While most people are familiar with common retirement investments, such as stocks and bonds, not many people delve into the lesser-known investments available. Stocks and bonds can be risky, while other investments can greatly reduce your chances of suffering a loss. Diversifying your retirement portfolio can mean a better, more comfortable retirement in the future. Here are several alternative investments to consider:
Gold, silver, platinum, and palladium are coveted as investments that appreciate over time. In fact, the value of gold goes up as the economy goes down, making it one of the most stable investments you can make. The worth of all precious metals moves together, so when gold and silver rise, so do platinum and palladium.
The market for gold and silver is especially strong, and experts advise investors to first ground their portfolios with these precious metals before moving onto other options, whose prices can be highly volatile via precious metals brokers. Before you sell your precious metal investments, speak to a professional financial advisor to set a target price. That way you can ensure you’re selling it for the most you can.
Residential properties, rentals, commercial buildings, rehabs, gas stations, and many other real estate options are viable investment opportunities to build your retirement. Unlike other investments, real estate takes a practiced eye and some expertise to navigate properly – but the returns can be generous and well worth the initial investment. Many real estate ventures result in quick turnarounds and high profitability in a short amount of time.
There are tips and tricks involved in investing in real estate, and it’s not without its risks. Housing market crashes, such as the crash of 2008, can put these investments in jeopardy. However, rental properties can also amount to constant monthly income. Joining a real estate investment group can safeguard your investment with the security of others equally as invested, and get you started toward building your real estate assets.
Certificates of Deposit (CDs)
Banks accounts and CDs are low-risk investments you can buy through your bank or a broker. The bank guarantees you a fixed return on money you don’t intend to use for a period of time (six months to several years). This return is usually much greater than what you can get on a regular checking or savings account, and is insured by the Federal Deposit Insurance Commission up to $250,000 per person.
CDs are much more reliable investments than stocks and bonds, since there is a guaranteed safety net. They are also more easily purchased – you don’t need a broker or any paperwork to buy a CD. Your bank will do it for you or you can go online to buy them. Brokered CDs tend to have a higher yield, although they also carry more risks. In general, investing in CDs is one of the more dependable investments you can make.
A dividend will give you a steady return as an investor. Dividends are payouts given to shareholders by companies based on the company’s earnings. They can stop at any time and should not be the only investment you make for your retirement. The best way to use dividends to your advantage is to reinvest the dividends you earn back into the stock market.
Most dividend-paying companies are well established, not startups, and thus can nearly guarantee steady payouts, usually a few times per year. Investing in dividends is a great source of retirement income if you have plenty of time to save or if you want to continue investing during your retirement. As long as the company is making money, you’ll be making money – and with reputable businesses, this is usually the case.
Master Limited Partnerships (MLPs)
MLPs are similar to mutual funds in that pools of shareholders divide the responsibility of an investment, and each partner in an MLP gets a portion of the income generated by the partnership. MLPs combine limited partnerships with the liquidity of common stocks, meaning they use a partnership structure but still trade units on exchange like other stocks.
In an MLP, there is no corporate income tax, but there are taxes on individual shares of the partnership’s net income. Shareholders can enjoy tax deferment while gaining current income when they hold or sell MLPs. The best way to hold MLPs is in an IRA account, not a pension or 401(k) plan, since the cash distributions received are considered taxable income and can result in tax liability.
Energy, Oil, and Gas
Want to make money and save the environment? Investing in renewable energy, oil, or gas can potentially do both. Two Wall Street giants recently advised investors to buy oil stocks due to the wide-scale activity decrease by oil companies after the price reduction. They believe oil is finally reaching the bottom of its cycle, and is due for an inevitable rebound.
Investing in renewable energies is predicted to result in higher returns than in previous history, due to a major shift in how we consume energy. Electrically charged vehicles are replacing carbon-based fuels, and coal capacity is being converted to natural gas, with much less environmental impact. Wind and solar energies are also increasing, leading to a bright future for green energy investments.
Whether you choose to invest in one, all, or none of these opportunities, the main thing is to be prepared for the future. Investing in your retirement is more than just planning – it’s taking real steps today to ensure your security later.