Once you’ve paid down your debt and are contributing enough to your retirement accounts, you can start thinking about other investment opportunities. Building a diversified portfolio could be one of the smartest money moves you can make in your 40’s, and it doesn’t have to be all stocks and bonds. In fact, alternative assets can help diversify your portfolio and potentially help your retirement savings stretch further, though it’s worth noting that investing comes with the risk of loss.
Experts generally recommend allocating no more than 10% of your invested cash towards alternative assets. But you have plenty of choices for how you’ll invest that portion, so you can choose something that aligns with your interests. Here are several ideas to get you started.
Crowdfunded real estate
For the past 30 years, real estate has outperformed the stock market, but until recently, investments in real estate were typically reserved for the wealthy. If you’re wondering how to invest in real estate without millions, crowdfunded real estate investment platforms allow you to invest in multifamily housing properties without having the cash to buy an entire apartment building.
With DiversyFund, for example, you can buy shares of a public, non-traded real estate investment trust, which collects rent on multiple properties and distributes dividends to shareholders. Those dividends are reinvested until the set investment term is up, at which point, assets are sold and investors receive a share of potential profits. With DiversyFund, the term is typically five years. As with any other investment, investments in REITs also come with the risk of loss.
Although past performance isn’t a predictor of future success, historically, blue chip art has realized 180% greater returns than the S&P 500 from 2000 to 2018. But works by famous artists like Andy Warhol typically sell for millions. Still, there’s an opportunity for everyday investors to buy shares of blue chip paintings through crowdfunding.
With Masterworks, you can buy fractional shares of paintings and either hold onto your investment until the painting is resold or sell your shares on the secondary market. Masterworks uses proprietary data to determine the best potential investments and purchase artwork that it feels is likely to increase in value. After three to 10 years, paintings are sold and any profits are divided among shareholders, minus management fees.
Gold coins typically don’t appreciate in value immediately, so you’ll likely have to hold onto them for years to see potential returns. Even then, there’s a chance it won’t gain value at all. That said, buying gold is another good choice for investors who want something tangible, especially those who are nervous about the market. Although gold coins won’t necessarily increase in price, gold has still seen about 600% growth in the past 20 years. If you’re going to buy gold coins, make sure to use a reputable dealer, such as APMEX, Inc. or JM Bullion. Alternatively, you could choose to invest in a gold individual retirement account through a platform like Gold Alliance.
If you’re knowledgeable about wine, you can buy bottles of fine wine and store them until they age and appreciate in value. Then you can sell them to another collector or at auctions or wine stock exchanges.
If you don’t have a storage facility, thousands of dollars to invest, or the expertise to determine which wines will perform well, you can also invest through an online platform like Vinovest. With a $1,000 minimum investment, Vinovest buys and stores wines for you, so you can relax and track your portfolio over time. You can access your wines at any time for your enjoyment or potentially sell your portfolio for a return.
Many businesses lease expensive equipment rather than buying it outright. They often work with equipment leasing funds to do so. These are typically made up of a group of investors who combine their money to purchase equipment that businesses need. Although returns on these investments aren’t guaranteed, these investors could potentially earn steady income if businesses choose to lease the equipment.
You may not be able to afford a California beach house in addition to your primary residence, but a cheap plot of land could still yield a high return, even if you never build on it. And if you’re looking to make a smaller investment rather than purchasing an entire plot of land, there are crowdfunded investment opportunities available as well. For example, the crowdfunded investment platform Steward allows you to invest in shares of sustainable farms.
Although it could cost millions to buy a major league baseball team, you can own a minor league team for around $500,000, which could be affordable if you pool your capital with several partners. Alternatively, you could invest in shares of publicly-traded teams, which would likely be a much less expensive option than buying your own minor league team on your own or with investing partners.
Mmm, bacon. You knew you could eat it, but did you know you could invest in it? Through the Chicago Mercantile Exchange, you can invest in lean hogs futures and options, which are cash-settled contracts. Because livestock producers use futures to manage risks such as potentially bad weather or limited feed availability, lean hogs are a volatile commodity. Investing in lean hogs also requires you to pay attention to the livestock industry, as the way to be profitable is to buy lean hogs futures when you expect prices to rise and sell them before you expect prices to drop.
Another way to invest in lean hogs is to consider purchasing call options if you predict prices will increase or buying put options if you think prices will decrease. These allow (but do not require) you to buy or sell lean hogs futures when they reach a fixed price.
If you already enjoy collecting toys, why not strategize and buy toys likely to be worth something in the future? For instance, some rare beanie babies still go for thousands of dollars on eBay, long after the craze has ended. To maximize your profits, aim to buy toys that are popular and also released in limited quantities. For example, some limited edition American Girl dolls now sell for thousands. Limited edition Lego sets and collector Monopoly boards might also be valuable in the future.
Typically, cars depreciate in value the second you drive away from the dealership, which doesn’t make them the best investment. But some classic cars can still sell for a pretty penny. If you want to know which cars might be worth something in the future, check out Bloomberg’s Investment Guide for Classic Cars. If you’re a mechanic or have the skills, you might also consider fixing cars and selling them for a profit.
Believe it or not, some rare stamps are worth millions of dollars. Experts say that valuable stamps can yield a 5% to 20% return over time, but that you’ll generally need to hold on to stamps for 5 to 15 years. Not all stamps are likely to grow in value, though; only about 1% of stamps around the world are expected to appreciate over time. But if you enjoy collecting something tangible, stamps could be a great alternative investment opportunity for you.
As more states begin to legalize marijuana and CBD products, the cannabis industry is growing. In fact, the hemp-derived CBD market alone is expected to grow from $390 million in 2018 to $1.3 billion by 2022, according to data analysis firm New Frontier Data. If you’re interested in capitalizing on this potential growth, you might choose to invest in marijuana stocks or exchange-traded funds through an online platform such as Stash, which lets you buy fractional shares for as little as $5. Just remember that growth isn’t guaranteed, and you could lose money too.
If you’re knowledgeable about comic books and tend to buy them anyway, you might get lucky with comic series that are later made into movies or otherwise experience a surge in popularity. If you visit conventions, you may also be able to find rare comics at a low price and trade or sell them. Some comics can fetch high prices at auction. For example, a 1938 comic featuring Superman for the first time sold for more than $2.1 million in 2011.
That Actions Comics #1 — the first appearance of Superman — happened to be owned by an Oscar-winning actor. Prior to 2011, Nicholas Cage had been on a buying spree of exotic cars, exotic animals, and exotic real estate. The profitable sale of his comic collection helped bail him out of the financial hole he had dug for himself.
Have an ear for which songs will become hits, or just love music? You might decide to invest in shares of a song through sites like SongVest, ANote Music, and Royalty Exchange and potentially earn royalties each year from your investment. Royalty Exchange boasts a return on investment greater than 10% based on a six-month annualized return in 2020, though returns aren’t guaranteed.
Tax lien certificates
When residents can’t pay their property taxes, local governments sometimes sell tax liens to investors at auctions. For the price of the tax bill owed, you can start to collect interest from the property owner. However, experts say you shouldn’t expect a return of more than 9% because of the way the sales are handled. Still, this is an option if you’re interested in expanding your investment horizons.
A parking spot in a high-traffic area of a big city has the potential to be an incredibly lucrative investment. You might be able to buy them for much less than a residential property and potentially rent them for hundreds of dollars per month. (Note that the actual cost and amount of rent will depend upon where your parking space is located.) There’s not as much active management required as being a landlord, which could make this a good choice if you prefer a less labor-intensive investment.
The bottom line
When investing money, whether in the market or through alternative assets, you don’t need to be extremely wealthy or especially savvy. However, keep in mind that most investment opportunities require patience and all carry some risk. And although some investment platforms let you start investing without much money, you’ll likely need to build and diversify your portfolio over time if you’re saving for a future goal. If you have specific questions or need investment advice, it’s a good idea to consider getting some guidance from a financial advisor.