I often get asked by people, “What are some good alternatives to investing in the stock market?”
As a former financial derivatives trader who was in the market 24/7 through the “Great Recession”, I uniquely understand the ups and downs of public markets. I’ve also been actively investing in alternative asset classes for over 12 years.
When people ask me about stock market alternatives, they’re usually coming from three main camps:
- Seeing the ups and downs of the market each day is too much for them psychologically.
- They’re young, have lived through multiple busts, and basically seen the stock market go nowhere in their young lives.
- They have a desire to get involved in something that’s tangible or that they can control more directly.
After 12 years of seeking out stock market alternatives, I’ve seen a lot so I wanted to share a number of good alternatives that you could gain tangible experience with today. I have personally invested in all of these ideas in some form or another.
Whether you have $1,000, $10,000 or $100,000, there are great options for anyone.
1. Real Estate
Real estate has been a solid investment for decades. Although there are occasional busts, usually they’re localized and preceded by a frenzy of buying, such as in areas like San Francisco recently. There are a number of ways to invest in real estate. I bought my first commercial property in 2010 from a bank that had to foreclose on it. We turned it around through a lot of hard work, and it’s paid off nicely.
Jeff goes into great detail in his full Fundrise review which is worth checking out, too.
Here are some other options for investing in different types of real estate:
- Farmland – Acretrader
- Single-family homes – Roofstock
- Commercial – RealtyMogul ($5,000 minimum)
2. Your Own Home
Housing is booming and looking at the state of monetary policy right now, it should continue to boom. Interest rates are at historic lows, so borrowing has never been cheaper. You can put an addition onto your home, buy a better quality home, or simply refinance your mortgage now at a lower rate and return a good amount of cash. I know people who have refinanced their homes into 15-year fixed mortgages and will save over $100,000 over the life of the loan!
3. Peer-to-Peer Lending
A third stock market alternative that I’m partial to is peer-to-peer lending. If you’re not familiar with peer-to-peer lending, it’s relatively new, but has definitely gained a lot of traction in the last couple of years. There are a few big players in the space, but the top two that you’ll want to check out are Lending Club and Prosper. Jeff has a Lending Club account and has done very well with it.
Really quick — what is peer-to-peer lending? It’s exactly how it sounds. You’re lending money to a peer and then you’re getting paid the interest rate. Essentially, you’ve just become the banker to the borrower. It feels nice sitting on that side of the equation for a change. 🙂
Let’s say you invest a thousand dollars in Lending Club. Of those thousand dollars, only $25 would go to one individual borrower, so if that borrower defaults you don’t lose a whole lot of money.
Think of it as buying stock in a mutual fund. If one of those stocks in that mutual fund goes belly up, you still have 99+ stocks in that mutual fund still making you money. The same thing happens with Lending Club, and that’s why I like it.
It’s diversification; you’re not putting all of your loans into one basket.
Again, Jeff’s done pretty well with it which you can see in his Lending Club Review. He’s averaged between an 8.5% to 9.5% return as of today, so it’s definitely worth checking out as a stock market alternative.
4. Gold, Silver, and Other Commodities
Precious metals like gold are usually bought in times of extreme financial system stress (the world is ending scenarios) or when high inflation is expected. So, they tend to correlate less with other financial assets. Currently, gold is over $2,000 an ounce! This is being driven by stimulative monetary policy around the world.
Other commodities, like copper, aluminum, or grains tend to track along with the economic activity. Since these investments don’t really distribute any cash, they’re often considered riskier investments; however, most portfolio managers advise having some exposure to commodities.
You can buy physical commodities or you can invest in financial ETFs that track the physical price. GLD is a gold ETF. ETFs for metals and commodities can be bought through any online brokerage account.
5. Cryptocurrency
This one scares people, but I continue to believe in certain cryptos for the long run as digital money native to the internet. I’ve invested in cryptocurrency since 2014, and while I’ve traded in and out of many currencies, I’ve held a core position in Bitcoin, Ethereum, and a few others. Bitcoin, in particular, has been around since 2011, and use cases continue to improve.
Luckily, I’ve been able to make some significant money in cryptocurrency. We’ll see what the future HODLs!
6. Art, Antiques, and Rare Memorabilia
Another stock market alternative are antiques. Jeff’s stepdad has invested in antique toys for years. These are the toys from the 30s, 40s, and 50s. He invested in various paintings and other different types of art. He also was a huge Lionel train collector and has an entire spare bedroom filled with them.
I’ve seen the value of some of them and it blows me away how much they are worth.
If you have a passion for things of the past, investing your money in such items as antiques might be a good alternative for you.
You can easily get started with Masterworks — buying fractional pieces of fine art, and watch the value soar!
7. Sports Cards
Did you collect sports cards when you were younger? Well, that market is blowing up right now. Like other forms of art or memorabilia, sports cards have appreciated in value for a long time as people look to put their money into things that are rare and valuable.
A LeBron James rookie card recently sold for $1.8 million! Look at this price chart of one of the rarest cards on earth, a mint Honus Wagner.
Sport card values are for real. I have a friend that’s recently invested six figures into cards by looking for cards of players who may have recently fallen out of favor, but are sure Hall of Famers. At the very least, dust off your old cards and see what they are worth!
8. Invest in a Private Business
If you’re lucky enough to have access to good deals you can invest in private equity or venture capital where you make direct investments in private businesses. You also generally have to be an “accredited investor” to do this. I’ve made investments in restaurants, technology businesses, and medical clinic businesses over the years.
However, there’s another way. More and more people are controlling their future through entrepreneurship — starting their own business, buying a franchise, or partnering.
Jeff has done this with his previous advising practice, and with this site!
He also has a friend who’s successfully opened several locations of two franchises. I think he’s up to 10 locations so far and is showing no sign of slowing down.
To get started, there are sites, like Flippa and Empire Flippers, where you can buy websites and digital businesses. You can learn how to buy these businesses on those sites, and get comfortable with the process.
Want more information on starting your own business? Check out these posts on the “13 best small-business ideas” and “65 home-based business ideas”.
9. Invest in Yourself
This one might be a bit of a surprise to you but think about it. The one thing that you can always invest in is yourself. How do you do that?
One way is by skilling up! Knowledge is key, and with the internet, you can take courses on virtually anything. Here are some great platforms for skilling up:
Another way is by going back to school to get a degree that’ll help you get to the next level. Jeff started by investing in designations like the CFP® designation. Maybe you want to be a CPA to be a Certified Public Accountant. Maybe there are certain designations in your field that could give you potential raises or open new opportunities for you at your job.
For me, I’ve invested in lots of premium classes on learning Facebook advertising, search engine optimization, email marketing, and Google AdWords.
Another way you can invest in yourself is by hiring a coach. Maybe you can work with a personal development coach. I’m currently working with a coach for entrepreneurs, and I will tell you that the investment has been worth it, tenfold.
Investing in Stock Market Alternatives
These are just a few of the stock market alternatives that you have at your disposal. Some of these are outside the box and may be less liquid than stock market investments, but they have a meaningful return on investment and happiness.
Have you tried investing in other areas other than the stock market? Share your story below!
I noticed that lending club had a Roth IRA option. Do you think that is a good decision or do you stand by the list on your Roth IRA blog?
@ Keith I would definitely consider Lending Club for a Roth IRA. Now that you mention it, I’ll be sure to update my Roth IRA post.
Investing in gold and silver is definitely a good alternative. While it is true that it involves quite a lot of risks, there are ways to avoid them by developing the right strategies.
I like your list and I am really impress with your friend who succeeded in his real-estate business. We should really take some time doing research and not make hasty decisions.
I’ve been looking at gold coins myself, but you’re right the price of gold has esculated over the last few years so realistically I’m looking at silver coins instead.
I always find stock market a difficult concept to study. I was really scared before to invest in stocks but now after reading your post I think I have understand a few things about this. Thanks a lot for explaining it to me.
#3 should be #1 in this economy. Real estate, in the US, is at the perfect price for investors.
#1 is a place to park your money, but it’s not an investment. It’s speculation. Gold doesn’t pay a dividend nor interest nor rent.
Antiques are increasingly risky. Easier to sell because of EBay, but overall prices have gone way down. Look at sports cards as a perfect example of a formerly flourishing market that has all but collapsed. Good luck getting 10 cents on the dollar on a collection.
Lending Club is great. Distribute your loans to reduce the risk, and enjoy your above-average returns by cutting out the middle man (largely)!
Rather than investing in yourself, I’d say the “Start a business” idea is likely to be much more profitable in the long run.
It’s nice to know that there are so many other investment options besides the stock market. Some of these (like real estate) do require a lot more work and know-how, but the good news is building that knowledge is something you have control over, as opposed to the stock market. Thanks for sharing!
#5 is definitely the most important on this list. Another alternative that you missed is websites. A portfolio of websites will bring much better returns than a stock portfolio. You can even outsource the ‘portfolio management’ to someone overseas for pennies on the dollar rather than an overpaid stock manager. 🙂
Great Article! My favorite alternative is #5 because its the one people seem to forget the most.