Investing money is an excellent way to further your finances and prepare for retirement, and it’s no surprise that over 61 percent of people in the United States invest in stocks and bonds. Bonds provided one of the fundamental retirement options, but yields have slowed. Finding bond alternatives is vital to maintaining wealth and preparing for the future.
Choosing to invest in stocks is a viable option for most investors. Still, there are other alternative investments worth considering for your hard-earned money. Investing in gold, real estate investment trusts, and dividend stocks will help you get the most bang for your buck.
Fortunately, you’re in the right spot to learn about the leading bond alternatives and investing tips. Continue reading to take the first step toward a robust portfolio today!
Real Estate Investment Trusts
Real estate investment trusts have gained significant fanfare over the previous decade as an excellent bond alternative. The history of REITs dates back to the 1960s. The goal was to open up paths for investors to put money into funds managing multiple real estate properties.
There are several benefits worth noting when considering investments in REITs. The income generation is massive with this investment opportunity. REITs must distribute 90 percent of taxable income to shareholders.
The barriers to entry are also low, making it an excellent path for a first-time investor. Investing in REITs comes with an entry price as low as $10. Investors will also love the passive income generation of a real estate investment trust.
Each property is managed, preventing you from becoming a landlord. You’ll reap the benefits of adding real estate to your portfolio without the extra work and stress.
Much of the attraction to bonds came from the fixed income they’d provide and the lower risk levels. The benefits cease when inflation rises and the bond yields diminish. Dividend stocks are among the top bond alternatives to consider.
Dividend stocks carry more risk than bonds, but the benefits offset the increased risk. The primary risk you’ll face is the volatility of the stock market. The benefits include higher returns than bonds and stocks that appreciate.
Targeting brands that have increased in value each year is an excellent starting point when investing in dividend stocks. Twenty-five years of annual improvement is a perfect rule of thumb when you invest in stocks.
Research your options for trading platforms when diving into stock marketing. Most online brokers will allow you to invest in dividend stocks and ETFs without paying a commission.
Master Limited Partnership
Master limited partnerships are another option worth considering when seeking alternative investments for your portfolio. MLPs are partnerships between limited partners and general partners. The general partners manage the daily operations of the investment.
Most MLPs have general partners as minority stakeholders within the existing structure. The partnerships are public and can be traded on stock exchanges. The primary difference to note is that MLPs sell units rather than shares.
Holding a unit entitles the holder to a specific amount of the income the MLP produces. They also share the same distribution model as REITs, with 90 percent of their income distributed to unit holders.
The most notable benefit of investing in MLPs is the returns. They provide significant returns compared to stocks and bonds. The best path with MLPs is to make a long-term investment and allow it to grow.
Alternative assets provide some of the best investment opportunities when you’re ready to move away from investing in bonds. Many investors view alternative assets as a hedge against inflation. You can still generate income with your bond alternatives without losing out on long-term growth.
Silver and gold ETFs provide a remarkable path toward generating income from your investments. Mining stocks are another path to consider, as these investments pay dividends to shareholders. Gold Bars are another option to protect your wealth and diversify your portfolio.
Farmland provides another avenue for investment and income growth. You’ll earn money from farmers’ rental payments to use the land. Cattle companies will allow you to invest in cattle, with much higher returns than stocks and bonds.
Preferred stocks are noteworthy alternative investments when moving away from traditional bonds. Your investment pays a consistent dividend, and you’ll get paid before the common stockholders. You’ll get paid first if the company goes bankrupt or merges with another.
It’s best to view preferred stocks as a middle ground between common stocks and bonds. You’ll enjoy the perks of increased income and security when investing in preferred stocks. Your investment also allows you to sell at a predetermined price to protect your money.
High-Yield Savings Accounts
With inflation rising, it’s fair to wonder if a high-yield savings account is the best path toward growing your wealth. Still, it’s a viable bond alternative if you’re seeking a short-term investment for your emergency money. Several brands are creating apps that offer impressive rates of return on your deposit.
Several of these banks offer over 4 percent in interest on your deposit. Check the limit on the money you can put in to enjoy those perks and narrow your options. Aspiration offers 5 percent interest on deposits up to $10,000.
Other options, like Varo, provide the same rate for less money. You’re capped at $5,000, providing a secure place to stash your emergency fund and allow it to grow. With these investing tips, you’ll enjoy impressive returns from your savings account while keeping your money ready for an emergency.
Explore the Best Bond Alternatives
Investing is challenging, but exploring the bond alternatives is vital when looking to protect and grow your wealth. Choosing to invest in stocks is viable, but it presents significant risk and volatility.
Investing in gold will help you hedge your portfolio against inflation. REITs and MLPs provide additional paths to passive income and dividends to build a robust portfolio and move toward retirement.
Mastering your finances is the key to security and the future you’ve pictured. Explore our Finance blog articles for helpful investing tips and guidance today!