- If you want absolute safety of your principal, you can invest in a certificate of deposit from a traditional or online bank. These bank CDs pay a set amount of interest for a set period of time, and the longer the deposit term, the higher the interest rate. It is important to balance the inconvenience of not having access to your money against the higher interest rate.
- Bonds represent loans to companies, government agencies and municipalities. You can purchase individual bonds, which guarantee a specific rate of interest until maturity, or you can purchase bond funds, which hold many individual bonds and fluctuate in value as bonds enter and leave the portfolio. Bonds tend to be more stable than stocks, but they are sensitive to interest rates and tend to fall in value as rates rise.
- Real estate can be a good alternative to the stock market, especially for investors who have the skills needed to rehabilitate and fix up old homes and apartment buildings. Those investors can purchase distressed properties, make the needed repairs and rent them out for current cash flow. Real estate can also provide long-term appreciation and a hedge against future inflation. Investors who do not wish to become landlords can invest their money in real estate investment trusts, a type of mutual fund that invests in commercial, residential and industrial properties.
- Commodities like gold and silver tend to do well during periods of economic uncertainty and high inflation, making them a good hedge against the stock market and other traditional investments. You can purchase gold, silver and platinum coins directly, or you can purchase mutual funds and exchange traded funds that track the prices of these commodities. You can also choose mutual funds that track the prices of other commodities, like cotton, soybeans and wheat.
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