer-to-Peer Lending:** This investment involves lending money to individuals or businesses through platforms. While it carries risks like default, it can offer higher returns compared to traditional fixed-income investments. In certain market conditions, peer-to-peer lending platforms might even outperform the S&P 500, offering returns of over 10%.
5. **House Flipping:** This method of investment involves buying undervalued properties, renovating them, and selling them at a higher price. While it requires significant capital and carries risks like market fluctuations, it can yield substantial profits.
6. **High-Growth Stocks:** Within the S&P 500, high-growth stocks such as Palantir Technologies have shown significant returns. These stocks are risky due to their high volatility but can offer substantial long-term growth.
7. **Thematic ETFs:** These exchange-traded funds focus on specific themes, such as technology or AI, and have shown dramatic growth in certain periods. However, they are risky due to their concentrated nature and market volatility.
## Considerations
Investing in these slightly 'riskier' opportunities could potentially lead to better returns over the long term. However, it's important to consider your risk tolerance, as these investments are not suitable for cautious investors. Understanding the market and sector trends is crucial for navigating these investments effectively.
Diversification is also key to managing risk. While these investments can offer high returns, spreading your investments to balance out the risk is essential in growth investing. It's recommended to allocate a percentage of cash that can afford to be lost to peer-to-peer lending platforms.
Following the money by reading what fund managers and analysts are backing, and checking which sectors are being tipped for expansion over the next 5 to 10 years, can help in finding growth investments. Emerging industries such as artificial intelligence, clean energy, biotech, and digital infrastructure are attracting big investment and have long-term growth potential.
Remember, growth investing can be exciting, but a little caution goes a long way when the markets wobble. It's essential to do thorough research and consider seeking advice from a financial advisor before making any investment decisions.
- Personal-finance tip: Adding a diverse mix of assets such as private equity, silver, Bitcoin, peer-to-peer lending, house flipping, high-growth stocks, and thematic ETFs to a personal-finance portfolio may generate significant long-term returns, but it's important to assess one's risk tolerance and diversity the investments to manage risk effectively.
- Executing calculated risks in the areas of finance like private equity, silver, Bitcoin, peer-to-peer lending, house flipping, high-growth stocks, and thematic ETFs could potentially lead to better investment returns over the long term, provided that one considers their risk tolerance, understands the market trends, and diversifies their holdings wisely.
