What are some of the best investments? Learn how to invest money without buying stocks from this guest post about ways to invest that don’t involve the stock market.
Best Investments – How to Invest Money without Buying Stocks
We’ve all heard of the stock market. It’s intimidating that’s for sure. So much so that a lot of people tend to avoid it like the plague.
But what if I was to tell you there are a plethora of ways to invest your money without buying stocks?
It would take me forever and a day to explain every single one to you, so I will highlight some of the best investments and answers to the question, how to invest money without buying stocks.
Investing Money with ETFs – The Exchange Traded Fund
One of the best ways to invest money without stocks is with Exchange Traded Funds. ETFs for short, are becoming insanely popular and there are a few reasons for this.
For one, most brokerages allow free commissions when purchasing ETFs. Why does this matter? Well, think of it this way. An investor wanting to start out with say $500 is severely restricted. With most brokerages, it often costs upwards of $10 when making a transaction.
With the average return of the stock market being 7 percent, you can see where the problem lies. An investor not taking advantage of commission-free ETFs is losing 2 percent of his yearly earnings immediately on commission. As a result, investing seems to have a much lower barrier to entry these days.
Another benefit of ETFs is instant market diversification. Instead of relying on individual analysis and stock picking, an ETF investor can pick an entire index or industry to invest in one click of their mouse. Want to invest in the Oil and Gas industry but don’t know which individual stocks to pick? Find an ETF that covers the entire industry and get exposure to all the biggest stocks.
Best Investments: Robo-Advisors – Automated Investing
If you want to know how to invest money without buying stocks, Robo-Advisors are what I would consider to be the new kids on the block. In addition, they are making a tremendous impact.
People have caught on to big banks and mutual funds. Their ridiculous fees are exposed and people are tired of paying them. But for a person who is looking to move their money to something that charges less but doesn’t have the time nor knowledge to make investment decisions themselves, where do they turn?
Well, more than likely they head to a Robo-Advisor. The name is pretty self explanatory. Robo-Advisors are investment advisors that automatically invest and balance your portfolio based on your risk tolerance and market conditions.
Your tolerance is often determined by a quick questionnaire with, in my experience, precision accuracy.
From there, you simply sit back and watch your money grow, for substantially less than a mutual fund. In fact, you can expect to save up to 75 percent. This adds up substantially over years and years of investing.
Best Investment Ideas: REITs – Real Estate Investment Trusts
Another one of the best investment ideas involves Real Estate Investment Trusts. I’m sure we’ve all dreamed of owning rental properties. Consistent passive income and an early retirement seems glorious. But, a lot of us can’t afford the down payment on our first house let alone multiple other properties.
Then there is the fear of tenants trashing your place, or the house sitting empty during tough economic times.
Enter REITs, your real estate dream come true. Alright, maybe not exactly, but they are still an excellent option.
An REIT is simply a company that produces income from real estate. It can be industrial commercial or residential properties.
REITs have to pass a ton of rules and regulations to qualify. For example, a REIT must have at least 75 percent of its assets placed in real estate.
The best rule though? These companies have to pay 90% of their income out as a dividend to shareholders. Because of this, you know you are getting your fair share of the trust’s income.
Investing Money without using the Stock Market: Stocks aren’t the be all end all
Investing, especially without the advice of a broker, is extremely intimidating. New investors who don’t put the time in to learn will surely lose their money, and even the people who do put the work in to learn may not have the time to constantly be monitoring and balancing their portfolio.
That’s why something like a Robo-Advisor may be right for you. There is no shame in letting someone else manage your finances. We all don’t have the time nor skill to execute the task ourselves. The fact you are making the switch from a big bank mutual fund to a Robo-Advisor is going to save you boatloads of money to begin with.
And if you feel like making the switch to all-out DIY investing but are still hesitant on your ability to pick individual stocks, ETFs or index funds can be a great way to have instant market diversification, and in the case of ETFs may even be free to purchase!
Dan Kent is a writer and co-founder of Stocktrades.ca. A DIY investor for 7 years now, Dan has a combination of dividend, growth and real estate investments into his portfolio and is looking to continually grow his net worth. You can check his website out at stocktrades.ca or follow him on Twitter at @Stocktrades_CA.