Traditional vs. New Investments

Traditional vs. New Investments

When it comes to investing, sometimes boring is the best course – especially if a particular asset has a solid track record as a proven workhorse.

​​Traditional investments might be boring to the cyber-connected crowd who are constantly chasing the next big thing, but why mess with something that works?
 
Meme stocks and cryptocurrencies are all the rage among young investors looking to get rich quickly, but the chances of becoming millionaires from something everyone is chasing is slim. Just like a lottery, the spoils will go to the ones who lucked out with the right timing. For the rest, it’s Loserville.
 
Smart investors are heavily allocated to traditional investments. Why? Because they’ve already proven themselves. There’s no learning curve with assets that have been around for hundreds of years.
 
With shiny investments with no track record of success, there’s no telling what surprises lurk around the corner that could sink the whole trajectory of the business model.
 
​​Take popular subscribers-only website onlyfans, for instance. Onlyfans generates millions of revenue from its user-created content – much of it sexually explicit – but this week, the company announced that it would ban adult material from the site after pressure from its payment processors. Not wanting to alienate the banks or potential venture capital firms, Onlyfans caved in to the pressure and completely upended its business model.
 
A major challenge is poised to put a big dent in bitcoin’s future popularity on the crypto front. Bitcoin’s recent surge has renewed concerns about its carbon footprint, countering the ethos of one of its biggest cheerleaders, electric vehicle tycoon Elon Musk. Bitcoin has a carbon footprint comparable to that of New Zealand, producing 36.95 megatons of CO2 annually, according to Digiconomist. It seems that this new school investment eats up energy like an old school factory.
 
While on the subject of carbon emissions, Tesla was hit recently with some potentially unpleasant news this week.
 
​​Did you know that one of Tesla’s major sources of revenue is selling carbon credits to other automakers? Did you know that one of its biggest customers will stop buying those credits from Tesla soon? Tesla made $518 million in revenue from sales of credits in the first quarter of this year – most of them to Fiat subsidiary Stellantis. Stellantis recently announced it would wind down its purchase of those credits from Tesla – threatening to put a dent in Tesla’s profitability and its share price.
 
The problem with new and unproven investments is that there are too many surprises and too many variables that can upend a company’s or asset’s trajectory – whether from pressure from interest groups, environmental concerns, or loss of a major revenue stream. New investments face challenges traditional investments have already ironed out because of their decades, even centuries, of established performance.
 
There’s a reason successful investors allocate heavily to traditional investments like real estate. These investments have perpetual demand, and any surprises have already been accounted for, making for returns on both predictable and reliable investments.
 
Why reinvent the wheel?
 
​​Savvy investors are wealthy because they stick with what works, and one of the assets that have never let them down is real estate. ​​So, while the crowds go gaga for crypto and meme stocks, successful investors stick with what’s tried and true.

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John Turley
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