Investing in the stock market can help you build wealth over time and save for a major future savings goal like retirement. However, stocks aren’t the only vehicles that you can use to generate wealth and potentially see a return on the initial money that you invested. Real estate, peer-to-peer lending, bonds, precious metals and other alternative investment options are just a few examples of non-stock investments you can put your money into.
The Best Non-Stock Investments
When most people think about investing, they imagine themselves opening a brokerage account and learning how to buy and sell shares of stock. While you don’t need to be a millionaire to start investing in the stock market, the best investment portfolios include a variety of assets to prevent loss in a single class of investments if the market makes a drastic movement. Explore some of the best non-stock investments you can use to build wealth below.
Real estate investing has long been used as a hedge against inflation. You can tap into multiple ways to potentially earn a return on your investment when you purchase real estate properties, including the following methods.
- Home improvements: Purchase a property that’s in need of repairs or upgrades. You can provide these upgrades and improvements yourself or with a team and look to sell the property at a higher price than you purchased it for.
- Rental properties: Purchase a property that you intend to hold for a longer period of time. While you own the property, you can cover the cost of the mortgage, property taxes and other expenses by renting the property to tenants.
- Crowdfunding: Passive investors can pool their money with other investors for a single rental property or a portfolio of class A commercial properties. Real estate crowdfunding allows virtually anyone to own equity in real estate with as little as $100 and without the headaches of being a landlord.
In addition to both methods, the value of real estate properties also tends to increase over time. Keeping your property in great condition and making notes of upgrades that you make after you purchase the home can help you maximize your return when you sell the home.
Did you know that you can invest in the real estate market without directly purchasing a property yourself when you buy shares of a real estate investment trust (REIT)? A REIT is a special classification of corporation that invests in commercial real estate. Most equity REITs operate in a relatively straightforward manner — the REIT uses funds from its stock sales to purchase properties, which it then rents out to tenants. The REIT then redistributes its profits to shareholders in the form of dividends. You can invest in private REITs or publically-traded REITs.
While shares of REITs are sold on the stock market, these companies have features that standard shares of stock do not. For example, in order to maintain the company’s REIT classification, the company must pay out at least a minimum of 90% of its taxable income in dividends. This feature makes REITs one of the only types of stock that must pay out a dividend, providing you with a relatively predictable stream of income.
Peer-to-peer (P2P) lending services allow you to provide small loans to other people and earn interest when the loan is paid back. You can think of a P2P lending service as a smaller-scale version of what banks do. Most P2P lending services allow you to invest only a small amount of money (in some cases, you can begin with as little as $25) to loan out to another user on the service who requests them. P2P lending provides you with a low-risk way to earn money on interest from personal loans.
If you’re concerned about the risks associated with investing your money but you want to see more of a return than you would if you left your funds in a savings account, you might want to consider investing in bonds. Bonds essentially function as loans that you give to the federal government, usually in return for a fixed interest rate. Corporate bonds are backed by the federal government, which makes them low risk when compared to other assets that you can invest in.
Like real estate, gold (and other precious metals) can be used as a potential hedge against inflation within your portfolio. You can invest in the gold market in a number of ways, some of the most popular of which include:
- Gold mining
- Gold bullion
- Gold coins
- Futures contracts
- Mutual funds that include gold assets
If you choose to invest in physical gold, you’ll want to be sure that you have a place to safely store your investment. A safety deposit box at your local bank can provide an affordable and accessible way to store your gold investment. The price of gold tends to go up as the value of the dollar declines.
Cryptocurrencies are decentralized digital currencies that do not rely on banks to verify transactions, instead opting for a peer-to-peer system that fills some of the gaps in security seen with traditional online fiat transfers. Though Bitcoin and Ethereum are two of the most well-known cryptocurrencies, there are hundreds of different coins and tokens that you can invest in.
Cryptocurrencies tend to fluctuate highly in value — so if you’re avoiding the stock market because you’ve got a low tolerance for risk, crypto investing isn’t the best market for you. However, these large daily price changes can help you compound your potential returns and may allow you to see profits with a short-term trading strategy.
Certificates of deposit (CDs) are bank accounts that offer a fixed interest rate for a specific period of time. Though the interest rates on CDs are higher than the interest you’d earn in a savings account, you typically need to pay an early withdrawal fee if you take money out of the account before the date specified on the CD. However, like bonds, CDs are backed by the federal government, which means that their values are guaranteed.
An annuity is a contract between you and an insurance company where you provide a set amount of money upfront when you open the account in exchange for a series of payments in the future from the insurer. Though annuities may offer tax advantages, many annuity providers also impose fees on these types of accounts that can affect your returns. If you do decide to choose an annuity for your non-stock investment, be sure that you completely understand your insurance provider’s fee structure.
Why Avoid the Stock Market?
You may identify a number of reasons why you might not want to invest in the stock market — especially if you’re close to retirement age. Stocks can fluctuate in value regularly, which means that the fewer years you have until you retire, the higher the chance that you’ll end up losing money when buying and selling stocks. With the exception of cryptocurrencies, non-stock investments tend to be less volatile than stock assets, which can help you protect a larger portion of your initial investment if you need to begin making withdrawals from your investing accounts soon.
Drawbacks of Avoiding the Stock Market
If you’re younger and you have more years to see returns on your investments, you could be missing out on major returns by avoiding the stock market. The S&P 500 (a stock index that tracks the performance of the 500 largest companies in the United States) has historically shown a return rate of about 10% over the course of a long-term investment strategy. Though this rate of return is not guaranteed, the historic performance of the market has been shown to outpace inflation more effectively than the other items on this list.
Contrary to popular belief, you don’t need to already have millions in the bank to get started investing in stocks. If you’re avoiding the stock market because you think it’s too complicated or you don’t have thousands of dollars to open an account, check out this guide to the best brokers for beginners to see just how easy and affordable buying and selling stocks can be.
Compare Investing Platforms for Non-Stock Options
Non-stock investments can help you create a robust and diversified portfolio. You can access a range of investing platform options to easily buy and sell non-stock assets. Benzinga offers insights and reviews on the following platform providers. You may want to begin your investing journey using the links below.
- securely through Nada / Cityfunds's websiteBest For:Accredited and Non Accredited InvestorsRating:
Frequently Asked Questions
What should I invest in that is not a stock?
The answer to this question will vary depending on what you’re looking for in your investment. If you’re tech-savvy, you may want to research cryptocurrencies and choose a project that you think has a bright future. If you’re risk-averse but you want to earn more money than you do in your savings account, buying bonds might be the way to go. Consider your risk tolerance and interests when you select non-stock investments.
How can you make money without stocks?
You can find endless ways to create passive streams of income without entering the stock market. You can create a business, purchase rental property, lend money using a P2P service, buy a franchise or even pursue a creative career (for example, starting a blog and charging ad revenue). Explore your areas of interest for inspiration on your next non-stock investment — and be sure to do your research before you invest.
How can I build wealth outside the stock market?
You can build wealth outside the stock market by investing in a rental property, REITS, a franchise, peer-to-peer lending, or other alternative investments.
Accelerate Your Wealth
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