2020 was a volatile year for the stock market. With the crash that began on March 9, the Dow plummeted with the worst single-day point to drop in the history of the US market at the time.
While you probably have encountered many investors that did very well for themselves during the recovery period, there are certainly a long list of reasons why a person might be hesitant to invest in the stock market right now.
If you are looking to learn how to start investing, the stock market isn’t your only option.
Let’s take a look at seven stock market alternatives that you might consider.
- Gold, Silver, and Other Commodities
The price of precious metals do not correlate with other financial assets as much as some of the other alternatives to the stock market. This is because gold and silver are typically purchased when the financial system is under great stress.
Other commodities do tend to reflect the state of the economy, such as grains, aluminum, or copper. You can either invest in ETFs that tracks the physical price of commodities or you can buy the physical commodities themselves.
- Real Estate
For many decades now, real estate has been a strong investment strategy. There have been occasional real estate market busts, so it’s important to understand the risk of entering this market.
A common way that individuals invest in real estate is that they by property that they then rent out. Typically, a person will get financing from a bank after making a down payment. They receive cash flow from the rental income, build equity in the property, and hopefully benefit from appreciation over time.
It’s important to understand that being a landlord can be a lot of work. It is not as simple as buying a property, finding tenants, never thinking about it again.
Having tenants and rental properties can be a real headache. In a worst-case scenario, renting out your properties can become a complete and utter nightmare. Do yourself a favor and take some time to read landlord horror stories online before you start purchasing rental property.
One way to lessen your responsibilities as a landlord is to hire a property management company. They can collect rent, make repairs, deal with tenants, and more, typically for a percentage of the monthly rent.
Investing in real estate does not necessarily mean collecting a bunch of multifamily units that you rent out to individuals or families. You could invest in commercial property or even put your money into a real estate investment trust (REIT). Many people find that investing in this type of trust results in a very good dividend payout and is much easier than owning rental properties yourself.
If you have been following the story of cryptocurrencies over the past several years, you’re probably wondering why you didn’t by $100 worth of bitcoin a few years ago.
Investing in cryptocurrency is seen as risky by many, however, for those people that invested early, the payout has been phenomenal.
If you’re looking to do a bit of gambling rather than investing, check out the best bitcoin casino.
- Peer-to-Peer Lending
If you are looking for new ways to invest your money, you might look into peer to peer lending. This is a relatively new form of investing that has become more popular in the last several years.
This type of investment is pretty much exactly what it sounds like. You lend money to another person and then you get paid back with interest.
When you engage in peer to peer lending, the investment is diversified. Basically, the money you invest will be lent out to a number of different borrowers, so that you are not left hanging if one of them defaults on the loan.
- Private Equity
When you invest in private equity, it means that you are investing in private companies, or at least companies that are not listed on a public exchange. This might mean you are investing in venture capital, growth capital, buyouts, or some other type of private equity.
If you are looking for the most classic alternatives to the stock market, take a look at bonds. When you buy bonds, you are lending money to a corporation or the government and you will receive interest in return.
It is common for investors to buy bonds when the stock market is going down. This can be a good way to diversify your investments so that they are not all in the stock market.
This type of investment can be more interesting and fun than some of these other options, but it’s important to understand the risks of investing in collectibles. Collectibles might be baseball cards, rare wines, vintage cars, or a wide variety of other items. When you begin investing in collectibles, you are buying and maintaining physical objects with the hope and expectation that their value will increase over time.
If you are going to pursue a collection with the expectation that you will receive a return on your investment, it’s necessary to be an expert on the type of item. Without experience, there are countless ways that investing in collectibles could end up being a waste of money rather than a way of increasing your money.
Which of These Stock Market Alternatives Is Right For You?
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