If you're thinking of new ways to make money, try out these six non-traditional approaches to investing.
Are you bored stiff with the traditional investing choices? Have you had your fill of vanilla stocks and boring bonds? If so, you are not alone. Every year, plenty are discovering creative ways to put their money to work for them. In today's incredibly varied financial environment, there are so many choices that it's no wonder people are exploring the extensive menu of profit-making ideas. It's important to dispel a major myth about creative or alternative investment choices. They're not necessarily risky. In fact, many of these popular money-earning approaches carry much less risk than corporate shares and bonds. Real estate ownership, to name just one example, can be a very conservative and reliable way for working people to grow their wealth.
Your portfolio's risk level has little to do with what you buy. Even a few stock-related ideas are considered non-traditional based on the way they're set up. Dividend-reinvestment programs (DRIPS), for instance, can be a wise, targeted way to put every penny toward shares that produce current income and add it to your account balance for enhanced asset growth. Other ideas that are enjoying a sort of renaissance in the 2020s include options trading, precious metals, peer-to-peer lending, art, startups, exotic metals, and more. Here's a look at nine ways anyone can earn acceptable returns on something other than traditional securities.
Technically speaking, DRIPS (dividend-reinvestment programs) contain at least a fraction of old-school attitude in their DNA, but the way they're structured is what makes them different. When you sign up for one of the many online DRIP accounts, you only opt for companies that have long histories of paying out dividends, either quarterly or otherwise. But instead of pocketing the payout, the plan uses it to purchase additional whole or fractional shares. The strategy is a sort of super-charged way to grow wealth and one that is catching on with a new generation of market enthusiasts.
Options have been around for decades but are just now making a major move as one of the world's most active asset categories. Yes, they're totally market-based securities and you buy them via your standard brokerage platform. Their benefits, however, make them attractive to people who like the chance for outsize earnings and the power of controlling large blocks of stock for relatively small amounts of money. Check out a helpful essential options trading guide to learn the basics of getting into options and making them an important, profitable part of your portfolio.
A standard options contract gives its holder the power to purchase 100 shares of a specified security at a designated price by a certain date in the future. If you hold an option to buy 100 shares of XYZ Company, for example, for $22 per unit, its current market price, your option contract will rise in value if the price of XYZ rises. Then, you can sell the contract and earn a profit. An option is an effective way to speculate on price moves and control a much larger quantity of an asset than you'd otherwise be able to afford. That XYZ contract in our example might cost $50, but if you were to purchase the securities outright, your cost would be $2,200. There's more to it than that, but the basic concept is the same.
Gold and silver
The precious metals (PM) category has been enjoying a new level of interest from people in all income categories. That's partly because it's so simple to acquire metals these days, either via online buying or in-person purchases at coin stores in any city or town. Both are excellent choices for anyone who wants to build a diversified and safe portfolio. The key factor behind the widespread attraction is that both of these shiny metallic substances tend to rise in price when the securities markets are falling. Not only are the PM's a reliable hedge but they come with virtually unlimited upside potential. Anyone who believes that very challenging economic times are ahead is a fan of the PM sector, which includes not only gold and silver but palladium, platinum, and rhodium.
Buying and selling real estate
As long as there have been human beings and land, people have come up with ways to own, control, farm, rent out, buy, and sell real estate. In the modern era, real estate represents one of the most profitable ways of putting assets to work for your portfolio. The beauty of buying is that you can often find bargains, improve them yourself, and then resell them for much higher prices. Additionally, you can negotiate your real estate commission and save on fees when you take the time to study the market and work with a reliable professional. Another key benefit for prospective investors is that there are several ways to take part in the real estate marketplace and earn a tidy profit on your stake. For instance, if you don't wish to own property, there are limited partnerships, investment trusts (REITs), both of which offer solid returns for owners.
By joining a large pool of other investors who offer loans to individuals and small businesses, you can join the P2P (peer-to-peer) market as a lender. The amount you put in is up to you, which makes this approach ideal for younger folks who have limited capital but still wish to take advantage of a relatively new, non-standard way of earning regular income.
Rare stamps, art, and startups
Once upon a time, children all over the world collected stamps for fun. Now, adults are taking a long second look at the rare stamp market and opting in. That's because truly rare, not just interesting or artistic stamps, represent an asset class that can act as a solid hedge against inflation and a falling securities market. Works of fine art are the same, and they offer the chance to buy in for less than $500 and enjoy the prospect of earning very large long-term returns. Finally, doing online research to locate startups is a favorite technique for people who are willing to become small-scale angels for tiny firms. If you go this route, be sure to spend time studying financial statements and speaking with all the principals of the organization you decide to back.