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5 Ideas on Building Wealth Outside the Stock Market

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5 Ideas on Building Wealth Outside the Stock Market


If you are reading this article you might already be contributing monthly to a 401K or IRA. You are also likely to be investing your extra income in the stock market but in 2020 and beyond building wealth is expected to go far beyond your typical nine-to-five job and investing in stocks, bonds and mutual funds.

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Many investors you might be one of them are not aware of the alternative investment options available to them these opportunities typically have low correlation to the stock market and can potentially protect your portfolio against fluctuations in the broader economy instead of putting all your hard-earned money in the same basket consider these 5 alternative strategies:

1. Invest in a Rental Property


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  • Difficulty: Hard
  • Time commitment: High
  • Money required: Medium ($20,000 to $100,000)


A drop in homeownership rates has led to a rental boom purchasing a second property can be a great way to help boost your finances.

Rental investments can generate returns plus benefit from any rise in the value of the property. However it can be difficult to be a passive landlord if you are not interested in managing tenants and handling maintenance you will need to hire a trustworthy property manager which can cut into your returns.

Also if you are looking to build equity you will need to purchase a property in a market with a strong interest in rentals and/or vacation homes many online portals will give you a feel for the market but you will need to build your own payback/investment model.

Lastly forced appreciation can be one of the fastest ways to get the most out of your rental property. Forced appreciation is when a property owner increases the value of their property by taking specific actions anything from gut-renovating a home to adding an extra bathroom.

With this said, renovations can be costly, especially if you are not doing them yourself. if you do decide to go this route make sure you do your homework and vet contractors before any work begins.

2. Invest in Alternative Assets


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  • Setup: Easy
  • Time commitment: Short
  • Money required: Low ($5,000+)
Recent technology has resulted in increased access to alternative asset classes for individual investors. Alternative asset classes such as real estate finance, litigation finance, marine finance, art finance, and commercial finance allow for potentially strong returns with typically low stock market correlation and are backed by tangible collateral. Furthermore their set durations and target yields offer the potential to generate income without the guesswork of timing when to enter and exit your positions.

They also require less time and energy than buying and managing physical investments such as rental properties.

In the past alternative investments like these were typically exclusive to institutions, hedge funds or ultra high net worth investors. Today, alternative investment platforms like Yieldstreet are reinventing this model allowing individual investors to access these investments for the first time.

For instance Yieldstreet offers investments in all of the asset classes mentioned above with target yields of 8-15%.

3. Invest in a REIT


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  • Setup: Easy
  • Time commitment: Short
  • Money required: Low ($500+)
Investing in a REIT real estate investment trust is an alternative to purchasing and managing a rental property on your own if you are not familiar with what a REIT is that’s OK. REITs are companies that either own or finance income-producing properties apartment or condominium complexes, shopping centers, hotels and warehouses are a few examples.

When you invest in a REIT you are investing in a pool of real estate assets with other investors it’s conceptually similar to a mutual fund with a REIT you don't need a large amount of capital to invest with upfront you also won’t need to manage the properties yourself there are many types of REITs so do your research before you make any investment decision.

4. Invest in a Franchise


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  • Setup: Hard
  • Time commitment: High
  • Money required: High ($50,000 to $1 million)

Investing in a franchise can be another way to help diversify your investment portfolio and grow wealth. A franchise is a license you buy that allows you to run a business under the name of an already-established business. For instance a franchisee can buy a license to open up a McDonalds, Dairy Queen or even a Holiday Inn.

One of the biggest potential drawbacks to investing in a franchise is that setting up 1 or 2 franchise locations may not generate enough income to make it worthwhile. You will probably need to open several locations for the investment to be worthwhile which usually means a larger check size and time spent finding the right franchisor. To get started you could attend a franchising trade show to get the lay of the land.

5. Peer-To-Peer Lending


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  • Setup: Easy
  • Time commitment: Short
  • Money required: Low (less than $500)

Peer-to-peer lending or P2P has only existed since around 2005 beyond being beneficial to those looking for financing it can also be a good way to generate passive income for an investor.

Peer-to-peer lending is also known as social or crowdlending it connects borrowers looking for alternative forms of capital with lenders such as you. Minimums for on P2P platforms are often low and can potentially result in high returns that is higher than if your money was sitting in a traditional or high-yield savings account investing with a P2P platform does come with risk so make sure to thoroughly vet both the platform and investment before taking the leap.

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