Traditionally, when financial advisers provided advice it usually incorporated a few different options on where and how to invest. There was shares, property, bonds and cash. The options were generally limited and most of the time, it would be a collection of actively managed funds that when put together would somehow outperform other investments.
They may have suggested, if you had a lot of money to look at sexier things like geared structured products and options. In fairness, technology made it hard for financial advisers. It was very difficult to manage, get access to other investments and overall help clients take ongoing action so they stayed on track. A time consuming and costly exercise.
But if we think back just a few years ago for a minute, things have changed. Not long ago if you wanted to buy shares in CBA you could, but you had to call a stockbroker. If you wanted to invest in managed funds you could, but you had to fill in a paper application form, write a cheque and mail to the fund provider. If you wanted to buy a property, you could but you had to buy the newspaper, write a list and track all property sales in the area.
I know you wouldn't dream of doing that today, but this was common practice just ten years ago.
The good news is that over the years there has been an explosion in technology enabling more efficiency and investment options for investors. It begun with master trusts and investment platforms. These online platforms allowed investors for the first time to buy, track and manage investment funds easily. Not long after, buying shares was easy. Stockbroking went online and everyone got a commsec share trading account. Now, real estate platforms allow you to find everything you could want to know about the property market without leaving your sofa.
So that's all great but what if there is more to come. What platforms will exist in the future to allow us to invest in other ideas and investments. We all know that things have changed but what we need to know is that what we invest in today will change even more so in the future.
Below are just "some" of the new ways you can or will be able to invest beyond your everyday investments you have today.
Before I begin, please allow me to put a warning in place. I want to be extremely clear that I am not recommending in the slightest any of these investments. If you are considering investing in any investment, you need to speak to a financial adviser and receive tailored financial advice to your personal situation. This list is purely to help educate you and make you aware of what exists and is coming to the world of investing. The companies I list are just some of the options out there and usually there are many similar options that will most likely be just as good or even better.
Fractional Property Investing
Traditionally, if you wanted to invest in direct property you had to buy the whole property and go to a bank to get finance. It is expensive, time consuming and difficult exercise to pull off successfully. Depending on your situation it might also be impossible to invest as you may not have the income or the savings to invest.
But that has all changed. Now you can invest online in minutes in to top quality property for as little as $100 with Fractional Property Ownership. You are now able to buy a tiny portion of a property for a minimal cost. You can also buy in areas that you may not have been able to invest in before because the cost may be beyond your capability. Now you don't have to buy one property but can diversify over many property around the country all from the comfort of your home. This type of property investing gives you all the benefits without the hassle. If you ever want to sell, you can put the portion you own up for sale on the platform to other investors within minutes. This new type of investing is similar to the stock market but for property. It's early days, but this technology will revolutionise property investing and will grow significantly I believe.
Traditionally, if you wanted to invest in a start-up businesses it was very difficult to hear about them, find them and invest. Now there are many platforms to allow start-ups to pitch for investment. A platform to join the investor and the entrepreneur together in one place. Think of it like Shark Tank but for investors online.
Start-ups are undoubtedly risky, but investing in start-ups can in turn be very profitable as well. Everyday investors can now also become equity owners in small businesses without the need to run a business. For business owners, they can grow without going to a bank. It is very powerful bringing the two together.
Early Stage Venture Capital
Venture capital investing is not new but Early Stage Venture Capital Limited Partnerships (ESVCLPs) are. This new type of investment has been given tax enticing status from the ATO and provides a tax offset if you invest. The government recently decided that one of the best way to grow the economy was through innovation and employment growth - no kidding. These funds take the need away for you to go out and find the startups to invest in – they do that for you. Some are also providing the business much more than just money. They are helping the business grow through leadership, contacts, experts and guidance. If you want to invest in innovation and get a tax advantage, this might be idea going forward.
From time to time, we all come up with an amazing idea or two. Even though we like to think they are all world changing ideas, some are better than others. Some people are even crazy enough to dedicate their lives to building something new. What inventors or innovators struggle with however is that once they have build the first prototype of their world changing product, they then need to convince people to part with their hard earned money. Crowdfunding has revolutionised this space. Initially, Crowdfunding initially was used to fund community projects and help people out in need, now it is used to help businesses get started. This allows businesses to get financial support from day one and even clock up their first orders without being in business. On a big scale, Investors come together and invest as a group to come up with the money required to get a business going and on a small (sometimes large) scale people buy the first products.
In the past if you wanted to invest in new residential developments you had to become a property developer. If you wanted to invest in commercial property, it was out of reach. Now, people are coming together to fund developments and big property purchases together. If it was difficult to fund that $2,000,000 investment by yourself, when you split it across 20 investors it is much easier.
Groups of investors are also coming together to build new property developments with builders and architects. It's a growing space and creating great opportunities that may not have existed before with beautiful developments on a small scale.
We are all very aware of how banks make money. They borrow it from us at 2%, borrow a lot more from other banks at 4% and then lend it out to people at higher rates on Credit Cards, Mortgages and Personal Loans. This banking model has been unchallenged almost forever, but it is changing all over the world. Here in Australia it's now on mainstream television and has been running for years in the UK & USA. You can now invest in it and the money will be lent out to borrowers at much higher rates than you would get in a bank savings account.
This is still very early days but instead of paying personal insurance, new mini insurance companies are being made that you can invest in as a collective. If you come together as a group you can limit losses and payout to those of need. It's a way of investing with insurance, a powerful concept.
International Share Investing
At the end of the day, Australia is a drop in the ocean for world wealth. We have an economy and stock market lucky to be 2% of the world. At home, the top 20 companies cover about 50% of the value of all companies. We are tiny, and highly financial services heavy. It is clear that it is advisable to look overseas to invest as well as Australia. The good news is that it is now becoming much easier to not only invest in global funds but also direct shares on world stock markets such as the Dow Jones and London Stock exchange. One way to invest is through an ETF that gives you ownership to a complete overseas market with just one share trade. There have also been new investing platforms such as mFUNDS and share market listed managed funds that can be bought by buying a share not filling in an application form. This is making it much more efficient to invest internationally.
Managed account platforms
While they have existed for some time, managed accounts have finally started to take off. Managed accounts provide transparency, individual tax reporting and more clarity on what you are investing in. Investors can not only invest in funds but they can see all the shares they hold within that fund. Information that was hard to access before and you never really knew what you had invested in. This is changing the game for transparency and tax.
Theme Share Investing
We all believe that we know where the world is going, but in truth nobody has any idea. There are certain themes however from time to time that investors are wanting to invest in. Whether that be green technology, ageing population or resource depletion. Companies are now making this easier to research and execute both in Australia but also worldwide. It's an interesting type of investing and one that has it's benefits and risks.
Examples - CashWerkz
Usually, if you wanted to keep money in the bank for a number of years, it was better to put it in a term deposit. You would get a higher interest rate than a savings account. The problem was that when you wanted to go to another bank you would need to head across the road and the process was a nightmare. This is no longer the case and there is technology to allow you to do this from home and automatically. Amazing technology.
Examples - ImpactInvestingAustralia
There's lots of investment opportunities out there but what if you could invest for two reasons, profit and helping the world, not just to make a profit. Impact investing refers to investments "made into companies, organisations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return". Basically, it's investing to change the world for the better but also to make money along the way. It might not surprise you but money in itself is one of the biggest ways you can impact the world if you allocate it wisely. What if you could make an impact and also make money? Sounds good right? One example, you might buy a commercial property that is a good investment but allow disadvantaged parts of the population live there.
Examples - AustralianEthical
In light of the above, we all need to invest or are investors in some form with Superannuation. But are we supporting a world we can be proud of or are we supporting companies that do not support the world. Responsible investing is saying that I need to invest but I will exclude companies that are not sustainable or beneficial to society. IE: Resources, Gambling, Tobacco, Alcohol, Logging. They also say support companies that are doing well for the world - clean energy, innovative technology, healthcare, sustainable products. In turn, responsible investing has performed very well as it is avoiding a lot of companies that are not sustainable and investing in ones that are growing. Making money and helping the world – a good combination.
We all spend money everyday but what if we invested everyday? Micro-investing does that. What is does is usually round up your spending to the nearest dollar and invests it for the longer term. Acorns in particular have made this marketplace theirs but there are many others. This is a great way to invest automatically and efficiently towards small goals and big ones.
Roboinvesting is now mainstream news. Most people have heard about them and most hate them, but some including me love them. Basically, it's usually technology to manage portfolios of investments efficiently and at a low cost. All around the world they have launched with reasonable success and it is getting cheaper by the day. The good news, is that most business are not just stopping there. Robo V2, V3 and V4 are on the way. Humans are irrational creatures and inefficient compared to robots, so there is definitely room for robo-investing in your portfolio.
Free Share Broking
Examples - Robinhood
Not only was it hard to buy and sell shares in the past, it wasn't cheap. New platforms are destroying the stockbroker model and making it free. This means the cost to buy and sell is non-existent and makes it cheaper to buy and sell if you need to. I do like the name as well of one- RobinHood.
About a year or so ago, bitcoin was all the rage, some would argue it still is. The cost to buy bitcoins went through the roof and the world thought we would have a new currency. That hasn't happened but there are reasons why this is considered to be option. Better technology is coming out and your not crazy to invest in to Digital Currency. It's easier than ever and will undoubtedly grow in demand as the world drowns itself in debt. Watch this space.
Most people believe they are better than the average. We also as humans love to follow others. New platforms are releasing the secret information and expert knowledge that has always been highly sort after. It is becoming more available than ever before to follow so called investment experts and the ones who are smartest guy or girl in the room.
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So as you can see things are changing faster than any of us can imagine. One tip however is that you might find that the way you invest today, will look nothing like that in the future. If you are investing however, it's important to partner with advisers in your life who are across these type of investments. Some will never be suitable for you but over time many will be. I personally love this space as it’s opening up the world to doing things better, not for the sake of it but because it benefits us all.
PS: If you love this area and know of any more, I'd love to learn more.
PPS: This is not advice and do not invest in any investment without getting personal and tailored financial advice to your personal circumstances.