Did the stock market rattle your nerves in 2008? Although I’m a firm believer that last year’s record declines in stock prices means 2009 is a great time to beef up your stock investments and buy, buy, buy—I understand that some folks are looking for some alternative investments to round out their strategies. And diversification is always a good thing. Here are five alternative investment ideas to consider this year:
Alternative Investment #1: Investment Properties
If you have the credit and the cash for a down payment, it’s a good time to get a rental property at a good price and a great mortgage rate. Yes, home prices could fall farther still, but you’ll likely hang onto a rental property for a decade or longer. If you can afford 20% down and a 15-year fixed mortgage and deal with being a landlord, this could be a great way to wealth. Start small—one small property and one or two tenants. And don’t make real estate your only investment; if you need cash, it takes a lot longer to sell a property than a few shares of stock.
Alternative Investment #2: Social Lending
If you’re already an involved investor but don’t know about social lending yet, you’re missing out. Social lending networks give everyday investors like you and me and the opportunity to invest directly in personal loans to others. People post requests for loans for various purposes; lenders review their profiles and credit history and choose to fund loans at the risk and reward levels they are comfortable with. One such leading network, Lending Club, makes it easy to start lending today with just $50 or so.
Alternative Investment #3: Online Businesses
After building and maintaining Websites like this one for just over two years, my little hobby now nets me an average of $4,000 a month. Not shabby. Whether you invest your time building a profitable blog or front the dough to purchase established sites, a monetized Website can be a nice addition to your portfolio.
Proceed with caution, however. I would never define revenue earned from blogs or other Websites as “passive” income. True, Websites can earn money while you sleep, but there’s always work to be done to keep it that way. If you purchase a Website, be sure to perform due diligence. Specifically, ask yourself: How is this site making money? Do I have to do to ensure it keeps making money? And, most importantly, why are they selling?
Alternative Investment #4: Your Debt
If you have credit card debt, paying it down shouldn’t be an alternative investment—it should be your only investment outside of tax-incentive retirement accounts. It’s hard to beat the return you’ll get by eliminating debt with a ten to thirty percent interest rate.
A more difficult decision: Should you invest or repay your mortgage or student loans early? It’s a decision you should make based upon your goals and comfort level. If you’re not comfortable investing in the market—pay down that debt! If one of your primary financial goals is to live debt-free, then pay it down as well. If, however, you’re comfortable hanging onto a mortgage or student loans and believe you can earn a better return in the market or another investment, then invest away.
Alternative Investment #5: Education
You are your number one asset. That is, your ability to earn money this year and in future years is more valuable than any stock, house, or gold you may own. Going back to school can, if done smartly, dramatically increase your skills and your value to future employers. Education is an investment in yourself.
Of course, if you do go back to school, consider the costs and benefits carefully. Make sure you’re going to school for something you enjoy—not just because it may earn you more money. You don’t want to graduate in debt and find out you hate the job going to school prepared you for!