With cryptocurrency taking a beating recently, not every investor is optimistic about its outlook. But if you still want to tap into high-yield investments, here are some crypto alternatives that you can build your wealth.
It doesn’t take a rocket scientist to figure out that we are currently going through an intense crypto crash, with many assets taking a dip. In fact, Bitcoin was down more than 50% below the all-time highs that it reached in 2021. Other coins like TerraUSD crashed almost completely at one point and went from their highest point at US$$1.04 to as low as US$0.26.
With cryptocurrency stable coin regulation and broader institutional crypto adoption by multiple industries and companies still in the pipeline, many experts are optimistic about crypto’s future. However, since it is a relatively new and speculative investment with not much history to back up future predictions, no one can accurately tell what the future holds for crypto.
So if you’re not that optimistic or aren’t that comfortable with buying the dip, there are still other crypto alternatives you can turn to, to achieve high returns, though some may also be equally as risky. We explore some of them here.
Options is a type of investment that is based on the value of underlying securities like stocks. You will be able to purchase a stock or commodity equity at a specified price within a future date range. If the price turns out to be different from what you originally predicted, you will be able to buy or sell the option security.
Depending on the type of contract you hold, you will be able to buy or sell the underlying asset. Bear in mind that each contract has a specific expiration date by which you will have to exercise your option.
Options offer high returns if you are able to time the market properly. This is why this investment instrument can be extremely volatile, giving you either high returns or high losses.
2. High-yield bonds
Bonds are fixed-income instruments that involve you as an investor lending money to a corporate firm or a government body. The bond can be thought of as an I.O.U that includes the loan amount by the borrower to the lender. The bond also includes details like the end date where the principal of the loan is due, and whether the interest payments by the borrower are based on a fixed or variable interest.
Depending on the type of bonds you purchase, some bonds have yields of up to 15% to 20% in exchange for the potential loss of principal. However, government-issued bonds are usually lower in interest. One example is the Singapore Savings Bonds that offer interest of about 1% to 3% p.a. Though the interest is low, it is considered a very safe investment vehicle as it is backed up by the Singapore government that has the highest AAA credit rating.
However, be wary of bonds that offer very high yields. These bonds can sometimes be junk bonds issued by companies that are in heavy debt and financially struggling such that they have a very high risk of defaulting or not paying their interest payments.
New to investing? Compare the brokerage accounts in Singapore to kickstart your investment journey.
Investors who want to invest in property but lack sufficient funds can turn to the cheaper alternative instead — Real estate investment trusts (REITs). It acts like a dividend investment and can offer relatively high returns of up to 10% to 15%, in exchange for tax breaks from the government. REITs comprise a pool of commercial or residential real estate.
REITs perform according to market conditions, and their performance is based on the overall economy citation, interest rates and the state of the property market. This is why they are very volatile and are considered high-risk investments. With high returns, you can also potentially experience high losses.
Known as foreign exchange, forex is the process of changing a currency into another for many purposes like trading, tourism or commerce.
Trading one currency against another as an individual investor can earn you interest rate differentials between two currencies. Changes in the exchange rate for currencies can also earn you profits. This happens when you buy a currency with a higher interest rate, and bet that the currency with the lower interest will fall in value, also known as shorting.
Before the 2008 financial crisis, many investors took advantage of the interest differential between the Japanese yen (JPY) and British pounds (GBP), a strategy known as carry trade.
Forex is also another investment that is extremely volatile. The currencies fluctuate according to interest rates, trade flows, tourism and economic strength as they affect the supply and demand of currencies.
5. Venture capital
If you’ve got the capital and are tired of traditional investment methods, you can always look for businesses to invest in as a venture capitalist. Whether it's a family member, a good friend or an entrepreneur whose business model you are extremely confident in, venture capitalists can profit if the business offers high-demand products and services that the public needs and wants.
However, one of the biggest risks is the leadership behind it. The start-up can have an excellent business model and a great product in mind. But as they said, the devil is in the details, in this case, the business execution. How many times have you read about start-ups folding due to poor management and marketing efforts? In most startups, there is very low transparency in the management’s perceived ability to lead the company to greater heights. For example, though Twitter is one of the world’s most recognisable brands, it is unfortunately considered a business failure it couldn’t translate to profits.
This is why extensive research is needed to ensure that your funds are pumped into the right company. It’s important to look into the viability of the brand and assess whether the brand is set up for success or not. Since there is a significant amount of risk involved, do your due diligence before committing.
You could also open a priority banking account, where you'll be privy to global market insights on structured products and private markets. Benefits include preferential rates on loans and interests, and you could also tap on a team of dedicated wealth management experts and a dedicated relationship manager to enhance your portfolio with other investments.
6. Real estate
Another high-yield investment you can look into is real estate. And yes, I mean buying a second house as an investment. On average, real estate experts agree that anything above 8% is a good return on investment, but aiming for over 10% to 12% is the most ideal.
Real estate investments take a significantly longer period of time to deliver ROI compared to conventional investments where you can let compounding work its magic. Real estate investments require a lot of time spent going for house viewings and negotiating on an agreed asking price (if you purchase a resale property).
Don’t forget that you’ll also have to research key information like past transactions, prices in the surrounding area, and property trends which could affect your investment strategy. Some examples are buying shoebox units for rental and focusing on cash flow-positive properties back in 2012 to 2013, which have now evolved.
On top of that, buying a property also means waiting out the Minimum Occupation Period (MOP) of five years if you purchase a new launch before you can earn rental income and the construction period of up to another three to five years. Bear in mind that you’ll also have to pay the Additional Buyer’s Stamp Duty (ABSD) on your second property which will also eat into your overall profits.
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