Inflation and the current economic climate are forcing more and more savers to consider alternatives to traditional investments when it comes to keeping their money. The general decline in confidence in the system, combined with the opaque management of banking institutions, is forcing people to turn away from them, looking for more attractive investments outside the banks.
Here are 5 investments where you can put your money outside the banks:
- Putting your money into property
- Putting your money on the stock market
- Investing in precious metals
- Putting your money into cryptocurrencies
- Investing in collectables
Why put your money outside banks?
It’s an interesting question: why would you want to put your money somewhere other than a bank? There are several reasons.
Investments with lower and lower yields
The return generated is the number one criterion.
Most of the saving account are struggling to retain its following. Admittedly, there is talk of a potential increase in the interest rate to around 3% at the start of the year, but this would still be insufficient to counter rising prices.
And with good reason: even though inflation has fallen in recent months, dropping back to around 6.1% in June 2023, the 3% on your saving account is absolutely not enough to prevent your savings from being eaten away: we’re talking about a negative real rate.
The rate indicated by the investment, i.e. 2% for savings accounts, is known as the nominal rate. The real rate is what you actually earn, less inflation.
Looking only at the figures for the end of the year is all the more misleading, as inflation in US almost reached 9% during the summer, while the interest rate on savings accounts was still set at 2%.
What about other bank products? None of the traditional bank investments, have been able to cushion inflation.
What about life insurance? The problem is a little complex: life insurance in dollars funds, the most secure type of investment based on government bonds, has seen its yields suddenly rise as a result of interest rate adjustments by the central banks (FED and ECB).
The problem is now affecting the units of account in your life insurance policy. With the rise in interest rates, it is these riskier investments that are under threat. If you haven’t already done so, you’ll need to make some judicious (and costly) adjustments to your policies!
A loss of confidence
The second reason why savers are putting their money outside banks is a loss of confidence.
Loans that are more and more difficult to obtain, the difficulty of withdrawing a certain amount directly at the counter, transfers blocked for no apparent reason, increasingly high management fees… Banks are taking frustrating action against their customers.
The spectre of a new recession similar to that of 2008, with the collapse of several banks, is no comfort to customers either. This is the typical threat that hangs over Europe and countries that use euros: for several months now, there has been talk of the solvency of Crédit Suisse, a very large international banking group, whose collapse would trigger an economic and banking cataclysm.
Diversifying your investments
When we talk about investing, we’re talking about risk. The important thing about risk is its management. Good risk management is central to any investment strategy.
But even if you put your money into different banking products, if they are all open at the same bank you are not really diversifying your investments and you are not optimising your risk management because you are subject to the financial health of a single bank.
By investing your money outside the banks, whether in the stock market, cryptocurrencies or real estate, you offer yourself optimal diversification and are no longer dependent on a single player or a single market.
Putting your money into property
Property has a dual advantage: it is a tangible asset, meaning that over and above representing a simple numerical value, your investment is tangible, and it cannot be worth zero because its primary function of providing shelter will be fulfilled even in the event of a property crash.
The other advantage is yield.
A rental property asset yields an average of between 5% and 6% a year, and these figures should continue to rise if we look at the evolution and trend of the property market in recent years: it is also subject to inflation, so prices are rising.
The problem with property? Unless you have a large sum of money at your disposal to buy your property, you will be forced to use the traditional banking system, if only to release the credit you need to finance the purchase.
Finally, you need to assess what you want as an investor: is it just to find a more attractive investment than your saving account or is it to stop feeding the banking system?
If the answer is the first, then go ahead and invest your money in property. On the other hand, if your answer is the second, and you really want to put your money outside the banks, then investing in property may not be the ideal solution.
REITs as an alternative to physical property
If you don’t want to be associated with a bank for this purchase, you can opt for a less expensive property or buy a parking space or an REIT!
REITs are the famous “paper stone”, allowing you to invest in property in a dematerialised way. You entrust your money to a management company that will allocate all the capital under management to different properties on the market, in search of the best possible returns.
In short, investing in REITs means investing in property assets while enjoying the liquidity of shares in a ETF, for example. Like a stock market security, you can sell your REIT very simply, from a distance, without having to suffer all the constraints of physical property.
Reconciling real estate and tokenisation
We’re now moving into a more specific and somewhat technical area: the tokenisation of real estate.
Tokenising real estate means making a digital asset with information permanently accessible on a large public register: the blockchain.
Elimination of notary fees, secure transactions, unlimited investment possibilities, no geographical barriers, no minimum entry budget… The tokenisation of real estate has many advantages to offer.
Want to buy property tokens? We suggest you go through RealT! Launched by 2 real estate experts, RealT has been operating across the Atlantic since 2017 with a very extensive catalogue. Setting up the wallet is fairly quick and their customer service is available to help if needed.
Putting your money on the stock market
This is one of the simplest ways of putting your money outside the banks: investing in the financial markets.
The stock market has the advantage of offering very attractive returns: Over the last 10 years, a ETF made up of the 1,500 biggest companies listed on the stock market (via the MSCI World index) has returned an average of 11.7% a year.
The year 2022, however, marks a turning point: between January 2022 and January 2023, ETF tracking the MSCI World index will post a return of -10.56%.
There is no need to panic, however, as 2022, like 2008 and 1987, is a year of significant decline. Overall, over the rest of the period, the stock market is performing fairly well.
The stock market has the advantage of being accessible to beginners too, or to those who don’t want to take any more interest than that, thanks in particular to ETFs, which are indices that replicate the price of one or more stocks. The best-known ETFs are the MSCI World, which tracks the performance of the 1,500 biggest companies listed on the stock exchange, and the S&P500, a stock market index based on 500 of the biggest companies listed on the US stock exchanges (NYSE or NASDAQ).
As with cryptocurrencies, the stock market is interesting from a long-term investment perspective: engaging in day-trading is a professional practice that remains highly complicated and meticulous.
It is important to note that it is possible to gain exposure to the stock market via your life insurance. Unit-linked life insurance policies are dynamic investments in which it is possible to buy company shares. While this type of life insurance offers a more attractive return on average, the associated risk is higher.
Investing in precious metals
It’s an investment you don’t often think about when you want to keep your money and your dollars away from banks, but buying precious metals offers many advantages for your financial assets.
When we talk about precious metals, we are mainly talking about :
These 4 precious metals are all the rage when it comes to alternative investments.
Here, we will focus on gold because it is the anti-crisis asset par excellence. Even more than the dollar, when the economic system is in crisis, investors turn to gold.
By taking your money out of the banks and putting it into gold, you guarantee that you will get a currency you can trust, rather than a debt currency, represented by the traditional state currencies of euros, dollars, etc.
Gold is the currency of confidence par excellence, which belongs to no-one and which enjoys international consensus as a reference currency, since it fulfils the 3 functions that a currency must fulfil:
- Value reserve
- Unit of account
- Means of exchange
We won’t go into the technical details of gold’s history and value, but just bear in mind that in the event of a crisis it is a safe haven and therefore an asset with which you won’t lose money.
If you are not very confident about the macro-economic context for the coming years, then you should invest some of your money in gold in 2024.
Putting your money into cryptocurrencies
If your confidence in the banking system has been waning for a few years, then perhaps you should swap some of your dollars for cryptocurrencies.
Beyond the mainstream media’s discourse on them, it is clear that cryptocurrencies are being criticised and singled out as dangerous for one very good reason: they offer a genuine alternative to the current banking and financial markets.
The first of the crypto-currencies, Bitcoin, was born in the aftermath of the 2008 subprime crisis with the aim of bringing greater transparency, freedom and less deviance to the financial markets.
Yes, despite Bitcoin’s volatility, it is the closest asset to gold today:
- The maximum quantity is limited: there will only be 21 million, and no one will be able to decide to create more.
- It belongs to no one and is not managed by any company. Its creator, Satoshi Nakamoto, is unknown and has not been heard from since 2010.
- The Bitcoin blockchain is impossible to corrupt and the register is entirely public, so no one can cheat or take advantage of the opacity of the system.
In our view, Bitcoin alone is worthwhile as an alternative way of putting your money outside the banks. The other crypto projects, called Altcoins, are interesting but unfortunately resemble classic financial products issued by private companies whose real usefulness has yet to be demonstrated on the markets.
Recent events have proved us right: since the beginning of June 2023, the SEC (the US financial markets regulator) has made Altcoins its prime target, asserting that these cryptocurrencies are financial securities that must be regulated.
If you still want to take an interest in Altcoins, look at the most serious projects: Ethereum, Cardano, Elrond, etc.
Investing in collectors' items
The last investment you should consider if you want to put your money outside the banks is to invest in collectors’ items.
With this type of investment, you need to be cautious and invest only in properties that have proved their worth, i.e. where there is an existing market with supply and demand, to ensure that your asset appreciates over time.
The best collectibles to invest in :
- Collector’s watches
- Classic car
Why are we talking about these 4 types of collectible? Quite simply because there is an enthusiast market for each of them, so the prices and associated returns can become very attractive.
Let’s look at all the advantages and disadvantages:
First advantage: these are items that you can obtain fairly easily on sites like Ebay or Leboncoin. The one-to-one market is totally possible, although more risky.
Second advantage: the returns on investment are very attractive. With pieces that are often unique or limited, and fuelled by the passion of the buyers, prices can often reach quite high levels.
First disadvantage: a fairly restrictive entry ticket, with the most valuable models of watches or classic cars requiring you to come up with a certain amount to make the initial investment.
The second disadvantage is probably the expertise required to find the right investments or put your money in the right place. On this point, not everyone can master the watch or spirits market, for example.
Finally, investing your money elsewhere than in a bank is accessible to anyone: a multitude of products await your capital, offering much more attractive returns. Depending on your appetite for risk and your investor profile, you need to find the investments that suit you best, but don’t forget that the key lies in diversification: it’s by spreading your money over as many different investments as possible that you’ll manage to put your money outside the banks in the best possible way.
Passionate about savings and investment topics. I modestly try to offer you simple, sometimes not so simple, solutions to beat inflation.