The question has come up before about utilizing non-traditional investments to build your long-term portfolio. I have developed a list below that also ranks some of these investments from least-risky to most risky relative to each other. Note that this many items on this list can be exchanged for another based on a particular situation, but I am reviewing this from a broad perspective.
- Certificates of Deposit / Savings Account
- Precious Metals (directly & indirectly)
- Peer-to-peer Lending
- Investment Real Estate
- Owning a Business
Certificates of Deposit / Savings Account – Both options offer a stunning low return, but you are guaranteed a very low risk investment opportunity. This invest should only be considered if you want to have a “cash” withholding in your investment portfolio or you need the money in a short-term (1-3 years).
Bonds – Bonds are another safer strategy with a lower risk but also a comparable lower rate of return. Although riskier than a CD or savings account bonds should be a staple of any person nearing retirement age as a method to generate income and protect the pripal from significant loss. Some types of bonds can also yield tax benefits (municipal bonds).
Annuities – Annuities are a mixed bag and come in all kinds of versions and packages. Often annuities are best to be avoided because they do not offer clear terms or can misconstrued their fees associated with their rate of returns. Proceed with caution and make sure you read the fine print before purchasing a long-term annuity contract. The risk of an annuity losing it’s principal value can be low, but often confusion terms can result in a lower actual rate of return once fees are calculated into your investment.
Precious Metals (directly) – You can choose to invest in a precious metals by physically purchasing and storing precious metals to have liquid assets. There is substantial risk to holding physical metals if it’s not kept in a secure location (lock box, bank vault, etc). Many people think that their are only a few options when purchasing precious metals. Here are some of metals you can invest in: Gold, Silver, Copper and Platinum.
Precious Metals (indirectly) – A safer option for adding precious metals to your portfolio would be to invest indirectly in precious metals with an exchange traded fund (ETF), common stock of a precious metal company or certificates. Certificates are closer to physically purchasing metals without the hassle of storing and securing the asset. Additionally you can consider investing in some non-precious metals such as Aluminum and Steel.
Peer-to-peer Lending – P2P lending allows you the opportunity to lend directly to individuals or companies through an online intermediary. Two of the most common lenders are Prosper and Lending Club. Your return and interest rates will vary with the level of risk of the loan.
Investment Real Estate – You can build your portfolio by purchasing investment real estate as a long-term asset. This process will be covered at a more in-depth analysis here.