5 Alternatives to Investing in the Stock Market

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While stocks are the cornerstone of the American investment experience, not everyone is interested putting everything into the stock market. Indeed, it can make sense, depending on your preference and your risk tolerance, to look for alternative investments.

If you are considering other places to invest your money, here are 5 alternatives to stock market investments:

1. Bonds

When you aren't planning on investing in stocks, one of the time-honored alternatives is bonds. You can keep your principal (relatively) safe with bonds, and earn interest.

Many investors turn to government bonds in times of economic uncertainty, since they are considered the next best thing to a “sure” thing. If you want a higher yield and are willing to take on a little more risk, you can consider emerging market bonds.

Further Reading: How to Invest in Bonds

2. Annuities

Yes, we've heard a lot about how annuities can be a nightmare — and without a doubt they can be. However, there are some annuity products out there that aren't so bad.

With the right annuity, you can plan for regular, reliable income (assuming you trust the insurance company selling the annuity). Your investment won't see a lot of growth, but it will enable you to receive a regular chunk of income when you're ready for it.

Before you invest in an annuity, though, do your homework. Annuities are known for fees, as well as for beneficiary snags and potential tax issues.

3. P2P Loans

An increasingly popular investment option is P2P (peer-to-peer) lending. You can use P2P lending as a way to earn interest on your money — and usually at a better rate than bonds or cash.

In some cases, particularly during an economic downturn, annualized returns from P2P loans can even beat stock market returns.

However, you still run the risk of loss. If the borrower defaults on the loan, you could lose your principal. But with a little careful probing, it's possible for you to find solid prospects for your P2P portfolio.

And if you want to help others while earning a return on your money, you can consider microloans to those in third-world countries who are trying to start businesses to raise themselves out of poverty.

4. Real Estate

Why not invest in something you can touch? You can buy a property and hold onto it, hoping to sell it for more later (a strategy my grandfather employed to great success when he sold to developers after 20 years).

Another strategy is to buy income property. You can purchase property designed to provide you with regular income from renters. In either case, real estate can be a solid alternative to the stock market — if you can handle the management aspects.

5. Gold

One of the most popular alternatives to the stock market is gold. When you invest in physical gold, you not only have something tangible, but you also have something that nearly every culture has considered valuable for thousands of years.

In a pinch, you can use your gold as currency in some places. You can hoard it and wait for the dollar to collapse (if you believe that's what's coming).

As long as you understand how to counteract some of the difficulties of investing in physical gold (where to store it, etc.), it can be a fine choice for some investors.

Other Alternatives not covered in this article:

Miranda Marquit

Miranda is a journalistically trained freelance writer and professional blogger specializing in personal finance. Her work has appeared and been mentioned, in various media, online and off. You can follow Miranda on: Twitter

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5 Comments

  1. Just don’t do bonds or gold. Real estate as a rental proposition is OK if you’re into that sort of thing. But to my mind there’s no other way than dividend shares. Part ownership of a real company paying real money, what’s not to like? Add margin to the equation and you’re… well, gold.

  2. Would you consider index funds to be an alternative? or just buying the same thing in a different way?

    Real estate is one of my go to investments. It’s paid off great on one hand but the market my largest investment is in has tanked a good 20% in the last year due to it being heavily tied to the price of oil(boomtown for oil)

  3. Great alternatives! Gold will always be a safe investment, even though safe doesn’t necessarily mean profitable. Real estate, as you said, is a great investment opportunity, but one needs to be very careful when studying the market. For example now would be a very bad time to invest in Chinese real-estate, because there is speculation of a bubble that’s about to burst. However, Panama and Belize are emerging economies and a real-estate investment there would be profitable.

    1. Year after year, the Chinese/Bay Area/South Cal bubbles are always there. What’s the cause of the last crash? Everyone blames the loose lending. Now as I know, they are doing 10% down and give you the approval as long as you have a job offer, not even the paystub. No thanks, but still, it is NOT a bubble coz everyone just want a roof somehow

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