The stock market has its stomach-churning moments. Dedicating a portion of your portfolio to investing outside of the stock market can help put your mind at ease when the market gets inevitably uncomfortable.
In the new interest rate and lower inflation environment, safe investments that were unattractive for years now provide solid returns and diversify our portfolios, ultimately reducing risk.
Furthermore, updated laws and fresh technologies have combined to make other asset classes almost as easy to invest in as stocks over the past decade.
Investors can now earn stable returns in the ballpark of long-term stock returns with less volatility. These assets aren’t new, but broad access to them through technology is maturing.
Most of the assets in today’s list are non-correlated to stocks, so they don’t fluctuate with the market.
Most of these platforms have low minimum investment amounts and have options for non-accredited investors.
A few are for accredited investors only (indicated by an asterisk *), meaning investors must have invested assets of $1 million or income over $200,000 ($300,000 for married couples filing jointly).
Note: RBD content is 100% free to readers thanks to our sponsors — some of which are highlighted in today’s article. Sponsored links are bold.
1. Fine Art Shares
I first highlighted Masterworks in 2019, when it was an intriguing idea but far outside of mainstream investments. Popularity has exploded since then.
The platform empowers investors to own shares of fine pieces of artwork. The first artwork was an Andy Warhol portrait of Marilyn Monroe.
Masterworks has now purchased 344 paintings, has over 800,000 users on its platform, and over $850 million of assets under management (AUM).
Even I didn’t expect that kind of success when I published my Masterworks review four years ago.
Contemporary art has outperformed the S&P 500 since 1997, making it an attractive asset class. However, it was unaffordable to most investors for hundreds of years.
Masterworks implemented a process by which it acquires paintings, creates a Delaware-based “special-purpose vehicle”, and securitizes it via Securities and Exchange Commission (SEC) filings.
There’s also a secondary marketplace to provide liquidity.
Masterworks is available to accredited and non-accredited investors — but is most suitable for investors looking to deploy $5,000-$10,000+ per year.
2. Private Credit *
Private credit is an alternative asset class dealing with privately negotiated loans and debt financing, usually between a corporate borrower and a non-bank lender.
Sometimes, businesses need cash for a purpose other than what a bank would traditionally lend for.
For example, a startup could need short-term debt financing to capitalize on a growth opportunity that a bank would consider too risky.
Private credit is nothing new. Hedge funds and institutional investors lend this way.
What is new is that high-quality private credit opportunities are now available to retail investors through a company called Percent.
Percent is a venture-backed startup, making it simple for accredited investors to invest in private credit. Investors can earn up to 20% on certain deals, though average returns are closer to 12% as of early 2023.
Investments mature in as little as one month or as long as a few years. Importantly, Percent prioritizes due diligence and transparency throughout the process.
The minimum investment is $500, allowing investors to diversify among several deals. Percent charges fees up to 10% of interest. For example, if a deal paid 15% APY and the fee was 10% of interest, your effective APY is 13.5% after fees.
3. High Yield Savings Account (Interest on Cash)
When in doubt about the market, cash is king. Now that interest rates have risen and inflation is in check, DIY investors should deposit surplus cash in a high-yield savings account instead of checking.
It’s the simplest way to increase your passive income with no risk. Of all the mistakes I see people making with their money, this is the easiest to fix. It’s a no-brainer, even when rates are closer to 1%.
If you need help optimizing your idle cash, I wrote a post about how to systematically sweep excess monthly cash flow into savings and earn more interest.
Check out my article, How to Manage Excess Cash Flow, which explains the process with a detailed diagram.
I recommend Raisin if you prefer credit unions for savings and money market accounts and CIT Bank (review) if you prefer a large bank. My Dad uses them.
Also, check out my comparison list of best high-yield savings accounts.
4. Diversified Alternatives *
A critical factor in reducing risk in the stock market is diversification.
Diversification is just as important for investing outside of the stock market.
An alternative investing platform called Yieldstreet offers several alternative asset classes to empower investors to diversify without opening several accounts.
With Yieldstreet, you can diversify your portfolio and earn passive income with investments starting at $500.
The asset classes available include these and more:
- Real estate
- Fine art
- Legal financing
- Supply chain
- Venture capital
- Marine financing
Yieldstreet is one of the top platforms on my radar of alternative investment platforms because it covers several asset classes instead of focusing on one (like other platforms mentioned in this article).
The company has been in business since 2015 and has a community of 450,000 members who use alternative investments to diversify their investment portfolios beyond stocks and bonds.
This platform is primarily geared toward accredited investors but has one product (the Prism Fund) that caters to non-accredited investors.
Read more: Yieldstreet review
5. Crowdfunded Real Estate
The U.S. Congress passed the Jumpstart Our Business Startups Act (JOBS) in 2012, which set the foundation for equity crowdfunding, which enables real estate, fine art investing, startup equity, and other assets.
Crowdfunding empowers ordinary investors to own smaller pieces of high-quality real estate, such as large apartment complexes, single-family homes, and commercial properties.
Investors can buy pieces of multiple individual properties or instantly diversify by buying funds.
Crowdfunding sites are regulated, and professional fund managers strongly scrutinize investments to find the best deals.
I recommend multiple platforms among the dozens of real estate crowdfunding sites that have emerged since 2012.
I’ve invested my money on a few of these platforms, including all three in today’s list.
- Arrived Homes
Crowdfunded real estate allows us to invest in real estate without becoming a landlord.
For accredited investors, EquityMultiple is a top-tier crowdfunding site that gives access to commercial real estate deals that used to be impossible for ordinary investors to access.
These are private market investment opportunities that have passed multiple layers of due diligence by real estate professionals. Each deal is unique, offering the ability to diversify your investments on a single platform.
Remember, when investing in individual real estate deals, there’s increased risk. However, spreading your money among multiple deals will lower your vulnerability. With higher risk comes higher returns.
$10,000 minimum investments.
Through EquityMultiple, I’ve invested in a mixed-use residential/retail property in my hometown. I also bought an Alpine Note as a short-term, high-yield alternative to savings accounts.
Alpine Notes are now the most popular offering of the platform, providing low-risk returns with interest rates 1%-2% higher than the best savings accounts.
EquityMultiple is for a more sophisticated investor with $10,000-$20,000 or more to invest each year.
Read more: EquityMultiple review
By far, the crowdfunding platform that piques the curiosity of RBD readers the most is Fundrise. Several RBD readers have joined since I first mentioned them and started investing in 2017.
Fundrise is a long-term investing platform intended only for money with a five-to-ten-year investment horizon.
The company securitizes real estate by placing multiple property purchases into funds called eREITs (electronic real estate investment trusts). As Fundrise has refined its securitization capabilities and with regulator approval, Fundrise can offer larger and more diversified investment options to investors.
Portfolio properties include single-family homes, commercial real estate, multifamily apartments, industrial parks, shipping warehouses, and more.
The company simplified the investment process to make it easy for new investors. Best of all, U.S.-based investors can start with only $10.
eREITs do not trade on an exchange, so they are non-correlated to stock market fluctuations, unlike traditional REITs, which trade like stocks. Fundrise’s eREITs offer diversified real estate exposure with minimal portfolio value fluctuation.
That means the prices are more stable and don’t crash like traded REITs when the stock market crashes.
New investors choose their style: income-producing, growth, or a balanced portfolio.
Read my comprehensive Fundrise review to see my personal returns after more than six years of investing on the platform. It’s a bit outdated, so keep an eye out for an update and possibly a video review showing the inside of my account.
Please note: This is a testimonial in partnership with Fundrise. We earn a commission from partner links on RetireBeforeDad.com. All opinions are my own.
While Fundrise lets investors own funds with dozens of properties for diversification, Arrived Homes gives investors more control over their investments.
Arrived Homes is different in two primary ways:
- Investors select individual properties to own.
- Arrived offers vacation rentals, making us short-term rental (aka Airbnb’s) owners without the hassle or large upfront expense.
Arrived empowers investors to buy small shares of single-family homes and vacation rentals. U.S.-based Investors (18+) can invest as little as $100. Increase that amount to diversify assets across several properties. Non-accredited investors are welcome.
The platform uses data science to find the right homes in the right locations, following a strict quality process before buying the property.
It then creates a separate LLC for each property and sells shares to individual investors like you and me. Arrived Homes hires local property managers who find the best tenants.
Investors sit back and collect consistent passive income.
I started investing in April 2023 and received my first dividends this month (October 2023).
The primary downside, for now, is liquidity. Once an investor buys into a property, they should plan to hold for five to seven years. Arrived is building a liquidity solution, but it is not ready yet.
If you’re interested, read my comprehensive review and check out my Arrived Homes returns page, where I list all the properties I own, their status, and the dividends paid.
It’s free to sign up and browse the latest properties.
6. Venture Capital Funds
Venture capital is a form of investing focused on startups and pre-IPO companies. These funds invest in companies that are further along than small business startups but not public yet.
Large firms take massive risks by funding non-public companies with seed money and funds to grow.
Most modern technology companies begin their journey with seed money and use venture capital to expand their reach as quickly as possible.
Since its beginnings, venture capital investing was only available to wealthy investors and institutions due to regulations.
However, in 2022, it became possible for non-accredited investors to own pre-IPO startups.
The Fundrise Innovation Fund is the simplest way to invest. Fundrise is arguably the most innovative startup in real estate investing, and they are expanding its investment options into venture capital.
The fund has a $10 minimum investment to start, and investors can add more money each month. Fundrise also enables real estate investments through diversified funds.
Investors will own small pieces of pre-IPO startups as they enter their growth stage and eventually get acquired or have an IPO.
Fundrise Innovation Fund investors participate in all stages of growth instead of waiting until after the IPO to invest. It’s still in the early stages of building the portfolio, but Fundrise presents an exciting opportunity for a low cost of entry.
Check out my recent post about venture capital investing to learn more about this asset class.
7. Farmland *
Farmland investment returns have outperformed commercial real estate, gold, bonds, and even the S&P 500 since 1990, according to data compiled by AcreTrader^.
But most of us can’t just go by a farm.
AcreTrader is an online crowdfunding platform that empowers accredited investors to invest in farmland and agriculture projects. With crowdfunding, you buy small fractions of the properties, participating in returns with smaller investment amounts.
Minimum investment amounts start around $15,000, depending on the deals. Farmland is an investment asset as old as time, but now you can access investments through an innovative technology platform.
You can immediately begin vetting available deals on their website. Farmland is more specialized than urban commercial and residential properties. Investors need to evaluate soil quality, crop type, and crop yield, among other metrics not relevant in the cities and suburbs.
Each deal type requires specific tax reporting, so consider the tax consequences before investing. Most deals pay an annual distribution in December.
Read my full AcreTrader review here.
8. Invest in Websites
You know about purchasing rental properties or investing in REITs. But did you know you can invest in a digital version of real estate?
By building your own website from scratch or purchasing an established one, you can build a portfolio of digital properties that pay reliable monthly income.
An established online website can be set up to run with only minimal upkeep. Depending on your skill set, you can handle the upkeep yourself or hire the work out to a freelancer.
Sites are generally worth 24-36 times the monthly profit. If a website earns $1,000 per month, you can expect to pay anywhere from $24,000 to $36,000.
Websites can be monetized by ads, affiliate partnerships (e.g., Amazon), sponsored content, or by selling products.
Investors may find bargain websites that need upgrades that could increase the site’s income. The right website with the right expertise can deliver excellent returns, often with small upfront and maintenance costs.
Another option is to start your own online business from scratch. Here’s my guide.
Read more: How to Invest in Websites for Extra Income
9. Small Business Startups
The JOBS Act of 2012 helped to make it easier for startup businesses to raise capital. Since the law’s passing, companies can raise capital through equity crowdfunding. It’s like Kickstarter but for partial ownership of a company.
Companies looking to raise capital share their business idea to attract investors on equity crowdfunding platforms or through a Reg A+ IPO. The platforms list pre-vetted startups and handle the investment transaction.
Non-accredited (non-millionaires) investors can invest as little as a few hundred dollars in a company. In return, the investor receives equity in the startup. You invest outside of the stock market. However, a select few may eventually go public.
Two popular platforms in the space are:
Two investing platforms on this list have equity crowdfunded on WeFunder: EquityMultiple and Arrived Homes. It’s cool to see platforms on which you can invest let you invest in the company itself.
Fundrise has raised money from its investor base but uses its platform to conduct the Fundrise internet Public Offering (iPO).
Check those out to get a sense of what kind of deals are available and how they’re structured.
Each of these platforms enables ordinary investors to invest like venture capitalists. That’s cool because you could be an early investor in the next big success.
But realistically, many of the startups on these sites are in the very early stage and can fail and you’ll lose all your money.
If you commit to opportunities on these platforms, keep your investments small and diversified.
10. U.S. Treasury Bills
Take a look at the current U.S. Treasury yield curve:
As I write this (October 2023), short-term rates (six months and shorter) are hovering around 5.5% (blue line). Yields are higher than a year ago and still higher than longer-term rates (the curve is “inverted” — a well-known recession indicator).
Treasury bill yields offer a risk-free rate of return because the U.S. Government backs them. A default is highly unlikely.
I bought one last December and watched it mature over the next six months for an easy 4.6% annualized return. You can buy short-term bills through most online brokers.
Investors can achieve a higher return than high-yield savings with total liquidity if they need the money before maturity. These investments are useful in your brokerage account if you don’t want to transfer idle cash to savings. Park it there if you’re uninvested, and the market is causing you anxiety.
There’s a $1,000 minimum to invest and virtually no maximum. Investors can easily purchase individual Treasurys through full-service online brokerage accounts or TreasuryDirect.gov.
Conclusion – Investing Outside of the Stock Market
Unleash yourself from the daily moves of the stock market. There are plenty of opportunities for investing outside of the stock market if you know where to look.
The investments mentioned above are legitimate and regulated. Though some platforms have only emerged in the past five years, the asset classes are not new.
Signing up for these kinds of fintech accounts carries some platform risk — meaning the business models may not succeed over the long term. However, the assets themselves are real, and most investments are liquidated or acquired by another company. Most of these companies are well past the early stages of viability.
Alternative assets like fine art, private credit, and real estate have a long history of returns that investors can analyze to determine if the assets are right for their investment objectives. Now, we have new ways to access them via innovative technology and loosened regulation frameworks.
These are exciting times to be an investor. Diversify your net worth into investments that are non-correlated to the stock market to grow and secure your wealth.
Are you investing outside of the stock market? Leave your comments below if you have ideas to add to this list.
^ Disclosure: This is a sponsored promotion for the AcreTrader platform. RBD may have investments in companies represented on the AcreTrader platform. This informational post is by no means a promotion, solicitation, or recommendation of any specific investment.
Photo via DepositPhotos used under license
Craig is a former IT professional who left his 20-year career to be a full-time finance writer. A DIY investor since 1995, he started Retire Before Dad in 2013 as a creative outlet to share his investment portfolios. Craig studied Finance at Michigan State University and lives in Northern Virginia with his wife and three children. Read more.
Favorite tools and investment services right now:
Sure Dividend — A reliable stock newsletter for DIY retirement investors. (review)
Fundrise — Simple real estate and venture capital investing for as little as $10. (review)
NewRetirement — Spreadsheets are insufficient. Get serious about planning for retirement. (review)
M1 Finance — A top online broker for long-term investors and dividend reinvestment. (review)