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As you start to save and increase your income, one of the most important steps you can take is investing your money. Many people struggle to know what to invest in besides the stock market. Granted, the choices are vast and can be quite confusing.
However, if you want to ensure a healthy financial future, ensure your family’s finances are secure and live comfortably in your golden years — investing is an absolute must!
And although there is always some risk with any investing you potentially do, you are risking more by letting your money just sit idly by.
I say this because, you could be missing 20-30+ years of compound interest, which can add up to thousands — if not six-figures of missed investment income.
Below, we will explore investing in the stock market as well as the investment options you have beyond that.
Editor’s note: M1 Finance is what we use to invest money in the stock market outside of our retirement accounts and is what we recommend. It is a hybrid of an online brokerage and robo-advisor so there are always physical people to speak to and there are no fees!
What to Invest In
Investing in the Stock Market
The commonplace you should be investing your money is in the stock market. The stock market is where investors all connected to buy and sell investments in stocks or bonds.
Stocks are shares of ownership in a public company, like IBM, GE, etc. You can also invest in various bonds, which represent a loan made by the investor to a borrower (typically corporate or governmental) and receive a fixed income.
Without getting too deep into the stock market, you have options to invest in individual stocks and bonds, ETFs, mutual funds, or index funds.
Of course, I’m simplifying this right now, so if you want a deep dive, I’d recommend reading this about the stock market.
For most people, investing in the stock market is as far as they will go usually because this is where they’ll have a company 401k for retirement, or even an IRA or Roth IRA (individual retirement accounts).
But if you want to obtain wealth and diversify your investments, you’ll want to invest your money beyond just the stock market.
Before Investing Your Money Outside the Stock Market
So, you are ready to invest your money beyond the stock market. That is exciting and a great mindset to have!
But, before you learn more about where you can invest further, it’s important to have a few items checked off first.
You Have An Emergency Fund
Before you get ahead of yourself, ensure you have a stable emergency fund built.
There are a few variations of how much you should have and experts who recommend different amounts. I think it depends on your specific expenses, how stable your income is (and current job market), debts, etc.
That said, I always recommend 6-9 months saved regardless. But you can always be safer and aim for a year’s worth. This fund should cover your expenses if you were to lose your job or have a huge unexpected liability.
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Investing in Your Company 401k
Before looking at any alternative investments, if your company offers an employee-sponsored 401k plan, then you must take advantage of that. Many companies provide a company match on a percentage of the money you contribute, which is huge for your future retirement.
Ensure you are signed-up, contributing enough to get the company match (or more) and keep it consistent.
With your 401k, make sure to sign-up for Blooom’s free 401k Analyzer. The analyzer will help you catch any hidden fees and provide portfolio recommendations.
Investing in an IRA or Roth IRA
If your company does not have 401k (like mine currently), then opening up a traditional IRA or Roth IRA with your financial institution of choice is a significant first step (Blooom also recently added IRAs to their analyzer too).
The contribution limits compared to a 401k are much lower, but this still allows you to invest in the stock market for your future retirement.
It’s important to have this set up as well and ensure you are contributing consistently or maxing it out if possible for you.
Pay Down Any High-Interest Debt
There is a lot of back and forth on whether one should pay down debt or invest for retirement. I have done both at the same time.
However, before investing your money elsewhere, I think it is essential to tackle any high-interest debt you have first.
Getting rid of debt will give you more peace of mind and will take care of debt that could snowball because of the interest, for example, credit card debt.
Know Your Goals for Investing
Lastly, I think it’s important you sit down and write your goals for investing.
Be sure this includes the stock market and any of the additional investment options in the next section. Become more financially literate about your situation and investments, then build your plan accordingly.
By doing this, it will help you determine why your investing, where to invest, and create the right strategy for your personal needs.
The Get Your Shit Together Printable Bundle includes tons of goal setting and journal prompts to help you get not only your general life shit together, but your financial life shit too. Click here to check it out!
Investing Your Money Outside the Stock Market
Okay, so here is the section you were probably waiting to read! If you can check off all the items in the previous section, then you probably are ready to invest your money beyond stocks and bonds.
By investing your money in various investments, you are diversifying and growing your wealth. Additionally, it helps protect you against potential bear markets (downturns) and create multiple sources of potential income.
Some of the investment options below might not be for you, remember you don’t need to do everything on the list below. Look at your goals, your current interest, and figure out what options will make sense for you.
Investing in physical real estate is one of the most popular options. It’s also where many accelerate their wealth and net worth.
The long-term goal of investing your money in real estate is to either rent or flip the properties to generate income.
However, real estate can be intimidating and time-consuming, with plenty of mistakes to be made.
Real estate crowdfunding sites can be an excellent option for you. Crowdfunding takes the pain out physical real estate for you, yet you still have the benefits and diversification of your investments.
There are pros and cons to both sides of your real estate options, so it’s up to you how you might want to invest.
So why should you potentially consider investing in fine art? Well, art was the top-performing asset class back in 2018, beating gold, real estate, classic cars, and the S&P 500, according to the Wall Street Journal.
Investing in fine art has been around for a long time, but it’s not the most comfortable option to get involved with. Typically, your options are the following with investing money in art:
- Need huge capital to buy well-known works of art (talking millions of dollars)
- Become an accredited investor to have access to private art funds
- Take chances on new artists who may or may not ever gain popularity
Yikes! Sounds a bit challenging, right?
Well, similar to real estate, there is now a crowdfunding platform that lets you invest in art and diversify your investments. The platform is called Masterworks, which allows you to purchase shares that are well-known art from artists like Claude Monet, Andy Warhol, and many more.
I have not invested money in the peer-to-peer (P2P) lending space, but it’s an option worth considering. P2P has been an exploding industry in the last few years and a top alternative investment for many.
Essentially, you loan money to borrowers in a platform, which then you collect interest on your loan once the borrower begins paying back the money.
The returns on your “investment” typically are not as high as your potential with the stock market or real estate, but still an option for diversification.
There are a few platforms you can consider being a P2P investor with such as:
Those are just some of the more recognizable names as there are others too.
Okay, okay, please don’t roll your eyes! I know I’m the one that avoided the whole Bitcoin hype like the plague back in 2017.
But, that’s because I viewed it as oversaturated and way overvalued. I mean, when your grandma and cousins under fifteen are talking about it, you know you should probably avoid investing for the time being.
However, cryptocurrency and blockchain technology are not going away. And there are many investment options for you to consider potentially. I recommend using Coinbase to buy and sell any crypto investments.
And while Bitcoin is the most popular one, there are many other cryptocurrency options like Ripple, Litecoin, and Ethereum, to name a few.
Proceed with caution, do your research, and start small. Cryptocurrency investments are still very new with not a lot of regulation from the SEC quite yet.
If you aren’t familiar with commodities, that’s okay. Investing in commodities means you’d be investing in economic goods or services.
That’s a broad and straightforward definition, but this area of investments would include things like:
- Crude oil
- Natural gas
The commodities list is quite extensive, and you can find some of these mixed in the stock market as ETF funds. But again, you might be subject to the stock market fluctuations.
I’m by no means a commodity expert, but if you are looking to learn how to invest in these assets, this article is for you.
Another potentially profitable investment option for you is investing in websites. There are a few ways to get involved:
- Buy and hold domains
- Buy and build blogs
- Build websites to flip
If you aren’t afraid to put in some work or know website building or marketing quite well, investing in websites or domains can be quite lucrative.
For many, this means buying websites to then build up with ads, affiliates, or digital products that can make money while you sleep.
Many websites can sell for thousands up to a few million a few years later, pending how well you build them up.
Plus, they can compound over time just like stock market investments where you can go from a few hundred bucks a month to $10,000+ a month. I’m not trying to sell you the dream. Investing in websites presents many challenges but it is a viable option.
Start-ups and Online Businesses
If you are quite business savvy, then investing in other businesses or start-ups might be a potential option for you.
Investing your money in start-ups is typically called “Angel Investing,” and you may need quite a high net worth to be able to get involved.
The other challenge is this. Most start-ups won’t go public on the stock market, netting you a lot of money. And they may never get acquired by another business.
To me, this is one of the riskiest investment options outside of the stock market. But, if you are outstanding and have a fantastic business sense, it can pay off tremendously.
Additionally, you could also invest your money in your own online business. Besides blogs, you can start an Amazon FBA business, maybe a dropshipping business with Shopify, or even invest in one of your money-making hobbies as a business too.
Investing in yourself or your own online business can pay you huge dividends in the future. I have and will continue to invest in myself for the foreseeable future.
Investing your money is one of the most important financial things you can do for yourself and your family. There is no doubt you should be investing in the stock market, but you may want to consider additional options as well.
And you might be wondering which of the above is right for you. Well, it all depends on your financial goals, interests, and risk that you can afford.
There are pros and cons to all the investment options listed above, so it’s your job to figure out what makes the most sense for you.
If you are unsure, you can always consult a trusted financial advisor about these options.
Just take your time and educate yourself on the options. Don’t be in a hurry. Take your time until you feel more confident in your investment choices.
This article originally appeared on The Money Mix and has been republished with permission.
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Founder of Invested Wallet and featured in Time, Business Insider, & HuffPost. Self-educated on personal finance and investing. He’s passionate about financial freedom, investing, side hustles, and helping others realize they too can transform their finances.