Unleashing Wealth for Renters: Exploring Two Alternative Investment Strategies
The dream of homeownership has long been a cornerstone of the American Dream. But with the cost of owning a home at historic highs, it's becoming increasingly difficult for many people to achieve this goal. Currently, the housing market is experiencing significant inflation, with home values reaching unprecedented levels. Alongside this, interest rates have soared above the 7% mark, creating an environment in which homeownership is increasingly out of reach for many. These factors render traditional real estate investments less attractive. Consequently, it highlights the need to explore diverse investment avenues that can yield substantial returns, even in the absence of homeownership.
Fortunately, owning a home is not the only path to building wealth. There are several alternative investment strategies that can help those who remain renters to build wealth and achieve financial success. Here are two alternative investment strategies that can help you build wealth even if you don't own a home:
Invest in the Stock Market
Investing in the stock market is one of the most accessible ways to build wealth. In 2022, the market delivered lackluster returns, characterized by a bearish trend. However, those who seized the opportunity to invest during the correction experienced significant overall returns in 2023.
The stock market can be volatile, but it also has the potential for high returns. Investing in stocks allows you to diversify your portfolio and take advantage of a variety of investment opportunities. The stock market has historically provided attractive returns over the long term, despite some short-term volatility. You can invest in individual stocks, mutual funds, or exchange-traded funds (ETFs) to diversify your portfolio and maximize potential returns.
Consider this perspective: while real estate experienced a surge in prices due to the pandemic, driven by remote workers and low interest rates, historically it appreciates at a rate of 3.8% per year. On the other hand, the stock market has shown an average appreciation of 10% per year over a 30-year period. This suggests that investing in stocks can be equally or even more advantageous than purchasing a home, provided that you conduct thorough research, make informed investment decisions, or seek guidance from a qualified financial advisor.
Start a Business
Starting a successful business is one of the best ways to build wealth. If you've read my book, "The Culture of Money," you're aware that my primary source of wealth stems from owning businesses. While I have dabbled in real estate and stocks, neither of these asset classes has yielded returns as remarkable as starting, developing, and ultimately selling a business. Investing in a business entails risk, but the potential for higher returns exists if one learns the art of running a business profitably.
In my previous post, I emphasized the importance of investing in oneself to acquire new skills as a means to safeguard against inflation. Moreover, these newfound skills can be transformed into a profitable business venture. Entrepreneurship can provide the opportunity to create value for others, solve problems, and generate income. With the rise of technology, it's easier than ever to start a business from scratch. There are also many resources available, such as business incubators, accelerators, and crowdfunding platforms, to help new businesses get off the ground.
There are several resources available for aspiring entrepreneurs aiming to start a business. Here are some that you might find helpful:
Business Incubators: Business incubators nurture the development of entrepreneurial companies, helping them survive and grow during the start-up period. A prominent example of a business incubator is Y Combinator, which has helped launch over 2,000 companies, including Airbnb, Dropbox, and Stripe.
Business Accelerators: Accelerators offer a specific program to startups that includes mentorship, educational components, and usually culminate in a public pitch event or demo day. A highly respected accelerator is Techstars, known for its mentorship-driven programs. In my church, we provide the BUILD program, which aims to educate entrepreneurs and invest in their startup ideas. It's possible that similar programs are available in your local area.
Crowdfunding Platforms: Crowdfunding platforms allow individuals to solicit funds from the public to support their business venture. One of the most popular crowdfunding platforms is Kickstarter, which caters to a broad range of creative projects. Another platform to consider is Indiegogo which supports innovations in tech and design before they go mainstream.
With determination, hard work, and strategic planning, starting a successful business can be a viable alternative to homeownership for building wealth.
In conclusion, while owning a home can be an effective way to build long-term wealth, it's not the only path to financial success. By investing in the stock market or starting a business, renters can build wealth and achieve their financial goals. With persistence, dedication, and hard work, anyone can build a bright financial future, regardless of whether they own a home or not. I'm praying for your success.
De’Andre Salter