Investors are increasingly shying away from once-popular investment options such as cryptocurrencies, and are more likely to favour property as a way of achieving the best returns.
While property has been a staple investment choice for decades, being a secure, tangible asset that tends not to see wild fluctuations in terms of its value, the likes of Bitcoin and other cryptocurrencies are a relatively new concept.
The first instance of cryptocurrency on the market, which is a digital currency that can be traded on a decentralised system where anyone can send and receive payments recorded on a public ledger, only came about in 2009. Bitcoin was the first of its kind and is still the most well-known among investors.
While the value of Bitcoin and the like has drastically increased since its conception, the level of volatility in the investment is huge. According to US News, the value of Bitcoin hit $20,000 in December 2017, and investors were reaping the rewards of their somewhat risky investments, but it then went on to plummet.
Investors want safer investments
While some people made a lot of money by backing cryptocurrency – potentially far more proportionally than those who invested in the property market – the turbulent nature of its performance means that some people also lost a huge amount of money, too.
Meanwhile, the UK property market in particular has remained steadfastly stable. The overall trajectory over the last two decades in the UK housing sector has been positive, despite various peaks and troughs that inevitably occur over time, and investors have made extremely healthy long-term gains.
A new study from Michelmores backs up the fact that today’s wealthy investors in particular are becoming more risk-averse. In a survey of 1,500 affluent people, including millennials, Gen X and baby boomers, people are investing their money more cautiously now, and property is becoming more popular.
It found that, across all generations, investors had become more interested in traditional asset classes such as cash and property over the past two years. Risk was classed as the most important factor when investing for 69% of respondents.
In the survey, property was viewed as one of lowest risk options for investors, and one which would offer ‘the best return’. The main draw for investing in property was said to be the high level of security it offers compared to the volatile stock market.
Richard Cobb, senior partner at Michelmores, pointed out the top factors that are influencing the behaviour and actions of investors at the moment.
“Brexit, the pandemic, and the war in Ukraine – on top of a forecasted global recession – have no doubt affected investors’ attitudes to risk and led to people looking for ways to protect their assets and get the best balance of risk and reward.
“On the flip side, more confident investors and those with a longer term outlook may seize the opportunity to buy up assets while the value is low and potentially reap the rewards.”
Another sign of investors increasingly wishing to avoid risk and to future-proof their investments was an increase in interest in ESG (environmental, social and corporate governance) when it comes to where and how to invest. This was particularly prominent among younger people.
More than a fifth of millennials (22%) said that ESG was now a primary concern, while 43% of baby boomers said that it had never been a consideration in their investment decisions.
The report notes: “The data shows increasing positivity towards sustainable investing as generations get younger, possibly indicating a real opportunity for sustainable investing to come of age and be a deciding factor in investment choices of millennials and the generations that follow.”
Overall, the study found that a quarter of respondents now see property as the best protected investment in the current economic climate.