Drake loses USD$300k bet—lesson offers investors 3 better options to take on risk for financial reward

1. Try your hand at crypto

Cryptocurrency, such as Bitcoin or Ethereum, is one of the most volatile investments you can make, especially since it is unregulated. As a digital, alternative form of currency, it’s managed by the people who use and buy it.

Expect extreme fluctuations and dedicate a small percentage of your portfolio to crypto investing rather than your entire life’s savings. Otherwise, you risk losing a portion – or all – of your hard-earned cash.

On the other hand, we’ve seen incredible returns in the 1000% or more range, so investors with an appetite for big gains (with a risk for big losses) may want to invest, accordingly. Even those with less of an appetitite for risk can capitalize on these market gains with Canada’s first robo-advisor, Wealthsimple, offering a regulated cryptocurrency trading platform called Wealthsimple Crypto. An an online platform, this crypto exchange allows investors to buy and sell crypto — for free. You can even invest your TFSA or RRSP in the Bitcoin ETF. Sign up for Wealthsimple Crypto today.

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2. Try investing in a precious metal like gold

Unlike stocks or real estate, gold doesn’t produce an income. Its future value is tied to price speculation rather than earnings or dividends, unlike an exchange-traded fund (ETF). In the last year, due to high inflation and geopolitical uncertainty, analysts have been cautious about the outlook for the gold market.

Moreover, there’s considerable risk in taking physical ownership of gold bars, coins, or even certificates, since they could get lost, damaged or stolen.

However, gold investors have made a mint over two decades, with an annual average return of 9.7% between 2000 to 2020.

If you’re interested in investing in this flashy — and megastar musician-approved — commodity, it may make more sense to get your gold exposure through a low-cost gold ETF backed by physical gold (stored in secure vaults), which tends to move with the spot price of gold. If you can’t resist the allure of individual stocks, stick with the big names like mining companies such as Barrick Gold (TSX:ABX) or Kinross (TSX:K) that have proven operations and performance.

3. Try investing in income producing trusts (aka: REITs)

Real estate investment trusts (REITs) are surely the less risky and more consistently lucrative choice for an alternative investment, since they can represent different property types in different markets.

Some examples include:

• Commercial (office buildings, warehouses or shopping malls)
• Multi-residential like apartment buildings
• Storage facilities
• Data centres and server faciliites

However, choosing the optimal REIT isn’t always easy, since you’ll want to find one with the right mix of assets and a strong management team that can consistently grow profits. That requires due diligence on your part, and will involve having to sniff out lucrative partners from their potentially subpar counterparts, or even bad-faith actors looking for a quick buck.

Another risk to be wary of involves interest rates. REITs don’t typically perform well when interest rates rise. Investors often see it as an opportunity to purchase bonds and other forms of fixed income instead, which tamps down REIT demand and share prices.

As such, the last few years would have been quite cumbersome for REIT performance, with the suffocating effects of inflation and higher interest rates providing hurdles for investors looking to capitalize on the real estate market. Hopefully, the June 2024 rate decrease will signal further dips in the future and more breathing room for investors — and make returns from REITs more appetizing for investors.

To get started, open a brokerage account that offers access to publicly traded REITs. Good options include:

• Qtrade: Customers get free trades on hundreds of ETFs, while stock trade fees and other share purchase are as low as $6.95 for elite account holders. Earn you up to $150 cashback when you open a new Qtrade account today.
• Questrade: Trading fees range from $4.95 to $9.95 (depending on the account). Open a Questrade account today and get $50 in free trades.

Bottom line

Investing can seem like a daunting journey, but with a diverse portfolio and acknowledgement of risk, it can also be incredibly rewarding. Whether you're dipping your toes into the exciting world of cryptocurrency, safeguarding your wealth with precious metals like gold, or exploring the steady income potential of REITs, there's a strategy out there to match your risk tolerance and financial goals. Remember, the key is to stay informed, diversify your investments, and be patient.