Asset Allocation Strategies

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>>> 5 Ideas to Build Wealth Outside the Stock Market


Yield Street

MILIND MEHERE, FOUNDER & CEO


https://www.yieldstreet.com/five-ways-to-make-money-outside-the-stock-market?utm_source=Taboola&utm_medium=cpc&utm_campaign=NEW_WL_Desktop&utm_content=K3hh&bloomberg


Having passed the 10th anniversary of the start of the Great Recession, we are now in the longest bull run in the American economy since WW2. Historical data reveals it is only a matter of time before the market pulls back.5

With the U.S. unemployment rate at lows near 4%, the federal government has executed on a fiscal stimulus package which, according to Ben Bernanke, former Chairman of the U.S. Federal Reserve, "is going to hit the economy in a big way this year and next year, and in 2020, Wile E. Coyote is going to go off the cliff".6

Today, many investors are unaware of new alternative investment options with typically low correlation to the stock market that can be added to their portfolio to protect against the fluctuations in the broader economy.

Rather than putting all of your hard earned money in the same basket, consider these 5 strategies outside the stock market:

1. Rental properties and Vacation homes:

A drop in homeownership rates has led to a rental boom, so purchasing a second property can be a great way to boost your finances.

Rental investments can generate returns, plus any rise in equity; however, it can be difficult to be a passive landlord. If you don’t want to manage tenants and handle maintenance yourself, you’ll need to hire a trustworthy property manager.

If you want to build equity, you also must purchase property in a market that has strong interest in rentals and vacation homes. While many online portals will give you a feel for the market, you will need to build your own payback/investment model.

• Set-up: Hard

• Time commitment: High

• Money required: Medium ($20,000 to $100,000)

• How: Self-research


2. Commercial property:

The approach is similar to that of rental properties, but in this case, you’re buying into properties like a one- or two-star hotel (think Days Inn [WYN] or Holiday Inn [IHG]) or a strip mall.

The initial investment is significant, and you need to vet potential partners to ensure they’re reliable and have domain expertise.

But if you’re willing to put in the initial time and capital, you can potentially expect a 6% to 12% return, compared to around a 1% to 4% return on a single-family home.

• Set-up: Hard

• Time commitment: Medium

• Money required: High ($250,000+)

• How: Self-research


3. Franchise play:

Invest in a single franchise or a group of successful chains, such as Subway or Dunkin’ Donuts. The franchise industry is set to grow this year, and that trend could very likely hold.

A franchise investment could earn you a 10% to 15% return on your investment.

The biggest drawback is that buying just one or two will not generate enough income to make it interesting. You’ll need to purchase several for the investment to be worthwhile, which usually means a larger check size and additional time spent finding the right partner. To get started, you could attend a franchising trade show to get the lay of the land.

• Set-up: Hard

• Time commitment: Medium to high (if you run it yourself)

• Money required: High ($50,000 to $1 million)

• How: Self-research


4. Peer-to-peer lending, social lending, and crowdfunding:

These platforms enable borrowers to connect with a wide range of potential lenders (that’s you!) instead of having to rely on traditional banks for financing. The borrowers are individual consumers or small businesses, and the investments usually target an 8% to 12% return.

Even by conservative estimates, the industry is growing rapidly. Most platforms focus on consumer lending and SMB lending, and you need to be aware of credit cycles and changes in interest rates.

• Set-up: Easy

• Time commitment: Short

• Money required: Low ($5,000+)

• How: Online platform


5. Alternative lending:

Investing in specialty finance products such as real estate, commercial loans, and legal settlements can yield 8%-20% returns, and it requires less time and energy than buying and managing physical investments.

In the past, these alternative investments were generally exclusive to investors with ultra-high net worth and large investment banks.

Today, they’re increasingly available to retail investors through platforms like YieldStreet, an alternative investment marketplace that offers investment opportunities in real estate, litigation finance, and consumer lending.

• Set-up: Easy

• Time commitment: Short

• Money required: Low ($5,000+)

• How: Online platform

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In Conclusion:

Diverse, lucrative investment options exist outside of the stock market - If you‘re willing to understand and go after them.

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