Alternative Investments to Make in Your 20s

When you start investing young, your most valuable asset is time. It allows you to pursue alternative investments in your 20s that may present higher risks but offer higher rewards over the long term. In fact, many young investors are moving away from more traditional asset allocations toward alternatives such as cryptocurrencies, collectibles and real estate.

At any life stage, but especially in your 20s, you have many good reasons to consider alternative investments and which ones appeal to you. Here’s what to keep in mind before you invest.

Why Consider Alternative Investments in Your 20s?

When you’re in your 20s, the future seems infinite, like a point in time that may never arrive. But when it comes to investing at this age, your future starts now while time is on your side.

Because of your long-term investment horizon, wisely choosing alternative investments while you’re young gives you several significant advantages:

• Compounding gains: This is what you earn over time on top of your investment returns, accelerating the growth of your investment.
• Taking advantage of risk tolerance: Alternative investments can be high-risk, leading to losses, but an early start gives you time to recover.
• Exploring growth opportunities: You can pursue potentially higher returns from alternative assets compared to traditional investments.

Below are some of the top alternative assets to consider.

Real Estate (Including Fractional and Crowdfunded)

Among non-traditional investments, real estate may be the best choice for young investors. Owning property is a time-tested strategy for building wealth, and you can begin without a lot of capital.

Online platforms, such as Fundrise and Arrived, allow fractional or crowdfunding investing in properties with low minimums. It’s possible for some investors to see average annual returns of 6% to 11.5%.

Conduct solid research to help manage potential risks from market fluctuations or platforms, and consider that real estate can be an illiquid asset. It can take time to sell, and some platforms require you to lock in for several years.

Cryptocurrency and Blockchain Assets

Skeptical of traditional markets, many young investors see cryptocurrency as a way to gain significant returns and diversify their portfolios beyond traditional assets. Growing up after the financial crisis in 2008, they prefer its decentralized nature. 

A reported 51% of Gen Z investors (those born between 1997 and 2012) have invested in crypto, which also comes quite naturally to those who grew up with Bitcoin, which arrived in 2009, and Ethereum, which hit the market in 2015. 

Young investors are drawn to crypto because they can operate and experiment without traditional financial intermediaries. They can participate in decentralized finance (DeFi) opportunities, such as staking, where they can gain rewards through a process that helps secure the network.

However, cryptocurrency carries significant risks. Regulations are still evolving, and investors lack protections. The market is also extremely volatile, and quick gains can be lost just as quickly. Do thorough research and make sure you diversify.

Startups and Private Equity (Through Crowdfunding or Angel Platforms)

Investing in startups and young companies used to be reserved for accredited investors — individuals with a net worth of at least $1 million or an annual income of $200,000. However, the Jumpstart Our Business Startups (JOBS) Act of 2012 changed that, allowing regulation crowdfunding (Reg CF) for non-accredited investors to put money into young companies up to a limit within 12 months.

Now, several online crowdfunding platforms provide you with easy access to invest, including:

• StartEngine: The U.S. equity crowdfunder has raised $1.2 billion for 500 startups
• Republic: Democratizes investment in startups and has raised $2.6 billion
• WeFunder: Equity and debt crowdfunding for U.S. startups

These platforms and several others allow young, tech-savvy investors short on capital to start funding startups with as little as $10 while allowing them to back companies that align with their values.

However, you should consider the high-risk, high-reward nature of putting money into startups. The reality is that you could easily lose your entire investment.

Collectibles, NFTs and Other Digital Assets

Young investors are altering the investing landscape by gravitating to newer categories of alternative assets, such as art, sneakers, trading cards and non-fungible tokens (NFTs), which are unique digital tokens that represent ownership of a collectible asset.

Having grown up through two major economic downturns — the financial crisis of 2008 and the pandemic-induced recession of 2020 — many investors in their 20s don’t trust traditional markets. Their skepticism joins a desire for higher returns, a high level of digital literacy, social media engagement and a values-driven investing principle to fuel their pursuit of alternative assets.

As digital natives, young investors are tapping into alternative investments through online platforms such as Acorns, Coinbase, FINQ, Public and Robinhood.

Precious Metals and Commodities

Diversification can help you reduce risk in your investment portfolio, and adding commodities can offer a hedge against inflation and market uncertainty.

Commodities include precious metals (such as gold, silver and platinum), energy (oil, natural gas and gasoline) and agricultural goods (corn, wheat, soybeans and coffee).

A gold rally has pushed the price of the precious metal to historic heights. It is now hovering above $3,300 and is forecast to go higher. However, you can invest in fractions of the metal through online platforms, including DigiGold from the Royal Mint or OneGold from precious metal giants APMEX and Sprott. 

You can also invest through exchange-traded funds (EFTs) that track gold’s price and are backed by physical assets of the precious metal.

Things to Keep in Mind Before Investing

Before jumping into any alternative investments in your 20s, due diligence is crucial. Alternative assets offer a potentially higher return at a higher risk. Consider your own risk tolerance, the time your money will be committed, whether your portfolio is diversified, the tax implications and your long-term financial goals.

Finally, while many young investors follow suggestions from social media, you should avoid the hype and do your research to evaluate the fundamentals of your alternative investments.

Frequently Asked Questions