5 Investment Ideas Outside of the Stock Market
It's essential to invest your money. Investing can help you earn passive income over the years, and can work wonders towards bolstering your retirement savings. The sooner you start investing, the more money you can make for your future. But here's a question: When you think of investing, do you automatically think of stocks, and stocks alone?
If you do, you're missing out. There are many other ways to invest your money, outside the stock market, that will earn you a good return. Plus, in case you haven't heard it before: When it comes to investing, diversification is key. That means putting all your money in the stock market is just not your wisest move.
Why diversify?
Different investments make different amounts of money, and vary on risk. For example, investing in a rental property or two is likely to be less volatile than investing in stocks, since stocks tend to fluctuate at a faster rate than real estate.
Also, having various investments means you aren't placing all your money on one bet—or all your eggs in one proverbial basket. So if one asset isn't performing well, you'll still have others that will generate income—if you have a diversified portfolio, that is. This will prevent you from losing all of your money on one investment gone wrong.
Where to invest—other than stocks
Depending on how much you have to start with, there are many ways you can invest your money outside of the stock market. Here are our top five picks for return on investment.
Gold
Did you know when the value of currency decreases, the value of gold increases? In fact, the value of gold increased by 19 percent last year during the pandemic. Gold hedges against inflation and rises along with the cost of living; it's also known as a "safe haven" investment during market turmoil or political tension. These are just a few of the many reasons to invest in gold.
Of course, there are ways to invest in gold through the stock market, but many people also invest in physical gold, such as gold bullion, coins, and jewelry. Gold is also a liquid asset, meaning you can exchange it for cash if needed. For example, if you have a heavy gold chain, you would be able to sell it quickly for money. It doesn't even matter if your jewelry is broken; as long as it's gold, you can sell it for cash. Gold is an excellent investment outside of the stock market that will diversify your portfolio.
Rental properties
Real estate is another fantastic investment opportunity that can create passive income as well. For example, if you purchase a rental property, you can charge more rent than the mortgage payment to earn extra income.
If your mortgage payment for your rental property is $650 a month and you charge $950 a month in rent, you're netting $300 every month in profit. Of course, you need to save some for home repairs when needed, but it's still a great source of cash flow.
Not only do real estate investments generate more money for you; they also build equity. Eventually, you'll own that property free and clear. Another great thing about owning rental properties? People will always need a place to live—which means financial security in your investment.
Peer-to-peer lending
Unfortunately, savings accounts and certificate of deposit accounts (CDs) don't pay much interest these days. That's why people are beginning to invest their money in peer-to-peer lending. You can earn between two and six percent on this investment, which is much more than the average savings account.
P2P Lending is when an individual investor supplies loans or portions of loans to borrowers without using a traditional bank. You will earn interest on the amount you lend out; the amount of interest you will make will be determined by the risk of the loan. For instance, a low-risk loan will not charge as much interest as a high-risk loan.
Borrowers use peer-to-peer loans for debt consolidation or even to finance their small businesses. Plus, the P2P market is projected to reach over $550 billion by 2027—making now the perfect time to get in.
As a silent business partner
Another excellent investment idea is to become a silent business partner. A silent partner is someone who provides financial capital into a business but isn't involved in the day-to-day operations.
For example, let's say your friend wants to start a coffee shop but needs additional money to get started. You would provide the money as a silent partner in the business—and earn a percentage of the profits, depending on the agreed terms. She would operate the business, and your involvement would be limited to the financial aspect. Of course, it's in your best interest to help promote and grow the business, if possible, to earn a profit faster.
Keep in mind there are risks to this kind of investment, and it may take time to start making money from it. It's vital to do your research and have all of the terms in a contract to protect your money as much as possible.
As a collector
Although art and collectibles can be a risky investment, some can have a high payoff. Fine art, vintage toys, fashion, and memorabilia can all bring in quite a chunk of cash. Who would have thought that a Star Wars Boba Fett Action Figure would have sold for $27,000? Not all collectibles will bring in this kind of money, but there's still an opportunity to make a decent profit off some.
Other examples of collectibles are advertising signs, fashion accessories such as purses, musical instruments, or even old electronics. As with any investment, be sure to research whatever collectibles you are considering putting your money into before purchasing.
Diversification leads to financial success
These five investment ideas can help you diversify your portfolio outside of the stock market. Of course, it's still important to learn about—and invest in—the stock market as well. But having multiple different investments is the best way to guarantee the long-term success of your portfolio, build retirement savings, and more.
