If you would like to invest outside the traditional financial markets, try non-traditional investing. In many instances, you only need to invest a small amount to test it out, and there are few if any requirements to qualify as an investor. Don’t just trade your time for money at a job; set aside a small portion of your earnings and then put your money to work for you.
With so many types of non-traditional investments, how do you choose? Binary options, gold investments, and peer-to-peer lending are popular because of how easy it is to invest in them.
Here is an overview of how these three types of non-traditional investments work:
This type of investment requires you to take a “yes” or “no” position on the rise or fall of a stock price. The payout is either all or nothing. This simple structure makes it far easier to understand than traditional options.
You can only exercise a binary option on its expiration date.
As the buyer or seller, you receive an agreed upon sum of money if the option settles above a specific price. If it settles below the specified price, you receive nothing.
Risk assessment boils down to estimating if the price will go up or down. You’ll either experience a gain on the upside or a loss on the downside. It doesn’t matter how far upside or downside the price goes, if it’s above or below the “strike” – the name for the target price –you receive a full payout.
Binary options are not always known by that name. They may also go under a different name in the market. In the foreign exchange market, for example, they are called “digital options.”
The biggest tip is to learn as much as you can about this form of trading. 24option has blog posts on how to trade different types of assets, for instance corn or oil. They also provide ebooks, videos, and live training to learn the best strategies.
Essentially, you should decide which markets you would like to trade in and learn how to interpret a binary option price in that market. The FOREX market, for instance, has different factors that influence price than agriculture commodities market.
Investors often think of gold as a safe-haven investment. They tend to buy more gold when the economy is facing challenges. In the summer 2011, the U.S. faced a debt ceiling crisis and it looked like the U.S. dollar, the world reserve currency, was about to collapse. At that time, gold hit its peak price. It hit a record $1921.50 on September 6th of that year.
Although gold has few industrial uses, it is valued as a hedge against inflation. Gold prices increase along with rise in the price of goods and services.
On the one hand, gold is expensive to store and protect, on the other hand, it moves separately from the rest of the economy.
Investors may use it to offset volatility in other assets. For example, the price of gold went up during the Crimea crisis.
You can invest in gold in a number of ways:
- You can buy it as coins or bars directly from a gold dealer.
- You can buy gold futures contracts.
- You can buy stocks in gold mines.
- You can invest in gold exchange-traded funds like SPDR Gold Shares.
This type of lending is the latest craze when it comes to earning money from financial services. Essentially, you lend money to a peer, bypassing financial institutions.
You loan money to someone looking for a personal loan through a lending website.
Many people ask for a loan to consolidate their debts to reduce their interest payments. To get that loan, they submit a loan request to a peer-to-peer lending website. Investors decide what loans to service. The borrower makes a regular monthly payment and you, as the investor, receive a portion of these payments.
Return on investment will vary. Two of the largest websites in the US are Lending Club and Prosper. It’s free to join as an investor. Lending Club estimates that an investor makes between 4% to-8 % on the highest qualified borrowers. Prosper’s website estimate the return to be closer to 8%.
There are some risks. The loans are not insured, making a default a complete loss. It can also be difficult to decide who is likely to honor the debt. However, the lending websites do try to screen and grade applicants by risk levels.
Rewards are higher than traditional investments like corporate bonds or certificates of deposit.
Investors have to do little work to keep track of the loans. The lending platform takes care of bookkeeping and sending on the payments to the investor.
You can start at once, and invest a small amount to see if it’s right for you, as little as $25.
Many investors get the satisfaction of feeling that they are making a positive contribution to their community by helping people get out of financial difficulties.
Should you give it a try?
As in traditional investments, there are no guarantees of success. Alternatively, you should go for it if you have clear financial goals and a solid plan on how you are going to invest. Do your due diligence when working with brokers, and study how your investment vehicle works.