The stock market isn’t the only option for making worthwhile investments, and since the recession, alternative investments are on the rise. Many see the stock market as too complex or risky, so they seek alternatives that appear more straightforward and secure. Some choose to invest in themselves, opting to spend their money on education or owning their own business. Others prefer to invest in commodities such as gold or silver.
Despite the benefits of staying away from the stock market, investors should be cautious with newly popular alternative investment opportunities, as these can easily take a turn for the worse. Jonathan Clements of The Wall Street Journal warns that history isn’t necessarily the best guide to which investments will succeed in the future. For example, gold stocks, real-estate investment trusts (REITs), and commodity funds were hurt by the recession. “As these investments become more widely owned, their performance may be more like the broader stock market,” he adds. Clements also stresses the importance of rebalancing your portfolio.
Ultimately, investments come down to a trade-off between risk and payoff. And it is largely accepted that diversifying your portfolio stands to help reduce risk and increase payoff. The best investments, considering the current economic climate, are always up for debate. But it’s essential to recognize that you often cannot predict what the market will look like down the road. Thus, every investment comes with a certain amount of inherent risk. But if you are looking to invest without playing the stock market game, here are some worthy alternatives to consider.
1. Savings accounts
While you certainly aren’t going to get rich on the interest gained from a savings account, it’s a very secure, low-risk option that will produce a small amount of interest. Particularly if you are a member of a credit union, interest rates may be better than you think. Plus, withdrawals from the account will not be limited, so if you need to borrow from your savings you know it’s there for you anytime, without penalty.
2. Savings bonds
There are two types of savings bonds issued by the U.S. Department of the Treasury. Series EE bonds pay a fixed interest rate, and series I bonds pay interest adjusted for the rate of inflation. If you redeem bonds in the first five years, there will be penalties, but in the long-term, savings bonds can produce a healthy return for such a low-risk investment. While savings bonds were traditionally issued on paper, the Treasury is phasing these out in lieu of electronic bonds that can be purchased via TreasuryDirect.gov.