Which Are The Best Alternative Investments To Make For Your Children?

Time is a great healer when it comes to the performance of stocks and a number of financial products and patient investors who are in it for the long term can sometimes be handsomely rewarded.

Our children certainly have time on their side and if you are planning to set them up with a fund for when they reach their adult years or to fund their college and other significant life events, even a small regular amount can accumulate to a substantial figure by them time they reach their late teens.

Every $10 you invest from the day they are born to their 18th birthday would grow to about $3,000 if you manage to achieve at least 3% growth each year. Multiply that by the number you are planning to put away for them each month or as a lump sum and you can quickly see that there is every chance of accumulating a substantial sum, if you are patient and make sound investment decisions.

Our line of thinking has changed in recent years and rather than simply investing in a fund that invests in stocks, there are plenty of alternative investments available to spread your risk and diversify your portfolio.

Not every alternative investment would be suitable if you were investing for your child, so which ones should you consider?

Precious metals

Bearing in mind that your strategy when it comes to investing for your child’s future is about getting rich slowly as time is on your side, you can afford to take a long-term view on markets like precious metals.

Gold and silver have often been seen as a traditional hedge against falling stocks and economic or political uncertainty and although sentiment may have changed slightly in recent times, the price of gold for example, does tend to still follow a pattern of rising in value when stocks are falling.

Consider investing in a gold or silver exchange traded fund (ETF) or maybe investing in a few coins, although you need to be aware of the fact that there are two distinct types of coin to invest in.

Bullion coins are minted by major national governments but their value is fixed to the price of gold and are not collectible, so you are investing in physical stock and paying a commission when you buy and sell.

With a gold ETF you don’t own any physical gold yourself and it is commodity exchange traded fund which combines exposure to mining stocks and the price of physical gold, without actually owning any physical gold at all.

Gold or any precious metal investment shouldn’t be a major part of your portfolio but in terms of investing for your children, your patience can often be rewarded over time and exposure via something like an ETF does give your portfolio a bit of balance in times when the stock markets are performing poorly.

Real Estate

It is no coincidence that so many of the world’s wealthy individuals have substantial real estate holdings and if you are looking to secure a better financial future for your child, real estate investments can help you achieve this aim.

A real estate investment trust (REIT) is an extremely accessible way for individuals to gain an exposure to real estate. An REIT is setup to invest in a variety of different real estate properties and you may even be able to benefit from tax benefits depending on your circumstances.

You can purchase shares of REITs on public exchanges, which means you can enjoy reasonable liquidity, and they pay regular dividends which can be re-invested. REITs are considered to be one of the most liquid alternative investment available and could provide you with great growth prospects and a potentially positive return by the time your child reaches their 18th birthday.

Wine

It might seem a bit odd to invest in wine for your child but investors in fine wines have consistently achieved annual returns of between 6% and 15% over the long term.

Therefore, as a long-term strategy this could prove to be a profitable investment and provide a decent nest-egg for your child if you invest wisely.

Wine connoisseurs and collectors are renowned for their fickle nature so you will need to procure good advice on what to sell and buy for the best returns and you may need to buy in reasonable quantities in order to achieve a sizable return.

If you want to present your child with a decent financial start in life and start investing for them from an early age, alternative investments such as gold ETFs, REITs and fine wines are not a bad play and a viable proposition when compared to simply storing money away in a savings account or just investing in stocks.

SHARE
mm
Elizabeth Goldman is the editor of AlternativeInvestmentCoach.com. She has written for Investing.com, Bullbearings.com and many others.