Utilize these technology platforms and strategies to invest outside of the stock market in traditional and alternative investment asset classes.
The stock market always has its ups and downs. But just because the stock market is volatile doesn’t mean all your investments need to fluctuate.
Building wealth through mutual funds, stocks, and ETFs is great over the long term while the market is going up. However, when the market sours, you have to maintain the fortitude to stay invested while your net worth plummets.
The good news is, since the devastating market tumble a decade ago, new laws and technology have combined to make other asset classes as easy to invest in as stocks.
Investors can now earn stable returns in the ballpark of long-term stock returns with less volatility. These assets aren’t new, but broad access to them through technology is.
They are non-correlated to stocks, so they don’t follow the market.
Below is a list of seven ways to invest outside of the stock market utilizing modern investing platforms and other methods.
These platforms all have low minimum investments. A few are for accredited investors only, meaning a net worth of $1 million + or income over $200,000. But there are options below for non-accredited as well.
Of course, if you’re nervous about markets you can always keep cash in a high-yield savings account until things settle. Interest rates are now above 2% so you can earn passive income on your cash while you wait.
1. Veteran Business Bonds
A relatively new platform called StreetShares is changing the way small businesses can access capital for growth. It’s a lending platform for small business funded by investors like you and me.
Qualified borrowers can get a fixed rate loan or line of credit to use for cash flow or growth needs. Only established businesses can borrow. StreetShares mainly focuses on veteran-owned businesses, but anyone can apply for a loan.
Investors fund those loans via veteran business bonds that pay 5% yields. The bonds are available to non-accredited investors. So anyone can participate. Get started investing with a minimum investment of $25.
What’s great about this site is you are supporting veteran-owned small businesses while earning a solid return. These investments are detached from the stock market because the businesses are more tied to local business health and the hustle of a veteran.
Learn more at StreetShares.
2. Real Estate Crowdfunding
The U.S. Congress passed the Jumpstart Our Business Startups Act (JOBS) in 2012 which set the foundation for real estate crowdfunding. Crowdfunding empowers ordinary investors to own smaller pieces of high-quality real estate.
It’s similar to investing in private real estate deal, except now it can be done on online platforms. Crowdfunding sites are heavily regulated and investments on each platform are strongly scrutinized to find the best deals.
Among more than 100 real estate crowdfund sites that have emerged since 2012, I recommend three of the sites that have risen to the top. I’ve invested my own money on these platforms and have made returns between 7%-9%.
Perhaps the easiest real estate crowdfunding site to get started on is Fundrise. Fundrise has securitized its real estate investments into funds or eREITs as they call them. These are similar to regular REITs you might buy on the stock exchange, but the eREITs and eFunds do not trade on an exchange. You can buy at any time, and sell quarterly if needed.
But these are meant to be longer-term investments that last three to five years. Buying one of the portfolios on Fundrise will give you exposure to a few dozen real estate properties, both equity and debt deal.
Fundrise returns consistent yields in the 8%-10% range.
You can get these high yields and diversification for a minimum investment of $500 with the Fundrise Starter Portfolio. Fundrise is available to all U.S. investors, including non-accredited.
Read my comprehensive Fundrise review here.
PeerStreet is another real estate crowdfunding platform. But it operates differently than Fundrise. PeerStreet focuses exclusively on high-quality asset-backed debt deals. They partner with experienced lenders and developers to provide financing for small to mid-sized real estate projects.
You can invest a minimum of $1,000 per deal, allowing you to diversify your money among many different debt deals. These are first lien deals, meaning PeerStreet investors are paid first if in the event of delinquency.
They also have an automatic investing built into the tool. If you have money available, they’ll invest it for you based on a set of criteria you select. You have 24 hours to review the deal and back out if you don’t like it.
PeerStreet is backed by serious investors including Andreessen Horowitz (early Facebook, Twitter, Airbnb investors), and Michael Barry, the man who saw the real estate bubble of 2007 and profited handsomely and profiled in Michael Lewis’s book The Big Short.
Read my comprehensive PeerStreet review here.
Also for accredited investors, EquityMultiple is a top-tier crowdfunding site that gives access to commercial real estate deals that used to be impossible for ordinary investors to access.
These are private market investment opportunities that have passed multiple layers of due diligence by real estate professionals. Each deal is unique, offering the ability to diversify your investments on a single platform.
Keep in mind, when investing in individual real estate deals, there’s increased risk. However, spreading your money among multiple deals will lower your vulnerability. With higher risk comes higher returns.
Learn more about EquityMultiple here. $5,000 minimum investments.
Note: If you prefer more traditional real estate investments, look into turnkey investing opportunities. These are real estate properties you can buy with an existing tenant in place. A good choice for long distance landlording in cheaper markets. Roofstock is a turnkey real estate investing site where you can browse deals for free.
3. Peer to Peer Lending
I’ve been personally investing in Lending Club for the past five years. During that time I’ve consistently earned returns above 5%. All U.S.-based investors can invest with a $1,000 minimum investment.
Lending Club is synonymous with fintech (financial technology). They’ve been at this for more than a decade. On the platform, borrowers are funded by investors (you and me). Investors lend a minimum of $25 to various borrowers through notes.
By only investing $25 per note, you diversify your risk among many borrowers.
Borrowers can use the money for various purposes. When they pay it back, you get paid your money in small increments.
Since you’re investing in consumer debt, you’re essentially acting like a bank. However, rates for borrowers are much lower, and returns for investors are good compared to bonds or even stocks. They are not correlated.
By investing with Lending Club, your money is invested in a whole new asset not available ten years ago.
To automate, I recommend a tool called LendingRobot. Read how to set it up here. Combine Lending Club and LendingRobot and you have a very passive investing strategy.
Learn more at Lending Club.
4. Pay off Debt
Paying off debt is a way to invest even though you might not expect it on this list.
When you borrow money you pay interest. When you pay off debt, you get a guaranteed rate of return… the interest rate.
For example, if your variable HELOC rate is currently 5.5%, every dollar you put toward the HELOC is a 5.5% return on your money, minus the tax benefit.
But consider credit card debt, margin debt at your brokerage, or high-interest mortgages or HELOCs to be an opportunity to deleverage and earn a return. The less debt you have, the less vulnerable you are to economic volatility.
I’m not saying to go pay off your mortgage if your rate is low. That’s another discussion. But I am suggesting you look at any debts you have as potential investments or opportunities to save.
Paying off debt is completely uncorrelated to stock market returns. If you have debts in the 7% plus range, paying it off or refinancing is a no-brainer.
Refinancing debt can save you a bundle. Especially the mortgage. If you can save a percentage or two on your interest rate, you can easily lower your payment by a few hundred dollars. The potential return on investment refinancing a loan is massive.
LendingClub isn’t just for investors. You can get very competitive rates on loans there.
You’ll put yourself in a better position for investing in the future and to weather the next market storm.
4. Farmland and Aquaculture
An online platform called Harvest Returns has made it possible for individual investors to invest in agricultural assets such as farmland and aquaculture (raising fish for food).
For a minimum investment of $5,000, accredited investors can invest in row crops, timber, livestock, and even fish farming. Harvest Returns helps farmers and agricultural businesses raise money for projects while investors reap the long-term financial benefits.
It’s kind of like real estate crowdfunding for but for farming. These investments are not traded on exchanges and therefore non-correlated to stocks.
I wasn’t able to view the details of any deals because the site requires a lot of personal information to do so. But I’m told these are primarily equity deals, with some debt deals available as well. Each deal type requires specific tax reporting, so be sure to consider the tax consequences before investing.
Learn more at Harvest Returns.
5. Commercial Solar Energy Projects
A Colorado-based company called Wunder Capital has created investment funds that enable individuals to invest in large-scale solar energy projects. These funds are like solar index funds giving you exposure to a diversified range of solar projects, funded by the crowd. It’s not a solar stock or company. You’re investing in multiple solar projects through the funds.
For a minimum investment of $1,000, investors can earn 6% to 7.5% returns which are paid on a monthly basis. Wunder Capital is for accredited investors only.
6. Invest in Websites
You know about purchasing rental properties or investing in REITs. But did you know you can invest in a digital version of real estate?
By building your own website from scratch or purchases an established one, you can build a portfolio of digital properties that pay reliable monthly income.
An established online website can be set up to run with only minimal upkeep. Depending on your skill set, you can handle the upkeep yourself or hire the work out to a freelancer.
Sites are generally worth about 24-36 times monthly profit. So if a website earns $1,000 per month, you can expect to pay anywhere from $24,000 to $36,000.
However, many sites are performing below their potential and webmasters are looking to offload them. So you may find a bargain that news some love and care to increase the income. The right website with the right expertise can deliver excellent returns, often with small upfront and maintenance costs.
Read more: How to Invest in Websites for Extra Income
7. Small Business Startups
The JOBS Act of 2012 helped to make it easier for startup businesses to raise capital. Since the passing of the law, companies can raise capital through equity crowdfunding. It’s like Kickstarter, but for partial ownership in a company.
Companies looking to raise capital share their business idea to attract investors on equity crowdfunding platforms or through a Reg A+ IPO. The platforms list pre-vetted startups and handle the investment transaction.
Non-accredited (non-millionaires) investors can invest as little as a few hundred dollars in a company. In return, the investor receives equity in the startup. You invest outside of the stock market, however, a select few may eventually go public.
Three popular platforms in the space are:
Check those out to get a sense of what kind of deals are available and how they’re structured.
Each of these platforms enables ordinary investors to invest like a venture capitalist. That’s cool because you could be an early investor in the next big success. But realistically, most of these startups will fail and you’ll lose money.
If you commit to opportunities on these platforms, keep your investments small and diversified.
Conclusion – Invest Outside of the Stock Market
Don’t feel like you’re a slave the daily moves of the stock market. Plenty of opportunities to invest outside of the stock market are there if you know where to look.
The investments mentioned above are legitimate and regulated. Though some platforms are new in the past 5 years, the asset classes are not. Meaning we have a history of historical returns, but a new way to access the assets with innovative technology and loosened regulation frameworks
These are exciting times to be an investor. Diversify your net worth into investments that are non-correlated to the stock market to grow and secure your wealth.
How do you invest outside of the stock market? Leave your comments below if you have ideas to add to this list.
Photo via DepositPhotos used under license
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