Alternative Investments to Diversify Your Portfolio
Are you looking for some fun and interesting ways to round out your portfolio instead of just learning how to buy stocks? While you can diversify your stock investments by holding various companies in different industries, countries, and market segments, many advisors also recommend holding some of your portfolio in alternative investments. If you’re looking for something new and different, there are several options that you might find appealing.
Peer-to-Peer Lending
These lending networks allow investors to pool their funds and make small loans directly to borrowers. The best-known peer-to-peer (P2P) lending network is Lending Club, which has issued over $20 billion in loans and has a 45 percent market share. As a Lending Club investor, you put just a few dollars toward each loan, which is pooled with hundreds of other lenders, so one borrower’s default won’t make a huge dent in your balance. You decide how much risk you’re willing to tolerate, with riskier loans paying higher returns. As borrowers make monthly payments, cash pools in your account, which you can withdraw or reinvest as you choose.
Cryptocurrency
Cryptocurrency, or Crypto for short, is a digital currency named for its security cryptography. The most well-known crypto is bitcoin, but there are many other types of crypto in use, such as Ethereum and Litecoin. This is money that is not backed by any government or central authority, which some people see as its strength and others view as its greatest weakness. Like any currency, its value rises and falls around the clock, depending on what people are willing to pay for it. Crypto prices have been extremely volatile, and learning how to buy cryptocurrency is not for the faint of heart or those who can’t afford to lose their capital.
Foreign Exchange Investments
Investors have been trading in the foreign exchange (Forex) market for a long time. Forex traders use one currency to buy another with hopes that they’ll sell at a profit. Like stocks and commodity futures, Forex trading is well-regulated, well-established, and highly liquid. Like crypto, trading takes place 24 hours a day and prices can be highly volatile. Forex trading is particularly appealing to mathematical investors who use formulas, charts, and analysis to predict currency prices.
Rental Real Estate
Popular television shows make house-flipping look like a fun hobby you can take on anytime you have 30 minutes of free time. Though reality is very different, fixing up houses and renting them out can be rewarding and a good source of revenue. If you have cash to invest but no home improvement skills, you might look for a partner. Once you have a small portfolio of single or multifamily homes to lease, you can contract with a property manager to handle the rental business.
Rounding out your portfolio with alternative investments is not only good business but can also be a fun way to branch out and learn new things. Rental real estate, Forex trading, crypto, and P2P lending are all good ways to expand your holdings and explore new financial realms.