People that work for a traditional employer have the benefit of being enrolled in an IRA. If you run your own business, then you don’t have that same luxury. Instead, you will need to be responsible for managing your own retirement plan.
Unfortunately, consistently allocating money to your retirement account can be difficult when you have an irregular income. However, you might be able to make up for this by focusing on high return investments. Of course, these investments tend to have more risk as well, but this means that you can offset the risk by investing in them earlier in your life, so that you have higher returns by the time that you are ready to leave the workforce.
In order to achieve these types of returns, entrepreneurs might need to add some non-traditional investments to their portfolios. Some alternative investments that might be worth holding are listed below.
Penny stocks
Penny stocks are equities that can be purchased for less than one dollar. You can find some interesting penny stocks to look at here. They can provide massive returns if the underlying company has strong fundamentals. Unfortunately, some bad penny stocks have floundered, which has given them a bad name.
Despite the negative attention that they have received, they can actually be excellent investments. You just have to know what to look for.
You need to start by understanding why the stock is trading for less than a dollar. Is it a relatively new company that could grow and be very profitable later? Or is it a former corporate giant that has become a shadow of itself?
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Let’s take a look at a couple of different scenarios with penny stocks to see which ones might work best.
Enron used to be a very large corporation before an accounting scandal surfaced around the turn-of-the-century. The value of the stock plummeted to almost nothing. The company didn’t just disappear right away. It continued to trade at a very low stock price, before it went completely defunct. Obviously, penny stock investors that wanted to trade Enron stock in the hopes that it would rebound were sorely disappointed and lost everything they invested.
On the other hand, some penny stocks belong to promising startups. They might not have gotten a lot of attention yet and may not even be publicly traded. They might be worth less than a dollar if you want to purchase them through private equity channels.
These stocks could actually be very good investments. However, you need to pay close attention to the financial documents. You should follow Warren Buffett’s advice and look carefully at the return on equity ratio, which is the most important financial ratio for investors.
Penny stocks in promising industries, such as sustainable energy might be very worth investing in. They have a lot of promises, even if the company doesn’t have a very long-term financial history.
Gold
Gold is another non-traditional investment that is definitely worth looking into. There are a lot of great reasons to consider using gold in your portfolio.
One of the biggest benefits of investing in gold is that you can hold it as a physical asset. This means that you don’t have to worry about it getting lost or seized during an electronic storm or other crisis.
Gold is also an excellent hedge against an economic downturn. If you have a knack for predicting the general direction of the economy, then this can be something you can use to your advantage. Since the market for gold is also less efficient than the stock market, it is also a lot easier to perform the average investor by timing general economic trends.
Cryptocurrencies
Cryptocurrencies can also be great investments. Some people that purchased bitcoin in the early years became multi-millionaires.
Some people argue that the market for bitcoin has reached its peak. However, there are still plenty of profitable trades that you can place with it. You can also take advantage of inefficiencies in the market for cryptocurrencies, as IG points out.
“Although the cryptocurrency market is relatively new, it has experienced significant volatility due to huge amounts of short-term speculative interest. For example, between October 2017 and October 2018, the price of bitcoin rose as high as $19,378 and fell to lows of $5851. Other cryptocurrencies have been comparatively more stable, but new technologies are often likely to attract speculative interest. The volatility of cryptocurrencies is part of what makes this market so exciting. Rapid intraday price movements can provide a range of opportunities to traders to go long and short but also come with increased risk. So, if you decide to explore the cryptocurrency market, make sure that you have done your research and developed a risk management strategy,” the authors write.
There are also a lot of different cryptocurrency coins that you can purchase these days.
REITs
A real estate investment trust (REIT) is an excellent way to invest in real estate. If you have a knack for understanding the direction of the real estate market, then you can make a lot more money than you would by passively investing in the stock market or purchasing corporate bonds.
There are a lot of different ways that you can purchase a REIT. They specialize in different types of real estate markets. You can buy a real estate investment trust that focuses on commercial properties or residential rental markets. You can also choose ones that focus on specific locations.
You can make a lot of money by choosing a REIT that is attached to a market that is likely to thrive. Again, this is an inefficient market, which means that there are plenty of opportunities to make more profitable trades than you could ever hope to see with the stock market.
There are a lot of great ways to take advantage of REITs. One option is to try to understand the direction of various real estate markets in your own area. You may see a housing shortage in a particular municipality. This means that you can choose an REIT that focuses on managing existing properties there, since they will be able to command higher rental rates relative to operating costs, especially if the property was purchased a long time ago and doesn’t have a steep mortgage principle to pay off.