You’ve heard of mutual funds, individual stocks, bonds, real estate, and of course, cash, as investment options. But have you looked into alternative investments? From P2P lending to classic cars, there are a ton of unusual investments that you may not have considered. Check out this list of unique investments!
1. Peer-to-peer lending. What the heck is that? Well after the most recent financial crisis, banks are shying away from lending to the people that need it the most, broke people with credit reports that are not exactly desirable. While not desirable, the most money can be made on higher risk individuals. And that’s where you come in…
P2P lending allows people in need of a loan to borrow from their peers who have the money (investors). No banks, lower interest rates for borrowers than banks offer, higher interest rates for investors than banks offer. Win, win, win!
Well that sounds terrifying! Who wants to lend to people with bad credit? In order to apply for a loan, you must have a minimum credit score of 640 to 660. It’s not bad per se, it’s just not great. Loans range from about $1,000 to $35,000 with interest rates between 6% and 30% approximately.
Investors will be provided with information about the riskiness of the borrowers they are planning to lend to. Borrowers are graded on an A, B, C, D, E scale. Can your borrower default? Absolutely. Investing involves risk. By screening the applicants carefully, you can minimize this as much as possible. Check out Prosper or Lending Club to start P2P lending.
2. Gold. If you believe the dollar is going to collapse in the near future, perhaps you should hoard invest in gold. I know December 21, 2012 didn’t work out for you, but you’ll show them yet!
Gold is a pretty popular tangible investment and the bane of Dave Ramsey’s existence. Over the long term, it doesn’t have a great track record, but due to the fact that the world is ending the financial uncertainty of the 2000s it is currently performing relatively well. Embrace your inner psycho and stock up for the apocalypse.
3. MLPs. A MLP, or Master Limited Partnership, is publicly traded and has the tax benefits of a limited partnership and the liquidity of a publicly traded security. MLPs may be businesses pertaining to natural resources (like petroleum) or even real estate enterprises.
Distributions on MLPs are consistent and relatively high (around 8%). They are also great as part of your asset allocation because they don’t have much of a correlation to bonds OR stocks.
4. Art. Wow, look at that — beautifying your home and investing at the same time! High-end art performs well, economic recession or not. This type of investment does require that you do a bit of homework.
You don’t have to buy a Van Gogh, but you could aim to buy the next Van Gogh. Invest in pieces that you enjoy and that your research has told you are worthwhile. Most importantly, take care of it. That painting will not be worth as much (or anything) if your 5-year-old draws on it.
5. Classic cars. Say what? Everyone knows that cars are a terrible investment because they are depreciating assets! Vintage cars are the exception to this rule. The rarer the car, the higher the value.
Unsurprisingly, expensive cars are worth more than inexpensive cars. Go figure! A vintage Rolls Royce or Ferrari will appreciate higher than your run of the mill “vintage” station wagon. How do you retain even more value? Painting the car back to its original color will raise its value, as will having a car with more original parts.
6. Sports memorabilia. Those baseball cards your mom hated? They could be worth thousands today! Sports memorabilia, especially rare or autographed pieces, can net you a pretty penny if you play it right. Educate yourself on which types of collectibles have grown in value over the years and start “collecting” that.
The best investors will buy pieces from a range of teams and not get too attached to the items. This is an investment, not a collection of toys. Sorry to burst your sports loving bubble.
No matter how old, some players are and will always be duds. Don’t collect their stuff, it won’t pay off! From what I understand, 19th century baseball memorabilia is a gold mine. Stay on the lookout for that stuff!
7. Second Life. Do you remember playing The Sims? Second Life is like that but bigger. For fans of The Office, this is the game that Dwight Schrute played where he looked exactly the same and owned a beet farm and worked as a paper salesman. What an imagination, Dwight!
Anyway, Second Life is a virtual world where you have a virtual job, a virtual family, and you buy virtual goods with virtual dollars. How is this an investment opportunity? Well as the popularity of the game has increased, the virtual dollars used (also known as Linden dollars) have developed a real world value. You can sell them on eBay!
Other investment opportunities include creating a popular product to sell in the virtual marketplace or flipping virtual real estate. Yes, I’m serious. No, I don’t understand why this is a thing.
8. Wine. Once used as a coping mechanism for investments gone awry, wine itself is now the investment! Purchasing wine as an investment can net you some extra cash provided (a) you bought it early at a cheap price, (b) you bought a vintage worth investing in, and (c) you have the climate controlled space to store it in. The only problem now is resisting the urge to drink your investment. And this is why I will never attempt to invest in wine…
Index funds and real estate are nice, but these alternative investments have a bit of sex appeal to them. If you are bored of the same ho-hum investing, try one of these unusual investments to throw some spice in your portfolio.
What is your favorite unique investment? Have you invested in any of the above?