Investing in stocks is a terrific way to create wealth. I spent many years helping investors manage their portfolios, and investing in the market is integral to any financial plan.
However, stocks are not the only way to improve your financial wellness.
If you want to know how to build wealth outside the stock market, this guide will help you find additional ways to increase your net worth.
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What Can You Invest in Other Than Stocks?
Buying stocks is vital when it comes to saving for retirement and wealth building. However, there are different ways to invest money that can be just as beneficial.
Here are the top alternative investment ideas to diversify your portfolio.
1. Invest in Real Estate
If you are looking for the best way to invest money without stocks, real estate is among the top options. Not long ago, you needed immense resources to own a rental property or invest in real estate.
Thanks to crowdfunding, that is no longer the case. Platforms like Fundrise let you invest small amounts of money in real estate.
Fundrise lets you invest in various types of properties, including:
- Shopping centers
- Mixed-use properties (these include both commercial and residential properties in one location)
- Single-family housing
You only need a bank account, and you can get started with just $10. Investments are housed in a real estate investment trust.
These include a variety of properties, similar to how an exchange-traded fund (ETF) includes numerous stocks. You won’t invest in individual properties.
Fundrise has multiple account types, including retirement accounts. The platform has minimal fees and loads of educational resources to help you get started.
If real estate investing interests you, Fundrise isn’t the only option. Here are the top platforms to consider if you want to build wealth.
|eREIT - mixed-use properties
|eREIT - residential apartment buildings
|eREIT - commercial real estate
|Commercial real estate, direct or by fund
|$1,000 - $5,000
|Turnkey single-family rentals
|Commercial real estate
|Commercial real estate
As you can see, you have numerous options to choose from. Many of them let you start investing with $500 or less.
Additionally, real estate often is not correlated to the stock market. This means the value is not tied to large fluctuations in the stock market.
If you truly want to diversify your investments, a platform like Fundrise is an excellent choice due to its investment mix.
|Fundrise - start investing in real estate
$10 to start
This popular crowdfunding real estate platform makes it possible to invest in real estate with as little as $10!
2. Invest in a Small Business
Launching a brick-and-mortar business is expensive. It’s also not always easy to secure the necessary funding through banks, so a new business must often look elsewhere to get funds.
Sites like Mainvest are a fantastic alternative for these types of businesses to open their doors. Mainvest allows a company to get the money they need, and you get to invest in a small business.
Like crowdfunding for real estate, the idea behind Mainvest is similar. It just applies to small businesses instead. Vetting is thorough for businesses to list the opportunity on the platform.
Potential investments include:
- Community centers
- Food trucks
- Health or wellness stores
You can invest with $100 at Mainvest, so you don’t need a lot to start. Like real estate, investing in a small business is often illiquid and suitable for long-term investors.
If you don’t want to tie up your funds, read our guide on the best short-term investments to pursue to identify some suitable choices.
Businesses disburse quarterly dividends, which can help you build your stream of residual income. Mainvest also provides numerous research tools to help you find an appropriate business to invest in.
Read our review of Mainvest to learn more.
3. Invest in Gold
Investing in gold may seem like an antiquated notion, but it is one of the leading non-stock investments to add to your portfolio. Plus, it can be a great tool for diversification.
You have multiple choices to invest in gold, from ETFs and mutual funds that hold the precious metal to buying bullion directly.
Vaulted is a good site to consider if you want to buy the metal yourself. The site caters to investors who want to purchase gold kilo bars.
These bars are minted by the Royal Canadian Mint, and you can either have them sent to you via FedEx or have Vaulted store them for you.
The choice is yours, which is essential when choosing to purchase gold. If you’re new to investing in gold, Vaulted has many resources to help you start and grow.
Best of all, you can sign up with just $10 and a bank account.
Read our guide on how to invest in gold to learn more.
4. Pay off Debt
Killing debt can be one of the best ways to build wealth outside the stock market.
The idea is simple. Your net worth is comprised of one easy mathematical operation that subtracts your liabilities from your assets.
Lots of debt, especially high-interest consumer debt, can derail your progress towards growing wealth.
If this is you, it’s best to pay off debt as quickly as possible. Doing so moves your net worth in the right direction, frees up more money to invest, and relieves stress.
You don’t necessarily want to avoid investing to solely attack debt. For example, you should at least fund your 401(k) enough to receive the employer match.
This dual-pronged approach is your best bet to create a wealth-building strategy that will serve you in the long run.
There are two main schools of thought on the best approach to get rid of debt. These include the debt avalanche and debt snowball.
Here is how the debt avalanche works.
|List your debts by balance size
|Make extra payments on the higher interest rate debt
|Pay the minimum on all other debts
|Repeat the process until you become debt-free
This is how the debt snowball works.
|List your debts by balance size
|Make extra payments on the smallest balance
|Pay off the smallest balance
|Apply extra payments to the next smallest balance
|Repeat the process until you become debt-free
Ultimately, which one you choose doesn’t matter. The key is to attack debt and pay it off for good. This is especially the case if you’re facing dire financial circumstances.
You can read our guide on the best alternatives to bankruptcy to find another solution.
If you need help lowering your interest rate, SoFi is a fantastic choice. Choosing SoFi or another lender is a good way to lower your rate and eliminate your debt faster.
5. Purchase Farmland
Physical property isn’t the only choice for real estate. Investing in farmland is an excellent alternative for people who may not want to invest in stocks.
FarmTogether is a top option for those looking for alternative investments like family farms.
Like other crowdfunded sites, you don’t directly purchase farmland through the platform. You purchase shares of entities that own and hold farmland.
Additionally, you don’t directly manage the farmland. FarmTogether works with individuals who manage the land. They also vet and manage each investment.
The FarmTogether site has resources to help you choose an investment and educate yourself on how investing in farmland works.
Investments are illiquid, and distributions are made quarterly or annually, depending on the farm.
The one drawback to FarmTogether is that you must be an accredited investor to use the platform.
This means you must have an income that exceeds $200,000 annually the previous two years or $300,000 with a spouse. Or, you need to have a net worth of $1 million.
You must have at least $15,000 ready to invest in order to open an account with FarmTogether.
6. Peer-to-Peer Lending
Peer-to-peer (P2P) lending is an excellent way to multiply your money. Also known as social lending, P2P lending has been around for years.
Similar to businesses that need funding, banks aren’t always a viable option for people who need to borrow money.
Reasons can range from the amount being too small to a risk the bank isn’t willing to take. Left with no other choice, people in this situation turn to sites like Prosper.
The site matches people who need money with lenders who can help them meet their needs. Through crowdfunding, people can amass what they need to borrow.
For example, if someone needs to borrow $10,000, they can borrow $100 from 100 different people.
Like borrowing through a bank, the interest rate they pay depends on factors like credit history.
In essence, as the lender, you act as the bank. Rates vary, but it’s common to earn four to six percent on the funds you lend.
Like any other investment, it’s important to do your due diligence to ensure an opportunity is a worthwhile risk.
If you want to create multiple streams of income, P2P lending is worth considering if you need to add something to your list of passive income ideas.
7. Buy Into a Franchise
If you’re sitting on a significant amount of cash, investing in a franchise can be a good alternative to the stock market. But, it’s not for everyone.
A franchisee is someone who has lots of cash and wants to be a part of owning a business.
Franchises are often food-related, like Chick-Fil-A or McDonald’s, or retail-oriented, like Ace Hardware or GNC.
The franchisee buys a portion of the given franchise and helps manage it. This can either be actively or passively, depending on the cumulative ownership team.
You create income through sales and potential expansion. However, this opportunity isn’t without risk or responsibility.
Market risk can impact sales growth, and you may need to be involved in a full-time role.
Franchise costs can be steep as well. Chick-Fil-A, for example, requires you to invest $10,000 minimum plus have the working capital necessary to manage the location.
Other retailers have similar, if not more extensive, funding requirements. But, for the right individual, being a franchisee can be an excellent way to build wealth.
Diversification is essential when it comes to investing. Stocks are a crucial part of that, but there are other ways to create a diverse approach to wealth creation.
With a little creativity, you can become wealthier and somewhat protect yourself against wild stock market swings. That’s a win-win in any book.
Before pursuing any endeavor, consult with a financial advisor to ensure the opportunity fits your risk tolerance level.
What are some of your favorite ways to build wealth outside the stock market?
I’m John Schmoll, a former stockbroker, MBA-grad, published finance writer, and founder of Frugal Rules.
As a veteran of the financial services industry, I’ve worked as a mutual fund administrator, banker, and stockbroker and was Series 7 and 63-licensed, but I left all that behind in 2012 to help people learn how to manage their money.
My goal is to help you gain the knowledge you need to become financially independent with personally-tested financial tools and money-saving solutions.