5 Trends That Will Make 2021 the Year of Tangible Assets

Heading into 2021, there are two prevailing types of investors circling the market. The first category includes investors going along with the crowd. They’re snapping up anything and everything from crypto to high-risk stocks with no underlying economic justification for doing so, mostly out of a fear of missing out.

I’m not sure going along with the mob is a sound investment strategy right now. Experts are saying both the stock market and Bitcoin are huge bubbles—both predicted to burst sooner rather than later.

So, you have one set of investors playing with fire on one side. On the other side, you have investors who are avoiding the market altogether. They’re the ones sitting on the sidelines, afraid to jump back in the waters out of a different kind of fear—fear of failing.

Are you sitting on the sidelines or trying to time the market? Did you know there’s a third choice?

There’s a third class of investors that prefer to stay out of the spotlight. These investors aren’t chasing dreams in the stock market or with crypto. They prefer opportunities in the private markets, opportunities in real estate, and other tangible asset classes.

Taking the Third Option

For these elite investors, there are always opportunities. Up market, down market, it doesn’t matter. After an unpredictable 2020, the only thing anybody can predict about 2021 is that it will be different than 2020. And these investors are poised to pounce on the opportunities arising out of these changes.

After a year of the proverbial wildfire that was the COVID-19 pandemic, 2021 is hopefully going to be a year of rebirth and rejuvenation. Some businesses will never come back. Others will rise out of the ashes but come back different.

Yet other new businesses will arrive on the scene to fill the voids left by 2020 and fulfill new demands in 2021. This could be a big year for the deal makers and movers and shakers willing to take the plunge and take advantage of these opportunities.

The Trends Shaping 2021

Here are some of the major factors in play for 2021 and why this year is going to be the year for banking deals in the tangible asset class—in particular, real estate.

Interest rates should remain low. Low interest rates mean low borrowing costs, making leverage more appealing as part of the real estate financing mix, in addition to self-financing and private capital. Lower debt-servicing expenses mean higher ROI. With the Fed’s announcement in August 2020 of its commitment to keep interest rates low for the next five years, we should expect borrowing costs to remain low for a while.

Vaccines. The rollout of COVID-19 vaccines should be followed by a gradual rollout of business, social, entertainment, travel, and sporting activities held in check during lockdowns.

Demand for housing. Housing will be in flux in 2021, with demand following migration. With mass migrations away from coastal metros in California, Washington state, and New York and workers seeking more favorable tax havens, lower costs of living, and higher quality of life in secondary markets in the Midwest and South, demand for housing is expected to fall in some areas and boom in others.

ESG will rise in prominence. Environmental, social, and governance (ESG) investing criteria will gain prominence in 2021 as socially conscious investors evaluate potential opportunities based on more than just profits. The ESG set of standards are criteria investors use to evaluate a company’s approach to and impact on the environment; its relationships with its employees, customers, suppliers, and the communities in which it operates; and how it conducts itself internally.

New business ventures. COVID-19 and government action have contributed to shutting down many businesses and activities, creating a vacuum that will be filled one way or another once pent-up consumer demand is unleashed as consumers emerge from their homes. Demand will be there and create opportunities for existing and new companies to fill the void.

Make A Decision

Investors sitting on the sidelines cling to the mantra of “no harm no foul,” but there’s no such thing. Inaction is as much of an investment choice as investing in something speculative like Bitcoin. In the world of investing, there’s as much to lose from doing nothing as there is from doing something foolish.

Investors who choose to do nothing are proactively refusing to grow money and build wealth. This is as much a strategic course as attempting to beat the market through timing. Neither one has been historically fruitful.

For the non-speculators and the non-hand-sitters, there’s a third option—one ripe for the taking in 2021, a year filled with opportunities and possibilities. There’s no doubt that 2021 will be full of change, energy, and activity. Out of this dynamic environment will arise opportunities for the taking. Don’t let it pass you by.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.