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Investor Insights Blog|Alternative Investments Outside the Stock Market

Self-Directed IRA Concepts

Alternative Investments Outside the Stock Market

The volatility and fluctuation of the stock market is well known and documented. However, many investors only invest in stocks, mutual funds, or exchange-traded funds (ETFs), which can make down-periods of the market a little stressful.

This uncertainty may lead you to explore diversifying your portfolio. But what does that really mean? Does it leave you wondering, “Where should I put my money?”

Investments outside the stock market

There’s a wide range of investments outside the stock market, and for many, they’re more accessible and easier to understand. Alternative investments offer true diversification while in many instances affecting local, social, or environmental causes.

Wealthy and institutional investors are increasingly finding value in this asset class:

The popularity is not surprising when you discover the strong returns many leading alternative investment options have had – historically and recently. The assets have fetched average annual returns anywhere from 10 to 40 percent – and that’s not factoring in emerging assets such as Bitcoin.

Before we reveal some of these assets, here are the average returns of traditional investments over the past 20 years for comparison.

Traditional Investment Annualized Returns

  • Russell 2000 Index:  7.29%
  • S&P:  500 5.37%
  • DJIA:  5.35%

Here are just a few of the many alternative investing strategies that have far outperformed traditional investments.

3 Alternative Investments Outperforming Stock Market Returns

1. Real estate fix-and-flips

Average rate of return 2020: 40+%

What it is: An investor buys a property – usually in distressed condition for a discounted price, rehabs the property in a fairly short period, and resells it at a profit.

Why investors like it: It’s possible to complete more investments quicker, potentially increasing the annual return on investments significantly. It can also be rewarding to witness the transformation of a home and with it, the revitalization of a neighborhood.

2. Promissory notes/private lending

Annual yields as of 2019: 12-20%

What it is: A promissory note is a loan, with a signed “promise” to repay the loan amount by a certain date, typically with interest added. Think of it like a loan from a bank – except now, you’re the bank.

Why investors like it: Interested in real estate investing, but don’t want to be a landlord? Know of a local business in need of a boost? Promissory note investing gives you the opportunity to loan funds to real estate investors, business owners, or others, providing you with a stream of passive, predictable income.

3. Gold

Average rate of return (spot price last 20 years): 10.2%

What it is: Gold is a rare metal that is bought and sold in various forms (including bullion bars and coins) as investments. Its value is due to various factors, including scarcity and its function as a store of value.

Why investors like it: The asset is not tied to the public market’s performance and is considered a “safe haven” in times of inflation and economic uncertainty.

Unlock more alternative investment strategies

Discover 4 more alternative investments beating stocks: access your complimentary report, Alternative Investments Outperforming the Stock Market, which reveals:

  • Investments that have been reaping larger returns than the stock market
  • The one factor to watch out for that could erode profits
  • A little-known approach that savvy investors are taking to keep more of their profits

Access report now

 

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What’s the difference between a self-directed IRA and a traditional IRA?

A self-directed IRA is technically no different than any other IRA or 401(k). A self-directed IRA is unique because of the investment options available. Most IRAs are used for stocks, bonds, mutual funds and CDs. A self-directed IRA allows those types of investments along with real estate, notes, private placements, and other investment options.


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