What comes to your mind when you think about investing? For most mutual funds, stocks and bonds are the “ideal” investment channels.
The more daring lot think about real estate investment trusts (REITs) and exchange-traded funds (ETFs).
Make no mistake; these are viable investment options. The problem? In most cases, you have to trade through a broker — and that’s where alternative investment strategies come on.
Some alternative investments can generate a pretty penny, while others may make you a more modest profit than stocks, mutual funds, or bonds. Either way, you’re not stuck in choosing the “traditional” investment options.
In this post, we look at five legitimate alternative investment options you can consider.
Let’s dive right in.
Table of Contents
Gold
Investment experts and financial advisers hail gold as a tangible inflation hedge, a long-term store of value, and a highly liquid asset.
It is not surprising, therefore, that gold is a coveted asset that can rival stocks or bonds.
Further, gold is regarded as an excellent form of investment if you want to diversify your investment primarily because of its significantly low correlation with other assets like stocks. This is especially true when there’s an economic downtown or inflation.
There are several ways you can invest in gold.
For small investors, it is best to choose direct methods of buying gold. These typically involve purchasing gold coins, bars, or other forms of gold.
If you’re investing in gold to hedge your retirement egg nest, it is wise to partner with a gold IRA provider to help facilitate the purchase and storage of your gold.
Financial experts recommend allocating 5 to 10 percent of your investment portfolio to gold. On top of that, learn a thing or two about factors that determine gold prices before investing.
Real Estate
Investing in real estate involves buying and owning properties.
You can, for instance, purchase a house, apartment complex, duplex, or condo and let it out to tenants to enable you to collect rent.
Often, you’ll make a down payment, and your bank will finance the balance. Apart from collecting rent, your property also appreciates.
Investing in real estate is good. However, it comes with its fair share of challenges. For instance, tenants fall behind on rent, accidents can happen, stuff may break inside the houses, and so on.
So, before buying a property, consider the risks and headaches of being a landlord and determine if you’re up to the task.
On the flip side, you can hire a management company to deal with the challenges of owning property, including late rent payments, repairs, etc. Of course, that will eat into your profits, but it will save you a lot of unnecessary headaches.
Alternatively, you can partner with other investors to purchase and manage a property collectively. The idea is to help spread the risk. Besides, you may end up meeting people with an intensive knowledge of managing a real estate property.
Peer-to-Peer Lending
Peer-to-Peer Lending, also referred to as P2P lending, is a relatively new alternative investment vehicle.
For starters, P2P lending involves offering loans for business or personal use and pretty much everything else.
You can join a pool of investors lending money to those who need it. The applicants are vented, and once qualified, the money is disbursed.
P2P lending targets people looking to overcome the somewhat bureaucratic bank loan application process.
As an investor, you’re entitled to a fixed monthly payment derived from the interest charged on loans.
In most cases, P2P lending returns are significantly higher than what you’d get from traditional saving options.
Still, you must be privy to the risk that people may fall back or default on payment. Keep in mind that P2P lending is popular with individuals who cannot get bank loans for one reason or another, which increases the likelihood of default.
Still, you can set the credit limit for applicants to help you make sure you’re lending money to the right people.
Equity Crowdfunding
If P2P lending doesn’t sound like a good investment option, you can consider equity crowdfunding. This involves approaching companies looking for money in exchange for shares in the business.
If you invest in a company through crowdfunding, you own part of it and are entitled to a monetary reward if the business succeeds. Of course, if the company doesn’t perform as expected, you’ll lose part or all your money.
The good thing with equity crowdfunding is that you can start with a few dollars and increase your investment amount over time.
Start a Business
You can start your own business instead of investing that money in stock or bonds.
You’ll need to do your due diligence, though.
First, you must research a good business idea that can potentially generate more returns than all of your investment options.
Remember that a business can fail, costing you a lot of money, so you’ll want to get your facts right beforehand.
Also, your business can thrive, generate a steady income, and grow over time.
You don’t have to put all of your money into a business at first. Some businesses have significantly low upfront and ongoing costs. Viable examples include online or virtual businesses like running a consultancy or digital marketing agency.
Another strategy you can use to become a business owner is to launch a part-time venture — something you can do during weekends or evenings.
Part-time businesses are great if you’re a full-time employee looking for a side-hustle to generate extra income per month.
If you’re unsure which business to start, you can ask a business consultant for advice. If you aren’t present to run the business, make sure you create time once or twice weekly to check what’s happening.
The Bottom Line
Aim to diversify your portfolio.
While investing in stocks and bonds is perfectly in order, you should consider non-stock investment opportunities like those highlighted in this article.
As a rule of thumb, find out possible returns to help you invest where your investment would grow best, depending on the risk.
Still, the higher the risk, the greater the potential profits.
