While many investors put their money into the stock markets, there are other alternatives where you can invest your money. Some of them are lower risk and lower reward, while others are higher risk with greater potential rewards. It's important to thoroughly research all potential avenues before you make any big financial decisions. Here are four alternatives to investing in the US stock markets.
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American depository receipts (ADRs) give investors a simple way to buy individual foreign stocks. To be clear, these stocks are traded on the NYSE and NASDAQ, but they are for foreign companies. Though most people invest in foreign stocks using only exchange traded funds, ADRs are better for customers who have a particular stock in mind. That is, when you invest in a fund, you are buying into a package of international stocks and bonds.
These funds also incur higher trading fees. So, while you are still trading within the US stock market when you use ADRs, you're hedging your bets on foreign entities. In general, your overall fees and taxes will be a little higher when you invest in foreign stocks, but it could be a great decision if you do your research and learn about the company.
Gold can be a great asset to invest in. While you probably won't be able to make a fortune if you have a little bit of gold in the safe deposit box, it stands as a steady investment that can withstand fluctuations in the stock market. In even the harshest financial climates, gold can hold its value. For this reason, it is often referred to as a rescue asset.
Government issued savings bonds are reliable long-term investments. They are great for short-term gains, especially when you consider that you will incur steep fees if you redeem your money before the end of the bond period. Bonds are usually sold in five-year or greater time periods. A savings bond will issue a greater return than a traditional savings account at a bank. Currently Series I savings bonds are earning 2.58% and pays interest every six months. You can redeem the bond after twelve months however, if you redeem the bond before it is five years old, you lose the last three months interest. That being said, you don't have instant and easy access to your money when it's in a bond rather than a savings account.
Real estate is probably one of the most popular alternatives to the stock market. You need to be aware that there are definitely risks when it comes to investing in real estate. However, the rewards can be plentiful. When you own an income property, you're actually receiving cash on a monthly basis from rent. Furthermore, when you resell your property years later, it will hopefully have increased in value.
This increase can actually be far more significant than a savings bond or stock purchase. But it's a bit of a gamble and you need to not only do extensive research but also rely on a bit of luck. It's also important to remember that economic downturns can affect property values and real estate prices vary greatly depending on what part of the country you live in.
These are just four of the most popular alternatives to investing in the stock market. No matter what route you choose, make sure you do extensive research.