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The following is a guest post from Greg Johson at Club Thrifty.
What do you think about when you hear the word “investing?” If you’re like most people, stocks and bonds are probably the first items that come to mind. Or, perhaps mutual funds and ETFs are more your style.
Although “traditional” investments are still a great way to grow your wealth, these days, there are tons of ways to grow your money – many of which have nothing to do with the traditional methods of investing you’re probably familiar with.
While investing in a work-sponsored retirement account is still a smart way to get started, investing in opportunities outside the stock market can still be a great idea. Even though all investments carry risk (some more than others), many less traditional opportunities can provide incredible value. Plus, adding some alternative investments helps diversify your portfolio, which is rarely a bad idea.
Here are four investment ideas to help diversify your holdings beyond the stock market.
1. Invest in a Rental Property
We own a couple of rental properties we purchased years ago, and I can tell you that they are some of the best investments we have made.
Of course, owning rental properties isn’t always easy. They can take some hard work to maintain, and dealing with renters can be a drag. Overall, though, we definitely think they’re worth the hassle.
You see, we only put $10,000 down on a 15-year mortgage – and the payment on that mortgage is more than covered by rent each month. We’ve also spent about $5,000 for repairs and maintenance on the house. However, at the end of 15 years, we will have invested about $15,000 into a home worth over $100K. Plus, once the mortgage is paid off, our monthly rental income is almost pure profit.
Now, those are the type of returns I love!
[Cody’s note: If you want to start investing in real estate today, I highly suggest checking out Roofstock. They are a new(er) platform that helps to connect investors with single-family rental homes. The properties are pre-screened and the customer service is amazing. I was fortunate enough to meet with one of their reps and was blown away by the quality of their business.]
2. Crowdfund Real Estate
Don’t have the money to secure a down payment on a rental property? Would you rather not deal with tenants? You can still get in on the real estate game through crowdfunding.
Crowdfunding of all types is becoming more and more popular, especially among millennials. So, it makes sense that it has made its way into real estate.
Through crowdfunded real estate platforms, you can invest in real estate without securing 20% for a down payment or carrying a mortgage. There are no tenants or property management companies to deal with either.
Although there are several real estate crowdfunding platforms available, we like Fundrise. In fact, we like it so much, we invest with them as well.
Unlike some competitors, you don’t have to be an accredited investor to sign up with Fundrise. You can start investing in real estate with as little as $500, which is a lot more attainable for your average investor than an annual income of $200K (or a net worth of $2M).
Keep in mind, like other markets, the real estate market can go up and down at any time. There’s no guarantee that you will make money. However, with companies like Fundrise, you don’t have to do all the work or take all the risk yourself. Instead, you get access dedicated team of real estate pros who will vet the properties for you – which can definitely be a bonus.
3. Peer-to-Peer Lending
If you’re looking for investments outside the stock market, peer-to-peer (P2P) lending is another option to consider.
P2P lending allows people to borrow money without going through a bank or credit union. Instead, borrowers connect with investors through lending platforms like Prosper and Lending Club. Even better, these sites handle all of the details regarding the terms of loans.
P2P lending normally pools money from several investors to fund loans, so you aren’t on the hook for someone’s entire loan unless you want to be. You make money from the interest paid by the borrower, and rates are usually based on the borrower’s credit. If there’s ever an issue with a borrower defaulting on their loan, the P2P lending platform takes charge of collecting the money so you don’t have to get involved.
One of my favorite things about P2P lending is that you essentially get to act like a bank. You decide who you’ll lend money to and how much you’ll lend.
Just create an account, add your funds, and split them up as much as you want. With minimum loan investments as low as $25, you can spread your money around to diversify your loan holdings and (hopefully) reduce your risk.
4. Start a Business
Starting your own business can be one of the most profitable investment strategies you’ll find. By becoming an entrepreneur, you are investing in yourself and your own ideas. Whether it’s a product you sell or a service you provide, starting a business can provide extra income for years to come.
Personally, I like business ideas that you can start from home and pursue in your free time. That way, you can spend time building your business while you’re still collecting a regular paycheck. If you’re able to replace your income, you may even be able to quit your job to take your growing business full time.
Many legitimate work-from-home jobs and businesses can be started with little money. You can also keep the cost of your overhead pretty low.
Additionally, being your own boss can lead to more control over your business and the potential for bigger profits. So, if you have the drive and self-discipline to become an entrepreneur, starting a business could be a great investment of your time and money.
These days, investing isn’t limited to stocks, bonds, and mutual funds. While they still are often good options, diversifying your holdings outside the markets could help increase your chances of success.
Personally, we’re big fans of rental properties and starting a business. However, if those options don’t speak to you, there are still dozens of other investment ideas you can try. Even better, many of these options have relatively low barriers to entry so almost anybody can afford to get started.
Regardless of what investment methods you choose, the best time to start is now. So, what are you still reading this for? Get out there and find a few investments you like right away!
Have you tried investing in any of the techniques listed above? Share your tips and experiences with us in the comments!
Greg Johnson is a personal finance and frugal travel expert who leveraged his online business to quit his 9-5 job, spend more time with his family, and travel the world. He is the co-owner of the popular blog Club Thrifty, where he teaches others how to spend less and travel more.