Many people think of the stock market when they hear the word “investments,” but there are other ways to use your dollars and wait for a return.
You don’t have to be a Rockefeller in order to make money from real estate. If you have enough savings and know-how to buy a fixer upper and flip it, like the shows on HGTV spotlight, you can make a profit. If you don’t like the idea of taking on such a big project, you can invest in real estate by using Fundrise, which touts itself as an alternative to stock market investing. Your money basically crowd-funds a property. You can start with as little as $500, and there are different plans to choose from.
Peer to Peer Lending, or P2P, is another way to get a return on an investment. At companies like Prosper and Lending Club, borrowers apply for loans and once they’re approved, the loan is funded by a group of individual investors. Prosper tells potential investors that the average return rate is 5.5% and there’s a $25 minimum investment per loan. Lending Club also starts at $25 and boasts a historical return of 3-8%.
Participate in your company’s 401k plan. The 401k where you work is an optional retirement plan. You choose how much money you want taken out of your check each period, and it is deposited into an account. Oftentimes, employers also contribute to this fund. The good news is that the money is deducted pre-tax, so it actually lowers the amount of taxes taken out of your paycheck. Once you retire, this money is taxed as normal income, unless you have a Roth 401k, where you are required to pay the taxes up front. Remember that this is a retirement plan, not a savings account, so the money in it isn’t easily accessible to you until you retire.
Invest in a CD, also known as a certificate of deposit. Go to your FDIC bank or NCUA credit union and tell them you want to open a CD. A CD is a type of savings account with better rates. Unlike a standard savings account, you don’t have access to the money until your CD’s maturity date, unless you want to pay heavy penalties for removing the money early. The longer the term length, the more money you’ll earn. If you worry that the temptation to dip into your money will be too strong, a short-term CD might be right for you. Short term CDs typically mature within months, but the annual percentage yield, or APY is much lower than it would be for longer term CDs. Some people find building a CD ladder to be beneficial. This way you invest in CDs with staggered term limit lengths and reinvest some of the money back into CDs once they mature. You can go to Bankrate to view CD rates for the month.
Whether you’re a stock market veteran or an investing newbie, there are always out-of-the-box ways to diversify your portfolio and invest in your future.