You already know that you’re going to need more than a savings account or CD to build your wealth, but what if you are uncomfortable with playing the stock market or investing in high-risk options?
Despite popular belief, the stock market isn’t the only investment you can make to increase your wealth. These four types of investments are things anyone can do – even without reading the Investing for Dummies.
1) Become a Landlord
One of the best ways to build residual income is to become a landlord. That’s right. Buy a house, business property, or multi-family living unit, and rent it out.
Dealing with renters can be challenging at times, but for the most part, renting out property can be a steady source of income. Plus, with very few exceptions, your property and land will always have value if you need to liquidate your assets.
I also like to think of rental property as an investment opportunity that doesn’t goes away. If the stock market were to crash tomorrow, your portfolio would suffer. However, your rental property would likely remain unaffected because your tenants would still need a place to live. In fact, if the economy were to take a hit, like it did in 2008, more people would be forced into renting, putting you in an advantageous spot.
If you are interested in investing in property, then it is important to remember that this investment strategy is not a get rich quick scheme. You must think of your property as a long-term game. It can be years before you see profit on your investment, since it takes time to pay them off. However, once you own it free and clear, the monthly rent is a nice income bonus.
2) Invest in REITs
Still not convinced to become a landlord? While keeping track of tenants isn’t for everyone, don’t give up on investing in real estate just yet.
Real estate investment trusts (REITs) allow anyone to invest in properties without actually having to buy or manage the property itself. With REITs, real estate is managed and financed through other companies. Your investment goes into a portfolio of several different real estate assets which then provide a share in any income earned through the properties.
If you’re interested in in REITs, some companies you may want to check out include Fundrise (which only requires a $500 minimum investment), DiversyFund (which has a $500 minimum investment), Realty Mogul (which has a $1,000 minimum investment), Groundfloor (which has a $10 minimum investment), EquityMultiple (which has a $5,000 minimum investment) and PeerStreet (which has a $1,000 minimum investment). Personally, I like Fundrise, DiversyFund, Groundfloor and Realty Mogul to start because the other options require you to be an “accredited investor.”
3) Invest in Yourself
Investing in yourself is not just some trendy excuse for a spa day and extra vacation time. One of the best investments you can make is in yourself, especially through knowledge and health. Motivational speaker, Jim Rohn, says, “Income rarely exceeds personal development,” as well as, “Unless you change how you are, you’ll always have what you got.”
If you don’t continually improve on how you work, how you communicate, and how you manage money, then you can’t expect a higher paying job, more money in your savings account, or the life you desire. Furthermore, if you don’t invest in yourself physically through healthy eating, exercise, and good habits, your poor lifestyle choices are going to end up costing you quite a bit when they catch up to you.
Investing in yourself can cost as little as a time investment, such as running for 30-minutes each morning. Many times, it will cost you money to invest in books, courses, classes, and conferences that expand your skills and mindset. You might even invest in courses that teach you how to get work-from-home jobs that allow you to earn more money doing something you love rather than slaving away at a desk job you hate.
Don’t underestimate how valuable investing in yourself can be. Another motivational speaker and author says, “Invest three percent of your income in yourself in order to guarantee your future.” How does this work? If you are in a job where all of your co-workers have similar resumes and paychecks, then you give yourself a huge advantage by investing in personal development resources that elevate your resume and make you stand out as a superior employee. Investing that three percent back into personal development could lead to a 10 percent raise or a job offer elsewhere that pays you 10 to 20 percent more.
4) Invest in Peer-to-Peer Lending
Peer-to-Peer (P2P) lending allows borrowers to secure financing outside of traditional financial institutions. Peer-to-Peer lending platforms can connect borrowers to investors for faster and more affordable finance options. On the investor side, this means you can invest your money into a P2P platform. That money is then pooled together with other investors, and you earn interest monthly as debts are repaid.
The largest P2P platform is Lending Club, where you can start investing with a minimum of a $1,000 deposit. After opening an account, investors purchase notes which correspond to different loans, grades, and terms. Then, they receive monthly principal and interest payments as the borrowers pay off their loans. Lending Club considers themselves low risk, and as the investor, you can always invest in loan grades and terms you feel comfortable with.
Prosper is another P2P platform that allows investors to start investing at only $25 per loan. Investors can then choose the loans they want to invest in based off of how credit-worthy the borrower is.
Like other portfolios, P2P lending allows you to set the amount of risk you wish to assume with your investment. The riskier the loan – i.e.: a borrower with poor credit – the higher the return. The safer the loan terms, the lower the return on your investment.
If investing in the stock market intimidates you, then don’t bother with it. There are quite a few other ways to make a decent return on your investment.
Try out one of these four stock market alternatives before turning to low-interest earning vehicles like CDs or savings accounts.