6 alternative investments in a bear market
When many people think of investing, they usually turn to the stock market. However, in reality, there are different investment options available. The type of investment you choose depends on various factors. But the most important thing is risk tolerance.
When there is an investment, there is a certain degree of risk. So if you want to profit from an investment, you must assume the risk of owning that investment. But, in a bear market, the rules that apply to investing may be different. Generally, in bear markets, you need less risky or less volatile investments. But experienced investors can get away with taking on more risk in both cases.
Nevertheless, you need to understand how you can manage this risk to get the highest returns on your investments. Ultimately, the whole goal is to increase cash flow. However, note that there are different types of income in each investment. The selection of investments is therefore crucial. Don’t be easily lured into get-rich-quick schemes. Stick to what you know. There are other credible and less risky ways to invest. That said, here are some alternative investments you can try in a bear market.
1. Real Estate
Investing in real estate is a solid idea as the sector is relatively stable. However, with real estate, you have to be prepared to hold this asset for the long term because it appreciates over time.
There are many ways to invest in real estate, such as house flipping or rental income. Or you can even opt for the now popular option of putting a property up for vacation rental.
However, don’t think that just buying a house and getting rent on it is the end of the story. Being a homeowner can be stressful. There is often a lot of management that goes into running a property. Think about maintenance, repair and insurance costs. In addition, if you decide to rent out your property, you must complete certain formalities, such as drafting the lease contracts. Therefore, you may need to hire a real estate agency to manage the property for you, especially if you own a commercial property.
But, if you want to avoid the hassle of owning real estate, you can opt for real estate investment trusts (REITs). Compare REITs to rentals and see which is the safest option for you. A REIT is a company that manages and owns income-generating real estate assets. They usually have a handful of commercial and residential properties. To be an investor, you must buy shares in a REIT. Then you will receive dividend income. If you get into a good REIT, you can be sure that dividends will increase steadily over time. It is therefore a solid alternative investment option.
2. Hedge Funds
They are businesses formed by raising large amounts of capital, reinvesting it and making more money out of it. However, this alternative investment option normally caters to individuals who have high net worth as the capital requirements are high.
Hedge fund managers oversee and select the investments that the hedge fund will make. They are experts in their field and they know how to make money. So, the strategies they use are excellent. And even so, you need to be careful about investing in the right hedge fund, as some specialize and only invest in specific types of assets. It’s not just about trading or buying stocks and bonds with hedge funds. There is diversity in the hedge fund market.
3. Art and antiques
If you like collecting art or antiques, this can be a good way to invest your money. Usually, art increases in value over time. But, it’s all about buying the right items. So you need to have good judgment to make sure you buy artwork that has the potential to increase in value. Then you can sell them at a later date.
But, if you don’t intend to sell art for profit, you may just be an avid collector of items. You can buy things and build your collections like stamps, coins, baseball cards, etc. are collectibles in which you can invest your hard-earned money.
4. Peer-to-peer lending
With this one, realize that there is no bank involved here. If you don’t mind the idea of lending to other people, consider this. These are programs where people pool their funds and lend them to people in need. If someone wants money, you pool the funds. Then, depending on your share, you will receive a fixed repayment each month, including interest.
So if you do the math, you can see that the overall returns you could get from this type of investment are good. However, the biggest risk is that you can lend to people who may not have the capacity to repay their debts in full. These people may not reimburse you. However, to protect yourself, you might want to consider things like credit ratings and so on.
Gold is probably one of the best alternative investment options you have. It is a valuable precious metal. Plus, it’s very stable, which is why it’s a good inflation hedge, which is exactly what you need in a bear market. It is therefore a great addition to your investment portfolio as it retains its value very well. Its value is intrinsically determined. It is therefore not a risky investment. If your investment portfolio has a high risk profile, consider buying gold to dilute that risk. Some experts advise that your portfolio be made up of at least 5% investments in gold or precious metals.
Also, when we think of investing in gold, we automatically think of buying gold bullion, which is gold in its physical form. But there are other options, such as gold-backed stocks, futures, and exchange-traded funds (ETFs). So, you don’t need a lot of capital to invest in gold.
6. Equity crowdfunding
It’s a fantastic investment option for those not looking to start a business. There will always be a demand or need for startups to raise capital. Startups need funding. Participatory crowdfunding aims to meet this need.
It allows you to invest in a startup in exchange for a share in the company. There are many crowdfunding sites you can consider. Just be sure to invest in reputable sites. The downside is that it can be a risky investment option. Although you are a co-owner, you will only reap the rewards of your investment if the business is successful. But if the company goes bankrupt, you lose your investment. So you want to make sure you’re investing in the right companies. The extent to which you can invest in something like this will greatly depend on your affinity for risk.
There are many ways to invest. The choice is ultimately yours. But remember, whatever you choose, invest in what you understand. There’s no point in investing in something you don’t know about. So, by all means, look for these alternative investments as they can be a great addition to your portfolio.
This article does not necessarily reflect the opinions of the editors or management of EconoTimes.