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Investing In The Gig Economy

The Blue Water Team

The gig economy is creating $1.4 trillion worth of business every year, making it a potentially profitable investment vehicle. This article by SoFi provides an overview of the gig economy and its potential for investors. 

The Gig Economy: A Definition

The gig economy consists of a wide array of businesses that rely on freelancers and independent contractors. These individuals use a variety of technological platforms to directly connect with clients and customers. 

Examples of businesses that are part of the gig economy include Uber, Lyft, Upwork, and AirBnB. The contractors who work in the gig economy use a variety of platforms, such as auction platforms, or web-based stores to provide their services to consumers. 

Contracts between contractors and clients can take many forms, from one-time jobs to long-term contracts, from occasional work to full-time services. 

The Gig Economy: Growth Potential

The gig economy is thriving. 42 million Americans work as independent contractors. These workers demographically represent the American workforce as a whole, spanning ages, industries, income levels, and more. 

Since 2014, independent contractors have grown 3x faster than traditional workers, and by 2027, the majority of American workers could be independent contractors. Freelancers are also the fastest-growing group in the EU.

As the number of freelancers grows, so does the number and size of gig economy businesses. For example, Grubhub and DocuSign are experiencing revenue growth that is 2x-3x greater than that of more traditional businesses. 

Reasons to Invest in the Gig Economy

Investors have good reason to choose the gig economy. 

Fewer Workers

The decline of birth rates is leading to a decline in available workers. Businesses want and need to find creative ways to fill open positions and get work done: Gig workers can fill this need. 

Advancing Technology

Technological advancements are making it easier than ever for freelancers and independent contractors to offer their services directly to consumers. Technology is allowing new businesses to compete globally. It is also making it easier for gig companies to gain a foothold in the marketplace, facilitating the creation of talent marketplaces, and removing the need for the traditional employer/employee relationship 

Investing in the Gig Economy

The promise of the gig economy for investors can only be fulfilled if investors know how to access it. Investors typically have four investment options: 

Single Stocks

Single stocks are flexible, liquid, and come with no management fees. Investors, however, must be aware of the time, diversification difficulties these present. 

IPOs

IPOs are potentially profitable, but they are difficult for investors to find, and to access. 

Mutual Funds

Mutual funds allow investors to invest across specific themes, many of which include investments in gig economy businesses. 

ETFs

ETFs have a number of advantages for investors. For example, they offer relatively good liquidity, diversification, low fees, and more. Check out our ideas for investing in the gig economy.