The search for alternative solutions: How are young people getting wealthy outside of the stock market?
A few months ago, CNBC released a revealing study that showed that young people between the ages of 20 and 45 who became wealthy did not do so through the stock market but had to seek alternative solutions. This phenomenon has left most people perplexed, but today we will analyze and explain this trend.
The Role of Central Banks and Their Limitations
If there are any readers over 60 years old, they will likely understand what I’m referring to. Over time, central banks have been limited in their options to prevent an unprecedented market crash. Their two alternatives have been printing more money and lowering interest rates.
While it is true that interest rates have recently started to rise again, if we observe the trend, it is evident that they are heading towards 0% or even negative values, as seen in Japan.
The Change in Investment Approach
This context has brought about a change in the way investments are made, or more precisely, it is bringing about that change. As is the case in all aspects of life, it is difficult to change deeply ingrained ways of thinking. If you have always voted for the Republican party, it is challenging to suddenly vote for the Democratic party. If you have always been a fan of a particular NBA team, it is difficult to switch allegiances. If you have always invested in dividends and believe it is the best investment approach, it is hard to consider alternatives.
So, where am I going with this? Those who have been in this field for a long time have always opted for fixed income investments. Why? It’s simple. In the past, interest rates offered substantial returns when investing in fixed income.
However, with rates at 0%, the paradigm has changed. Now we only have one alternative: to adapt to the new paradigm.
The Rise of Alternative Investments
This shift in paradigm has led young people to lean towards alternative investments, and that is precisely what our portfolio aims to achieve.
I want to make it clear that I am not suggesting that you invest 100% of your savings in Dogecoin or leverage yourself 300% in the stock market index. There are other alternatives that, through risk diversification, can generate substantial profits.
In fact, based on our investment thesis, we believe that gold can be a much more profitable asset than the stock markets in the medium term. For those who don’t remember, I will mention other occasions when this has happened.
The Potential of Gold as a Profitable Asset
Based on our investment thesis, we believe that gold could become a much more profitable asset than the stock markets in the medium term. Historically, there have been moments when gold has demonstrated its ability to generate significant gains. Here are some notable examples:
- Economic and Political Crises: During periods of economic instability or political turbulence, the value of gold tends to increase. This is because gold is perceived as a safe haven in times of uncertainty. In times of crisis, investors seek to protect their capital, and gold presents itself as an attractive option.
- Inflation and Currency Depreciation: When inflation is on the rise and a currency experiences depreciation, gold becomes a reliable store of value. Throughout history, there have been cases where rampant inflation has eroded the purchasing power of currencies and led to an increased demand for gold as protection against value loss.
- Portfolio Diversification: Including gold in a diversified investment portfolio can provide long-term benefits. Diversification helps reduce risk by allocating assets across different classes, and gold has demonstrated its ability to act as an independent asset that is not necessarily correlated with other markets, providing additional coverage against volatility.
Conclusion
In conclusion, CNBC’s study has revealed an interesting phenomenon: young people who become wealthy are not primarily doing so through the stock market but are seeking alternative solutions. This change can be partly attributed to the limitations of central banks and the trend towards near-zero interest rates.
On the other hand, although it may seem that being a store of value for 120 years will last forever, that is not the case. In fact, I would say quite the opposite, looking at the following chart. We are much closer to a paradigm shift. I’m not sure if it will be the Yuan, Bitcoin, or Ethereum, but when a crash occurs, we will try to capture it through complex options strategies.
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