Trading stocks is one of the most popular form of investment. And it is right to be so because of the opportunities for profit that it offers. While market stocks are indeed the leader in numbers when it comes to investments, there are investments that exist that an investor can add to his portfolio. These alternative stocks are a way to offset the volatility of stocks as well as improve the performance of a portfolio. By including these stock substitutes, investors get a chance to explore more opportunities and build a well-balanced portfolio. They also have the option to replace the stocks completely if they choose to. Here are the top three stock substitutes that investors can maximize.
According to a 2014 survey done by Morgan Stanley Wealth Management in their Investor Pulse Poll, Real Estate is the next best choice among millionaire investors after stocks as investment. Real estate has recently surged to the top spot in popularity and profitability among investment options. Investing in real estate is easy if you have the capital. The following are ways in which you may invest in real estate:
1) The most common way of real estate investment investment is through purchase. Buying a residential or a commercial property gives the investor the ability to rent said real estate and earn a steady income from them. Owning a real estate property is no easy job. First of all, you must be able to cash out a huge sum of money to buy it and then you have to renovate the place if it needs work. After that the maintenance also require more effort and more capital with all the taxes and mortgages. Other than that, the profit will be worth it if the real estate property was at a location that people will be able to do their business in.
2) Another way is by joining a real investment group. Becoming a part of a group cuts down the capital that you need to expend however it also cuts down on the profit you hope to make. However, as you are in a group, the risks are spread out as well. Most real investment groups do the work for you. The taxes, location hunting, renovation, and other real estate concerns will be taken care of them by using your money for you. Just keep in mind that these groups might charge fees for such actions.
3) Lastly, investors may invest in a real estate investment trust or REIT. REITs are just like stocks and unlike the two previous methods of real estate investment, are much cheaper. As they are like stocks, REITs are also found on major exchanges which you may and sell.
Another stock substitute that investors might take interest in is Social Lending or Peer-to-peer lending. Social lending is a way of investing which departs from the standard financial system. What separates it from other investments is that no intermediary is involved meaning that there are no financial institutions such as banks or exchanges that govern this investment. It is a basic way of profiting from lending through a personal level. Lenders will set an interest rate which is normally lower than that of banks while borrowers set their own rules with regards to the debt. The payment method, collateral, etc. The biggest setback here would only be the risk of default. As no intermediary exists, the investor must be responsible for the commitment of borrowers to their obligations.
One of the best substitute for stocks is the one that has always been there: Bonds. Bonds are a safe-haven for investors meaning it is an investment which investors turn to especially in times of major volatility caused by various factors such as political conflict, economic events, and other happenings. Bonds offer lower risk as they offer a fixed income for a set time period. The various bonds available in the market will be able to satisfy any type of investor such as municipal bonds, federal government bonds, and corporate bonds.
There are more alternative investments that are available out there. Although stocks have the opportunities for big profit, diversification is important because the risk in stocks are big as well. Just remember that whatever the investment is, be prepared. Do your research and invest wisely.