Local Investing vs. Digital Assets: Which Should You Choose?
Updated on June 17, 2021
If you’re looking for alternative investments, they don’t get much better than local investing and digital assets.
They’ve both seen a considerable uptick in popularity in recent years, as investors constantly look to diversify their portfolios. Traditional investments, such as the stock market, have left some investors wanting more from their investments, both financially and emotionally.
We know this as we currently have investors and entrepreneurs with over $1 billion dollars in credit on file with us to purchase high-quality digital assets. Before we get into why this is, we thought it would be interesting to compare these investment opportunities to help you decide which one is best for you.
What is Local Investing?
Local investing is investing in businesses in your local area rather than traditional investments, such as the stock market. Small businesses, Mom-and-Pop shops, local farms, there are more opportunities than you might think.
The overriding idea behind investing locally is that you are choosing Main Street rather than Wall Street. Next time you go through your town or city’s “Main Street,” take a look at how many of those businesses are independently owned; you wouldn’t see them anywhere else.
The owners of these businesses live in the same neighborhood as you, and they contribute to the local economy as well as making your area a great place to live. This is one of the reasons why investors are beginning to invest locally, but there are a lot more.
Why Invest Locally?
Local investment is about more than just investing for financial return. The reward is that you get to directly help your local community. Small businesses often struggle to get approved for bank loans, but if you have some spare capital, then you can change that. That investment could be the difference between someone getting their life’s passion off the ground or being turned down by another bank.
This is one of the main reasons why people are searching for alternative investments. When you invest in bonds, funds, or stocks, there’s a disconnect between you and your investment. Other than your return, you have no real understanding of the effect your money is having. While it might be making you richer, it’s also likely to be making Wall Street and high-powered financial institutions richer as well.
Taking ownership of your investment means you have complete control over where the money goes. This allows you to invest in opportunities that you personally believe in. Maybe there’s a farm store that wants to distribute local produce but doesn’t have the startup capital. You could step in to invest and would be able to see the evolution of your investment. This provides a very clear picture of where your money goes and has the potential to greatly impact the lives of people in your own community and the community as a whole.
Because you have this direct relationship with your investment, there are usually some nice bonuses that come with it. To say thanks, there might be freebies and discounts on the services or products that the business sells. While it’s not going to grow your wealth, it does represent a fun pick-me-up, particularly if you invested in something that you enjoy.
How to Invest Locally
It can be tricky to get started in local investment. You need to establish yourself as an angel investor, someone who has the capital to become a private investor to fund startups and provide small business loans. This doesn’t necessarily mean you need to be a multi-million dollar investor; some businesses might need a few thousand dollars to achieve their goals.
Traditionally, local investors are required to be active in their community and to have a finger on the pulse for when potential deals may arise. This isn’t about financing your family and friends, but spotting opportunities all around your local area.
Fortunately, this is starting to change, and networks have started to sprout up. In many states across the US, Local Investing Opportunity Networks (LIONs) have been set up to connect investors and business owners. This makes it much easier to find potential deals and projects that you really care about.
There has been another network created called Slow Money. This network is described as a movement that aims to organise investors and donors to steer new sources of capital to small food enterprises, organic farms, and local food systems.
Community Development Finance Institutions (CDFIs) are typically loan funds that are available for underserved and deprived communities that struggle to get funding for business. The returns are modest, a few percent up to around 6%, but the money is directly contributing to the economic development of communities and local small businesses that need it most.
Depending on where you live, you might be able to find crowdfunding opportunities in your area. If you’re in a large city, then small businesses might be crowdfunding for investments. This means you could invest local with the knowledge of where your investment is going.
Business owners are usually looking for financial backing in the form of a loan. In return, you agree upon an interest rate, which is typically set at 4%–7%. Some deals could include an equity agreement where you own a percentage of the company, but this is less common.
It’s a fairly typical investment in that you should know your potential return before you invest, but you must also be ok with the fact that you might not see any return. There is more of an unknown quality when it comes to local investing. You don’t have 30 years of data to go off of like the S&P 500 Index; rather, every deal relies on the circumstances of who you’re investing in.
This makes it particularly important that you do thorough due diligence, as there aren’t any protective regulations as seen with traditional investments. If you do invest locally, then it can be incredibly rewarding in the emotional sense and can earn you a decent return.
Another investment class that takes back ownership of your investment are digital assets.
What are Digital Assets?
Digital assets are online business models, such as affiliate websites, Amazon FBA stores, and e-commerce stores. Basically, any successful business model that takes place online will be classed as a digital asset.
These types of investments have become very desirable for entrepreneurs and investors to purchase. If you’re looking for an investment that still allows you to keep your money away from Wall Street, but has a higher earning potential, then digital assets might be for you.
Why Invest in Digital Assets?
The past few years have seen the market for online businesses become very liquid with a large amount of deal flow year-round.
This makes it relatively easy to find acquisition targets based on the criteria you desire. The listing price, the type of business, and how many hours worked are all search criteria that you can use to find tailored investment opportunities.
Because these are successful businesses that are already earning a profit, you can calculate your return on investment (ROI). Due to the high-earning potential of digital assets, you might be surprised to find out that maintaining the business’s profitability means you could typically get an ROI in two to four years.
Another reason why investors love this class of investment is scalability. While the ROI is already appealing, it’s also possible to speed it up through improving the asset. For example, you buy an affiliate website that makes money by recommending products to consumers. Then, you increase the traffic the website receives, which is likely to increase conversions and improve the net profit, thereby speeding up the ROI.
We published an ROI series in which we interviewed buyers of content websites and Amazon FBA stores to see how their businesses fared after purchasing. There are some pretty amazing results, including buyers who doubled their net profit by making some quick fixes and earned a full ROI in just 12 months.
If your motivation isn’t purely to profit like some investors in digital assets, then there is still the option to invest in things that you care about. Perhaps you’re interested in fitness, why not acquire a content site in the health and fitness niche and create incredibly valuable content to encourage other people into fitness.
If education is a passion of yours, then you could purchase an e-commerce or Amazon FBA store that sells educational resources. Your low supply costs mean that for every X amount of products you sell, you could donate one to your local non-profit charity or community project. There are plenty of options to invest in something you care about or to use the high earning potential to redistribute your wealth into community development.
Similar to local investing, digital assets come with their own set of risks. No high-return investment is without risk, and online businesses can be a volatile investment. The data from our ROI series showed that it’s possible for a business’s profitability to take a hit. If a Google update comes out that impacts your traffic, then your source of income is heavily impacted. There are always going to be cases such as this, but by learning how to invest in digital assets, you can minimize the risk.
How to Invest in Digital Assets
The first precaution you can take is to use a reputable broker to find online businesses to invest in.
At Empire Flippers, we vet all the businesses that get listed on our marketplace to ensure you’re not wasting your time searching through unsuccessful businesses. Register for a free account to get the full range of filter functions and to save listings to your watch list.
When you have this setup, you can begin to establish your investment criteria. If you want to run something hands-off, then you could look for a business that comes with a team to run things for you. There’s also the option to spot assets that need to be fixed up so you can improve their fortunes and try to earn a quicker ROI. For the high net worth investor, this opens up the possibility of purchasing high-performing assets that earn tens of thousands of dollars a month in net profit.
Because of this versatility and a liquid market, it becomes possible to leverage your skills to find tailored investment opportunities in online business. This can give you a competitive advantage over other buyers that allows you to get ahead of the game and spot opportunities where no one else sees them.
Which Should You Choose?
Both of these options are interesting and rewarding investments. Hopefully, this article has brought to light two investment classes that are underrepresented in the investment industry.
If you only have room for one in your investment portfolio, then whichever you choose will largely depend on what type of person you are. Some people are naturally outgoing and will be happy to network with business owners to find local investment opportunities. Other people will prefer to keep a lower profile, or like the benefit of being able to acquire investments remotely. If this interests you, then digital assets will be more for you.
Another point to bear in mind is the ROI. Local investments tend to have a low monetary return, so if return matters to you, then digital assets will be able to deliver this better. The reason we pitted these two investments together is that they both allow you to take back ownership of your money and keep it from big corporations. There’s no doubt that investing locally can be a very emotionally rewarding experience, something that doesn’t happen with most investments.
A simple issue might be that there isn’t the availability of local business in your area. While you may want to invest locally, you may not always be able to find suitable deals. Turning your efforts to online investments could give you the diversity in your portfolio that you’re searching for.
The truth is that local investments and digital assets can both make great investments. If you have the time and room in your portfolio to try both of them, then they would make great additions.
Being in a position to help the community is a very fortunate position. To see what’s available in your area, begin by searching for local investment networks. Test the waters and see what kind of businesses are looking for help. There might be something that you’re passionate about.
In the online business space, there is more and more capital arriving in the market for digital assets, which is a sign that it’s an option that should at least be considered. To get a feel for the industry, take a look at our marketplace to see what kind of assets are available to buy right now. You can also set up a call with one of our Business Analysts if you want tailored investment advice for acquiring digital assets.
