Alternative Investments: Consumer Lending, Distressed Property
Technology allows investors to access and consider dozens of investment options.
In addition to traditional stock and bond investments, you may consider alternative investments (“alt” investments), such as precious metals, real estate, and commodities. Investors consider alt investments, because the value of these assets fluctuate differently than the stock and bond markets. If the stock market declines by 15% in a year, for example, and alt investment may not decline at the same rate- or may even increase in value.
Becoming a Lender
There is a growing market that allows investors to provide non-traditional loans to individuals. Instead of borrowing from a bank, an individual works with a lending company, and the funds loaned to the individual are provided by investors.
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As an investor, you receive a competitive interest rate on the amount you invest for lending. Borrowers can access a licensed money lenders list.
What About Property?
One popular investment over the years is real estate. Generally speaking, real estate falls into the alt investment category, meaning that the value of real estate does not fluctuate in the same way as stocks and bonds. As a result, including real estate in an investment portfolio with stocks and bonds adds diversity and helps to reduce the overall portfolio risk.
Keep in mind, however, that investing in real estate may be more complex than simply buying a stock or bond mutual fund. Real estate is not a liquid, which means that it is more difficult to sell than a stock or bond security. Also, your real estate investment may involve complex contract language and legal issues, so do your homework.
A higher risk category of real estate investing is distressed property. While these properties have a lower than average price, the property is typically in disrepair, or in a poor community. Only investors who can afford to rehab or build on a distressed property should consider these investments. Also, it may take years to sell these properties and recognize a gain.
Investing is distressed properties can be profitable for people who are know the local real estate market, and who can spend the time and money to rehab properties and make them attractive.
For some people, an investment in distressed properties is the sort of thing they do again and again. These rehab experts see each property as their very own project, and they enjoy the challenge of improving a property so that it can be sold for a gain.
Successful investors diversify their overall risk, and many investors include real estate in a portfolio with stocks and bonds. If you have the patience and the dollars available, you may be able to buy a cheap property, put in time and money to improve it, and make a profit on a sale.
Do Homework
Regardless of what types of investments you choose, do your homework. Find useful information online and talk to experts. A well-designed investment portfolio can generate a reasonable rate of return and limit your risk.
This post is for educational purposes only.
Ken Boyd
Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies
Co-Founder: accountinged.com
(email) ken@stltest.net
(website and blog) http://www.accountingaccidentally.com/
(you tube channel) kenboydstl
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