Career Advice - A Community Blog

Erik Larson writes about the job market, resume improvement, and career advice

Top 5 Alternative Investments to the Stock Market

Written by Erik Larson, Community Blogger | Nov 20, 2017 2:09 PM

Investing in the stock market is common, many individuals of various socio-economic backgrounds regularly or periodically buy stocks. Some do so to generate dividend income that they may be able to partially or fully live on in the years to come, and others do so to generate growth in the value of their investments. However, as popular as stock market investing is, you should diversify your portfolio with multiple investment vehicles. Portfolio diversification could help you to mitigate risk while maximizing your return. These are some of the excellent alternatives to stock market investing that you can consider adding to your portfolio soon.

Real Estate

Real estate is an excellent investment vehicle to choose, and there are many property types and markets that you can invest in for further diversification. When you invest in income-producing property, you may enjoy regular income from rental payments, numerous tax write-offs and even the ability to leverage your investment with a loan. However, you may need to put 20 to 30 percent or more down on the property that you choose. Because sales prices for different property types and markets vary substantially, you may be able to easily find a few properties that are ideal for your investment plans.

Contracts for Difference

If you are like many investors, you may be asking what is CFD trading. CFD trading does not give you direct ownership of shares in any publicly-traded company. However, you trade on the differences in price for stocks and other assets. Because you can trade on different types of assets without being a direct owner through FCD, you may enjoy less exposure to risk in some cases. You generally need to work with a broker to proceed with CFD trading.

Peer to Peer Lending

Another investment type to consider is peer to peer lending. Through peer to peer lending, you can pick and choose which borrowers you want to lend your money to based on risk, credit profile and rate of return. Your funds will then be repaid to you with interest over the term of the loan. Because you are only one of many investors in each loan and because you may invest in multiple loans at the same time, you may enjoy a great return without excessive exposure to risk. There are multiple trusted peer to peer lending platforms available online.

Annuities

Annuities are life insurance products that generate a return based on your life expectancy, your initial investment amount and the rate tied to the annuity. The rate and terms of an annuity vary by life insurance company, so you should shop around thoroughly before choosing an annuity product to invest in. There are numerous annuity product types, such as those that provide you with a fixed amount of income throughout your life and those that offer a variable return over the course of a decade or two. Because there are many annuity products to choose from, you may be able to locate an annuity that helps you to meet your financial goals.

Precious Metals

When you are looking at alternatives to stock market investing, buying precious metals could be a smart idea. This includes gold, silver, platinum and others. These are generally excellent hedges against inflation, and their values typically increase when stock market prices decrease. You can invest in actual bars or coins, but remember that you need to have a safe, secure place to store these items. For diversification, choose to invest in several different types of precious metals rather than only in one specific type.

There is a place in many investors' portfolios for stocks, and you can diversify your stock portfolio by investing in various companies in different sectors. However, for true diversification, you need to focus on purchasing other types of investments. Each investment vehicle has pros and cons, and each may require a different up-front investment. When you learn more about some of these excellent alternatives to stock market investing, you may be able to better determine the right investment vehicles for you to use. Remember to incorporate several different types of investment vehicles into your portfolio for reduced risk and a wonderful return on your investment over the years to come.

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