From 2001-2006 I lost over a quarter million dollars trading stocks, options and currencies.
I was pretty much the dumbest 20-something ever.
Fast forward to today, and I’ve dug myself out of a pretty darn big debt hole, recently got married, and have even begun investing again.
Just not in stocks.
I know I’m not the only one to get burned by the markets, and lets be honest, most of my losses were due to my own actions. But still, there are plenty of people who are looking for investment options outside of Wall Street.
I’m still playing it pretty safe, but here’s 5 investment options that I’ve been looking into, and a few I’ve tried out already. Take these with a grain of salt, I’m not exactly Warren Buffet.
1. Lending Club
Lending Club is a company that allows you to play the bank. It attracts borrowers looking for up to $25,000, and then Lending Club investors fund the loan (Note) in increments as small as $25.
I’ve invested quite a bit in borrowers through Lending Club, and so far my results have been positive, but I have had some defaults. I think the key is diversity. If you invest just $250 into one loan…well, that’s quite risky. But if you invest in 10 loans of $25 each, even if one defaults, with an APR of 10% or so you’ll at least still break even.
Lending Club isn’t for everyone, but I’ve found it an investment that allows me to sleep at night.
Click here to go to Lending Club and see what they are all about.
2. Real Estate
I think it takes a certain personality type to be a real estate investor, and then another type to be both an investor and a landlord. If you have enough money, you can outsource the landlord part, but your returns will be lower.
My wife and I have agreed to avoid real estate investing, even though in many markets right now you could cash-flow (cover your mortgage) some properties with rental income. We would only be able to afford one property investment, and I don’t want to play landlord.
There are thousands of “short sales” on the market right now where the bank will have to sell the property for less than they are owed. They take time to close, but if you have the patience of a kindergarten teacher, you could pickup some homes for a steal.
Every body is good at something outside their day job. And usually that talent can be turned into a side-business. When I was in my teens, I had a strange love of lawn-mowing. So I dropped 100-fliers around the neighborhood and picked up 3 weekly clients with about 2 hours of marketing work.
Creative? Check out Etsy. Like to workout and enjoy people? Do personal training on the side. Huge snowboarder? Offer private lessons.
There are thousands of side-business ideas out there, but find one that plays to your strengths. You’ll be more likely to stick with it, and find that your investment will pay more than just financial dividends.
4. Revenue-Generating Domains
If you don’t know what a domain is…skip this section.
Domain name investing is only for the well-informed. Think of a domain-name (freefrombroke.com for example) as a piece of land. Some land is much better (Waterfront!) than others (next to the Coal plant!). And some land can produce cash-flow (timber for example).
A good domain can earn advertising revenue from type-in traffic, or people directly typing in your domain name.
These domains aren’t cheap, but a revenue-producing domain name will often sell for anywhere from 2 -20 years annual earnings.
My advice here: If you’re a web nerd, and this interested you, look at names above the $5,000 range at minimum. Anything less and you’ll have a tough time earning much from type-in traffic. High value domains are auctioned off dozens of times a year in live and web auctions. Checking out domaining.com for news on auctions and domain investing.
5. Angel Investing
Would you like to help start-up businesses in your local community? If you live in a large enough market, there is probably a local angel investing chapter near you. Angel investors must be accredited (1+million networth or 200K+ in annual income the last two years).
Angel investing is very risky.
When I was just out of college I raised money from some family friends for a company I was starting up. It got pretty hairy and I came very close to not being able to pay them back. I did, but their total return over 3 years was about 5% total. So, not exactly the best return for the level of risk they took.
While I haven’t done any angel investing myself, at some point in my life this is something I would consider as an alternative to stocks in giant corporations where I have no influence. At least with a local angel investment in a company I am familiar with I might be able to provide some value to the founder and help move the company along.
Bottom line: You need to be creative when investing outside of the stock market. Most non-mainstream investing is very illiquid, so be prepared for the long haul.
What other alternative investments have you looked into or are invested in?
This is a guest post from Debt Kid, who after day trading away over a quarter million dollars found himself in some serious debt. He’s been blogging since 2007 about his journey to get out of debt.