6 Alternative Investments Besides Stocks and Bonds to Help You Achieve Financial Freedom


What do you think of when you think of investing?

If you’re like me the thing that comes to mind are stocks. It’s the standard isn’t it? When you watch the news you hear about the Dow and the S&P 500. These are the stock indexes, or the ‘market’ you hear about.

As you know it’s easier than ever to invest in stocks.

It used to be an investment for the wealthy but today you have low-cost online brokerages where you can buy stocks with virtually no minimums. You can even buy fractional shares (yes, you can buy a part of one share of stock.)

But stocks aren’t the only investments out there. You have an ever-growing choice when it comes to investing your money.

Investing is the most democratic it’s ever been. The ultra-wealthy will always have options that ‘every man’ can’t afford to get into but there are services out there that are helping bring the masses to investments that were once reserved for the wealthy.

These days you can be your own bank, be an angel investor, and even put money into a hedge fund.

Your road to financial freedom is bridged with a number of alternate investments.

Read on as I go into six better known alternate investments…

Alternative investments besides stocks and bonds.

1) Be Your Own Bank

Did you know you can be your own bank and loan money to people?

In the market known as peer-to-peer lending you can lend your money to people trying to do things like pay off credit card debt or start their own business. You invest in notes, which represent their debt, and you earn interest on the loan. The riskier the borrower is considered the higher the interest you can earn. Sounds like a bank right?

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Peer-to-peer lending has gotten popular through companies like Lending Club and Prosper who set up markets to match lenders with borrowers.

I’ve heard of people doing well with peer-to-peer lending but you have to do your homework on the loans and make sure to diversify your risk. There’s always a chance that a borrower doesn’t pay back their loan.

2) Real Estate

Real estate is a huge source of wealth for the rich and you have a lot of ways to work real estate.

One way is to buy a house and rent it out, becoming a landlord.

Of course you don’t have to buy a home outright. There are ways to leverage debt to acquire homes with minimal down payments. Do it right and your tenants will pay your mortgage.

As you can imagine this isn’t for everyone. You have to be able to stomach dealing with tenants as well as all the warts a house carries with it.

Another option with real estate is to buy houses, fix them up, and flip them.

You’re buying a beat up place and fixing it up to sell for a higher price. You may have seen any number of popular shows on TV that deal with flipping houses.

House flipping can be a relatively quick way to get big returns. But it’s not easy for everyone to do well with flipping. You need the know-how and time to work on the house, or know people you trust that can work for you. You also need the money to get the home and materials. And there’s market risk too. You have to find someone to buy your home once you’ve fixed it up.

Yet another option for real estate are REIT’s.

These are real estate trusts where you invest in the trust that holds the real estate. An easy way to diversify REIT’s is to invest through an ETF that covers a number of REIT’s at once.

3) Invest in Yourself

Want to earn more? Have a skill that someone else finds valuable that you can get paid for. This could mean developing a new skill or improving skills you already have.

The workplace is full of people who aren’t willing to do that little bit extra that will make them stand out. Don’t be one of them. Investing in your own skills can pay back with dividends when it comes to your earning power over your lifetime.

4) Invest in a Business

Are you looking for a way to build wealth while getting out of the cube hive that is most office work? Invest in a business.

You can follow your passions and start a side-business to earn extra money. You don’t have to look far to find stories of businesses that started out this way and went on to grow into solid businesses unto themselves.

You could also invest your time and money in a business that already exists.

Keep in mind you need to be the type who can work on your own. It sounds great but it’s a lot of work when your business, and your income, rides on your shoulders.

5) Be an Angel Investor

It sounds so cool and romantic doesn’t it? You take a chance on a small startup that’s gaining traction. A couple of years later the startup goes public and you rake in millions! Too bad you have to be ultra-rich to take part, right?

Or do you?

With a company like AngelList you can invest in start-ups without needing typical angel investor money. They let you ‘piggyback’ on investments made by wealthier investors.

You never know if a startup will actually make it but angel investing is an interesting way to gain access to companies you won’t see on the stock exchanges.

6) Put Money Into a Hedge Fund

You always hear about people killing it with hedge funds, don’t you?

I’m sure you’re only hearing about the success stories but still it’s an investment vehicle that’s mostly closed off to people like us (read: ultra-wealthy). In fact you usually need something like $5 million to just get in. Think about that — the minimum is what I’d retire now on.

Like angel investing the world of hedge funds is opening up a bit. Sliced Investing has worked to make hedge funds more accessible and easier to research. You still a good amount of money to start investing with them but it’s nowhere near the multi-millions you would otherwise need to be in a hedge fund.

Final Word on Alternative Investments

I think you realize there’s more out there than stocks when it comes to investing. Stocks provide a solid road to financial freedom but it’s not the only road out there.

It seems every day the investments of the ultra-wealthy become a little more available to the masses. You certainly don’t need all of the investments I mentioned here to achieve financial freedom but it is nice to know you have options to help diversify your financial portfolio.

Of course the most important thing you can do on the road to financial freedom is start. So get going!

Have you ever invested in any of the above?

Disclosure: This blog post was written for Sliced Investing pursuant to a paid content arrangement I have with the company’s representatives as part of an effort to raise awareness about alternative investment options. All views expressed are entirely my own, and were not influenced or directed by Sliced Investing. You can learn more about alternative investing at SlicedInvesting.com. Learn more about this effort to raise awareness by following hashtag #Invest2015 on Twitter.

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Published or updated February 24, 2015.

Comments

  1. I haven’t invested in strictly & only those things (I don’t exactly have the cash to afford it), but I am a big fan of lifecycle funds that invest in stocks, bonds, real estate & other assets and keep your asset allocation balanced for you based on how close you are to retirement.

    This is a really easy (and affordable) way to invest in more than just stocks, while lowering your risk to hopefully increase your returns.

  2. I haven’t tried any of the above, but we have considered real estate. Right now the hassle of dealing with tenants is just too unappealing. Perhaps as we get out of the “little kid” stage, we’ll feel more inclined to be landlords, but for now we’re sticking with boring ol’ mutual funds :) It’s always nice to see a list of alternatives to ponder.

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