OK Millennials! Forget Stocks, With Current Market Volatility Passive Alternative Income Is Now Having Its Moment

By Connect Invest
With the stock market at its worst and most volatile since the Great Financial Crisis many young investors are now looking for guaranteed income investment products with the expectation that they will provide safety and security, and mitigate any losses from this current market volatility.

Worn down by bad news both in and out of the financial world and still dissatisfied with low interest and long-term fixed-income investment opportunities being offered by traditional banks, young investors are now looking to alternative sources of passive income in search of better interest rates, safety and liquidity.

The problem is that many guaranteed short notes and CDs don’t fulfill the promise they are supposed to: the benefit of better interest rates and lower barriers to entry than what other types of investment products offer, but also backed by physical assets and with short terms.

Indeed, the concept of regular, consistent passive income backed by real assets that provide regular short-term liquidity is still something that remains both relatively unknown and elusive to the majority of non-accredited investors, very specifically Millennials and Gen Z’ers.

It’s not for lack of wanting. A recent survey conducted by Drive Research on behalf of Connect Invest found that nearly half (40%) of U.S. investors are comfortable investing outside of traditional banks and institutions, but the majority of these investors feel they lack knowledge or don’t have enough capital to invest in non-traditional investment products.

It’s also not for lack of interest. The survey found that more than one-third of U.S. investors are looking for opportunities to be more proactive with their investments this year (36%), with the number jumping to 63% when looking specifically at Millennials and Gen Z. 

Furthermore, nearly half of respondents see portfolio diversification as important, and one in four want more of it: With stocks hitting successive post-pandemic highs and digital assets like cryptocurrencies and NFTs soaring in value but now suffering significant losses, Millennials especially feel their investment portfolios are not diversified enough.

To be sure, with the difficulties and precarious situation caused by the pandemic - and while the pandemic granted the ability for young Americans to finally be able to save some money - it has prompted many to rethink their investing goals and consider alternative options, especially ones that don’t require large amounts of up-front capital, don’t lock in that capital, and don’t require being deemed an accredited investor.

They also don’t necessarily want traditional, bank-offered, off-the-shelf CDs that offer still-lower yields and inflexible terms. 

Accessibility is also key. Investors need to have access to investment options that will allow them to generate monthly income, with less risk and more predictability. Fixed-income investments that guarantee monthly returns give investors, particularly new investors, the opportunity to grow their income and gain exposure to alternative markets. 

Take the real estate market for example. As concerns grow over the strength of the real estate market, it remains one of the most stable asset classes. Investors have the opportunity to fund real estate projects through short-term investments that will drive monthly returns for them. Throughout the term, investors generate monthly interest on the principal investment until the end of the investment term, at which point they receive back their full principal amount. It’s the knowledge of how to invest during times of concern that young investors are looking for.

A reality confirmed by Drive Research is that younger Americans are increasingly seeking investment advice through non-traditional sources, as their lives and education have gone online. 

More than one-third (38%) of Millennials and nearly half (47%) of Gen Z’ers are turning to YouTube, and TikTok is also gaining traction with 17% among Millennials and 29% among Gen Z’s getting advice from the popular social media app.

True diversification has long been available to investors: the issue is that it is predominately only available to institutional and high-net-worth investors who are both qualified and familiar with the types of investment offerings that offer risk mitigation and protection against volatility.

Less known is that it is also available to the average investor at a fraction of the cost - and risk - that many other alternatives require.