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, especially in 2020. 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.
1. Fine Art Shares
I’ve been following an online platform called Masterworks that has emerged to enable ordinary investors to invest in fine works of art. According to the company, masterpiece art has outperformed the S&P 500 and gold since 1997.
It works like this. Masterworks identifies fine works of art with the potential for value appreciation, then makes a purchase. Next, they create a Delaware ‘special purpose vehicle’ and file paperwork with the Securities and Exchange Commission (SEC).
Masterworks started with an Andy Warhol painting of Marilyn Monroe for about $2,000,000 and the offering is qualified by the SEC. Since then, they’ve offered 18 more paintings on their site.
It’s a great idea that is gaining momentum. There’s more artwork is in the pipeline and you can start investing with just $1,000.
As of summer 2020, they’ve launched a secondary platform, so you can buy shares in previous offerings. It also helps with liquidity if you decide to sell your shares.
Read my full Masterworks review here.
2. Farmland and Agriculture
Farmland investment returns have outperformed commercial real estate, gold, bonds, and even the S&P 500 since 1990, according to data compiled by AcreTrader. But most of us can’t just go by a farm.
AcreTrader is an online crowdfunding platform that empowers accredited investors to invest in farmland and agriculture projects, making it possible to tap into these out-sized historical returns of 10% or more. With crowdfunding, you buy small fractions of the properties, participating in returns with smaller investment amounts.
Minimum investment amounts range from $3,000 to $10,000 depending on the deals. Farmland is an investment asset as old as time, but now you can access investments through an innovative technology platform.
You can immediately begin vetting available deals on their website, which is a more straightforward process compared to urban commercial and residential. Investors must be accredited to participate. Accredited means your net worth is greater than $1 million or annual income above $200,000.
Each deal type requires specific tax reporting, so be sure to consider the tax consequences before investing. Most deals pay an annual distribution in December.
Read my full review here.
3. Premium Wines
Wine collectors have long experienced the price appreciation of fine bottles of vino. Wealthy consumers (and investors) can fill their wine cellars with bottles that have traditionally performed well as investments.
According to this article at Forbes, a diversified portfolio of wines can outperform the more volatile stock indexes. However, you need to know what you’re doing (and avoid drinking your bottles!).
A new investing platform called VinoVest has emerged to help regular investors buy and securely hold exceptional bottles of wine as an investment. The startup enables you to identify investable wines, then handles the purchase, storage, and bottle insurance.
Wine investing is liquid, non-correlated to the stock market, and has a proven track record of returns, according to VinoVest.
You can start investing for a minimum of $1,000. VinoVest welcomes both accredited and non-accredited investors.
4. Crowdfunded Real Estate
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.
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.
$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.
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.
PeerStreet is only for accredited investors.
Read my comprehensive PeerStreet review here.
5. High Yield Savings Account (Interest on Cash)
2020 is turning out to be a crazy year. When in doubt with the market, cash is king. Not only does cash not fluctuate in the short-term, it enables you to take advantage of opportunities that arise from economic disruptions.
If you have any amount of cash sitting idle in a checking account, the easiest way to increase your passive income is to transfer the cash to a high yield savings account.
Of all the mistakes I see people making with their money, this is the easiest to fix.
It’s a no-brainer, even when rates are low.
If you’re not sure how to optimize your idle cash, I’ve written about how to systematically sweep excess monthly cash flow into savings earn more interest.
Check out my free article, How to Manage Excess Cash Flow that explains the process with a detailed diagram.
I recommend MyBankTracker to find the highest-paying online savings and money market accounts. The top banks now yield just below 2%.
6. 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.
Read my comprehensive StreetShares review here.
7. 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
Bonus! 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
Favorite tools and investment services right now:
Credible - NOW is the best time ever to refinance your mortgage and save. Credible makes it painless.
Personal Capital - A free tool to track your net worth and analyze investments.