How To Invest Without Messing With Stocks

If you’ve got some extra scratch you’d like to grow into something bigger, do not risk it on the Arizona Cardinals against the point spread. The stock market is definitely a better option, but its volatility and complexity can scare people off.

Free From Broke suggests several ways you can gamble your fortune without dealing with the Gordon Gekkos of the world.

The post suggests dabbling in real estate, domain name squatting/speculation and side businesses. There are definite paths to losing your shirt by making poor investments in any of those fields, but with homework and luck you can succeed just as well outside the stock market as within.

What are your favorite non-stock investments?

Five Ways to Invest Without Buying Stocks [Free From Broke]

Comments

Edit Your Comment

  1. Mom says:

    We’re really taking investment advice from someone who can’t hack it in the stock market, so now he’s squatting on domain names? Let’s check back in a couple of years to see how this turns out.

    • kmw2 says:

      I dunno, domain name squatting has worked out OK for several owners of sex.com. I will admit though, that the domain name biz is pretty much tapped out.

      • sirwired says:

        sex.com is about the worst example to pick for successful domain-name investing. I think it was tied up for years in lawsuits, criminal indictments were issued when somebody stole it, etc. It’s been a nightmare for all involved.

  2. obits3 says:

    “What are your favorite non-stock investments?”

    If you have any debt (e.g. car loan, mortgage, credit cards), make extra payments. You will get a rate of return equal to the interest saved. Also, money “saved” is not taxed:

    Corporate bond at 5% = a return of 5% less your tax rate.
    Paying off a loan early at 5%= a 5% return.

    • Coelacanth says:

      Pick the right muni bonds, and those can be tax-free….

      • obits3 says:

        True, but getting rid of debt first doesn’t involve broker fees or the risk that the bond may go down in value (forcing you to hold it till maturity). Also, the market tends to adjust for the “tax-free” status of the bonds. Munis know that they are tax-free, so lower interest rates are offered.

    • AnthonyC says:

      For most debt, this is true. Payments in excess of the minimum amount go directly towards the principle. However, if you’re not careful, some loans may just apply your extra towards the next payment, saving you nothing. Just check before adopting the strategy.

      • mmmsoap says:

        Doesn’t that help you as well, by shortening the length of the loan? Or is that not how it works….

        • SonicPhoenix says:

          No, in fact it’s much worse.

          For example, let’s say that a 30 year mortgage for $100,000 would require $200,000 in payments over the term of the mortgage. If extra payments are not applied to the principle, you’ll be paying the loan off earlier but you’re still paying $200,000. So let’s take two scenarios:
          1. Extra payments apply to the principle
          2. Extra payments are treated as the next month’s payment.

          Now let’s say that you pay the loan back in one month.
          Scenario 1 – you will pay out $100,000 plus one month of interest
          Scenario 2 – you will pay out $100,000 plus 360 months (30 years) of interest

          This is why you always wany to confirm that extra payments go to the principle.

  3. Skellbasher says:

    Buying a high traffic domain name to generate ad clicks is one thing.

    Domain squatting is something completely unrelated, and illegal by the Anticybersquatting Consumer Protection Act ,15 U.S.C. § 1125(d).

    It should be noted that the article does not suggest cybersquatting, that’s a Phil addition.

  4. rpm773 says:

    The post suggests dabbling in real estate, domain name squatting/speculation and side businesses.

    Well, then. Stocks it is.

    • Platypi {Redacted} says:

      No kidding. How are those other things good ideas? Angel investing, really?

    • sirwired says:

      Indeed. Maybe the title should have been changed to: “Five ways to lose your shirt faster than investing in the stock market.”

      Given that this “advice” is coming from a failed day-trader, I’d say he failed to learn one single lesson from is ill-advised previous attempts at getting rich quick.

      • rpm773 says:

        On the other hand, perhaps it’s time to go long on the apples and pencils this guy seems destined to eventually sell on the side of the road.

  5. Warren - aka The Piddler on the Roof says:

    Squatting on domain names? Seriously?

    Fine. I’m going to go grab http://www.clown-penis.fart in preparation for my retirement.

  6. BarkIsNutritious says:

    Warning: This is terrible advice.

  7. kmw2 says:

    What is with the lousy investment advice this week? Domain name squatting is illegal, and most of the good ones are gone. Real estate is in a downward spiral, and is impossible for most people anyhow. And most small businesses fail within a year. This is almost as bad as recommending gold.

  8. TheGreySpectre says:

    If you are terrible at stocks and find them confusing hire someone who knows what they are doing…

  9. sirwired says:

    Look at that little bio at the bottom: Who the #$(*#&$! is going to take investment advice from an idiot who pissed away 250-large daytrading?

    All five of those are incredibly risky investments that make Blackjack in Vegas seem like a good idea. If the stock market is just too much volatility for you, you’d need to have an IQ of about 5 to think those are good places to put your cash.

    The solution to being terrible at stock picking is to invest in a diversified portfolio of mutual index funds. The “Target Retirement Funds” available from Vanguard, Fidelity, etc. are generally low-cost, one-stop-shop ways to invest without having to know a damn thing about investing. You pick the year you want to retire, and let-er-rip.

  10. SideshowCrono says:

    If you want to invest without messing in stocks, you could try direct loan services such as Prosper.com. However there is a whole slew of new risks you open yourself up to but you can get some good returns (assuming people pay you back, big if). It’s a pretty neat idea though overall and one I plan on dabbling in at some point in my life. I just wouldnt do it with any money I may actually want one day.

    But seriously if you want to invest without investing in specific stocks then just buy some SPY (S&P500 index etf). If it goes down, buy more SPY. If it goes up, well then buy some more SPY. Just don’t think about it and dollar cost average your way to prosperity.

    • SideshowCrono says:

      Ah I skipped right over that Lending Club thing when I first read the article. I had only heard of Prosper.com anyways and, to be honest, I wouldnt touch any of those services with real money. They ran into a whole bunch of issues back when the credit bubble burst.

      It’s funny to read the descriptions though for people who say they want to “get rid of their debt” with a 25% loan from the ‘community.” People should know that when you ask for someone to loan you money (ie be in debt to them) it probably isn’t the best idea to declare that you view the loan as discharing you from debt obligations. I’m pretty sure you still owe someone, ole chum.

      • Total Casual says:

        Don’t group Lendingclub with Prosper.com. Speaking from personal experience most investments on Lendingclub actually make money-although in the last two years stockmarket investing would have produced bigger returns.

        On the other hand all evidence points towards Prosper “investment” being equivalent to throwing your money into a fire, stay away from it.

    • NeverLetMeDown says:

      My issue with prosper.com is this:

      Why would I want to loan somebody money on more favorable terms than major banks, with sophisticated consumer risk models and high levels of diversification? It’s kind of like telling a world champion poker player that he shouldn’t fold, and that you’ll put in the money for the bet.

    • samandiriel says:

      I’ve tried both prosper.com and lendingclub.com in the last four years. Prosper doesn’t vet their clients nearly as well as Lending Club – I came out only cloes to breaking even. Lending Club I’ve got a return of about 10.34%. I choose loans manually tho, which isn’t so good if you large amounts to invest.

  11. noahproblem1 says:

    The Cardinals are a 3 1./2 point favorite (home vs. Seattle) – if I had money to bet..er..invest I think I’d take them and give the points…

  12. metsarethe... says:

    I would also suggest getting in EARLY on pyramid schemes

  13. wrjohnston91283 says:

    If you’re not investing in stocks, its most likely because a)you find it too risky, b)you don’t understand it or c) you don’t have time to deal with it.

    The five options listed here are:
    1) lending club – confusing and risky.
    2) real estate – confusing, risky and time consuming
    3) side-business, risky and time consuming (actually, confusing as well, due to the rules and regulations relating to running a business). It’s also not really “investing”, but rather a job.
    4) Revenue-generating domains – confusing, sketchy as hell, risky and time consuming
    5) angel investing – similar to #3, but far riskier.

    Of these, the only legitimate “investment” would be real-estate, which involves a lot of free cash or a lot of risk, and can take up considerable time.

    Here’s a better tip. Learn about stocks, bonds, mutual funds. Look into IRAs & 401ks. If stocks are too risky for you, look into CD’s or money market accounts (but the rates are going to be low – less risk, less return).

  14. jim says:

    yeah, lets go to some guys blog for investment advice.

  15. daveinva says:

    Arizona Cardinals? Have you *seen* the Lions this year? They’re 7-1 against the spread! That’s better than ANY stock on the S&P :-)

  16. Promethean Sky says:

    Domain name squatting. Yeah. If anyone I know tried that, they’d get a foot up their ass on general principles.

  17. FrankReality says:

    I haven’t figured out one could possibly lose $250K between 2001 and 2006 in the stock market unless you were a complete idiot. Three key words – trading, options, currencies are red flags. 2007 to 2009 on the other hand is another story. I think this guy seems to confuse speculating with investing.

    Whatever happened to buying a diverse group of mutual funds and holding them???

    I have to say that I personally lost a significant amount in the market between the peak in October 2007 and the low point in March 2009 (on the order of his losses), so I don’t consider myself an expert, but having stayed in with a buy and hold diversified portfolio, my investments have since recovered nicely and since I have a substantial time horizon, I’m ok.

    During that time I continued my tax deferred savings plan contribution at the maximum allowed and took advantage of the down market to buy at bargain prices. Super good.

    Some other ideas for investment:

    1) Education which improves your marketable skills or makes you more valuable in the job market,

    2) Paying off debt – especially when interest rates on savings are so miserable,

    3) Short-term bond funds – want to stay away from long term bonds due to the risk of inflation, particularly with the “quantitative easing” going on – fancy terms for devaluing the dollar.

    • kmw2 says:

      Day traders are usually noise traders – they really have no idea wtf they sre doing. Or, as a certain neoclassical economist once began a paper, “PEOPLE ARE STUPID. Look around you.”

  18. nocturnaljames says:

    Real estate has further to fall. Terrible investment. domain squatting is old news, good luck competing with the evil pros.

    Considering inflation is rising dramatically, commodities are up 50%+ across the board, investing in physical commodities is going to hold onto your wealth more than anything with the Fed induced inflation coming. Holding onto dollars is a losing game.

  19. MongoAngryMongoSmash says:

    My parents helped set me up with mutual funds and stocks years ago and I haven’t touched them. It was like 95 and I think I had, McDonalds, Oracle, and Staples. It hasn’t been a windfall but it’s building nicely. I also have a fund where they take the top five and lowest five from each of the three markets and then keep them until the end of the year.

    On a side note, the best investment I ever made was into starting up my shirt business. Low overhead, no boss, and pretty much a constant, repeatable stream of income, without having to really do anything. I just post a few designs each week, choose the products, set the royalty amount and hit OK. Then it’s all about the social media connections. Build up a fanbase and gain some cred through your peers and it’s a nice little check every month to pay for the mortgage, Christmas, and vacation.

  20. Blueskylaw says:

    I can’t even stomach the advice in this article. You may as well buy the mineral rights to an Indian burial ground or invest in a mirror recycling factory.

  21. morehalcyondays says:

    The key is to diversify–don’t put all your eggs in one basket. If you want to buy gold, don’t put more than 5% of your money in. By a mix of growth oriented mutual funds with long track records.

  22. jamar0303 says:

    And yet no one’s mentioned foreign currency…

    Though granted, it’s still a gamble, but the RMB-USD currency pair is bound to turn up some returns as the US tries to get China to push up the value of the RMB.

  23. smartmuffin says:

    *sigh* Terrible advice that will lose people money.

    If you don’t want to “mess” with stocks, just put your money in an S&P Index fund and LEAVE IT ALONE. You’ll get to enjoy nice average annualized returns, provided you leave it in for awhile and don’t panic and take it all out whenever there’s a recession.

  24. Clyde Barrow says:

    domain name squatting? lol..sure. That was big news back in 1999. Not news today.