Lowering the Investment Bar

Lowering the Investment Bar

One of the fundamental principles in finance is planning for the long-term. As Boomers reach retirement age and millennials come into greater buying and investing power, the market is bound to adjust. The major problem? Millennials just aren’t investing

The market is unlikely to overlook this multi-billion segment of potential capital so the old and survival-biased beast is forced to look inward. If there’s one thing millennials love it’s new technology so it should come as little surprise that a new wave in investment opportunity comes on the blockchain. A leader in this emerging market class of digital assets published a piece that hit this challenge on the head:

Armed with reasons that range from not having enough money in the bank, to a general distrust of the stock market, 43% of millennials said in a recent GOBankingRates survey that they haven’t invested a dime. The news isn’t good for the other 57% — 54% of them have invested less than $5,000. Some quick math will tell you that, even with compounded interest, it won’t be anywhere near enough for that ideal retirement.
So why aren’t millennials investing? 45% responded that they don’t have enough money, while 34% can be attributed to a lack of education around investing — either they don’t know how or aren’t aware of the different options available. The other 21% either don’t want to invest or don’t have time.

No matter how you slice it, these results reflect how disillusioned millennials feel towards investing, and financial matters in general. The real estate market is off-limits to most, the impending recession has decreased trust in stocks. Bonds pay peanuts in interest. Savings accounts? Well, what’s the point? There is hope, though!
A combination of technological advancement and innovation has given birth to the idea of fractional asset investing. The idea is simple: instead of buying an entire property, work of art, sports collectible, or share, you buy a portion of it, also known as fractional investing…

Why Millennial Investors are Considering Fractional Investment – RealT

So what is fractional investing? Think about it like a traditional REIT or mutual fund but instead of owning a piece of a giant bundle of companies or properties, it can be a piece of a single property. By applying the current investment paradigm on this smaller level, it solves quite a few bars to entry for new investors. RealT continues:

1. It Solves the Money Problem
The main problem with investing it that few people can afford it. Stocks can be very expensive, even for just one share. Fractional investments change this. It lets you buy a $100 or $1,000, or whatever you feel comfortable with, portion of a single share, while entitling you to the benefits of your portion.

2. It Speeds Up the Process
Even if you could afford real estate, the process for making it happen is paved with bureaucracy. Fractional investments remove much of the bureaucracy and legwork from the equation. You simply buy the desired portion of the property, sign a document, and watch as the rental income arrives in your account each month.

3. It Makes Portfolio Diversification Easier
Art as an investment has long been considered an activity of the wealthy. Sure, you’d love to own a masterpiece and then sell it at an auction for a handsome sum, but how many of us have that kind of money lying around? Fractional investments give you access to assets that you wouldn’t normally have access to. You can expand your portfolio beyond stocks, bonds, and ETFs with minimal effort and at a price that is affordable.

4. It Turns Illiquid Investments Into Liquid Ones
Some assets, like real estate and art, can’t easily be converted into cash. To make these traditionally illiquid assets liquid, the assets are often tokenized so that they can be sold fractionally. Tokenization is a method that converts rights to an asset into a digital token. In real estate, for example, your ownership share is denominated in tokens that can easily be exchanged for cash. No real estate agents necessary.

5. It Provides More Passive Income Opportunities
You can park your money in fixed-income assets like bonds as access to passive income, but that’s about it. Your return on investment may not be that high, however. A 30-year US government bond, for example, yields a paltry 2.29%. Fractional investments give you access to higher-yield investments. Owning a portion of a rental property or blue chip share is a lot more lucrative than your typical bond or savings account. And you can reinvest the income for greater profit potential.

Fractional investment is growing everyday and prudent investors are getting ahead of the curve. Pair this easier entry-point with the security of a distributed ledger cutting out administrative risk and the opportunities become even more exciting.

Read more the full article above and more about fractional real estate on blockchain at RealT