Hey friends! Enjoy this guest post from our friends at Club Thrifty!
Everywhere you look, investment gurus tell you to diversify your portfolio to balance risk. But balancing risk is different for everyone, and there’s more than one way to do it. The trick is to not put all your eggs in one basket.
For my wife Holly and me, that means we don’t limit ourselves to investing in the stock market alone. In addition to diversifying within the stock market, we spread our investment dollars outside the market, as well.
Investing Outside of the Stock Market
Some of our non-stock investments include different types of real estate, high-yield savings accounts, bonds, and college savings accounts for our kids.
Plus, we’re always investing in our business, which provides the biggest dollar-for-dollar return on our money. We’ll show you more in more detail how we’re diversifying our investments outside of the stock market.
1. We Buy Real Estate Properties
Buying real estate can be a fantastic investment opportunity. Holly and I got started in 2007. We currently own two single family homes and are looking to add at least one multi-family residential building in the future.
Quite frankly, being a landlord is one of the best financial moves we’ve ever made.
We originally got into real estate as a way to build a residual income stream, and it’s more than paid off over the years. In addition to using the extra cash for retirement, we also plan to use our rental income to supplement our kids’ college education.
Of course, having tenants can be a lot of work. We’ve replaced heating and cooling units, refrigerators, roofs, and more. One time, a huge tree fell and crushed a shed and fence at one of our properties – so there are always unexpected expenses that can pop up.
Those situations don’t happen very often, thankfully. Most importantly, the rent checks we get every month provide a decent boost to our income, which we love.
2. We Use High-Yield Savings Accounts
Holly and I rave about the benefits of high-yield savings accounts all the time.
If you haven’t moved your cash to an online savings account like CIT Bank, what are you waiting for? I mean, you won’t earn a massive amount of money, but getting an interest rate that’s 20x the national average is a pretty great deal.
We use high-yield savings accounts as a place to keep our emergency fund. Since these accounts are FDIC insured, we get a sweet return on our money without the risk of investing in the markets.
Our online savings account helps us stash money for our upcoming travel adventures, too. It’s also a great spot where we save cash to pay for Christmas gifts every year.
3. We Invest in Crowdfunded Real Estate
Being a landlord is great, but we decided to try out crowdfunded real estate to diversify our investments even more. I’m so glad we did!
There are a lot of options to pick from, and you might have heard of popular platforms like Fundrise, PeerStreet, and RealtyMogul.
Personally, Holly and I invest our money with Fundrise. We started in 2018 because we wanted some more exposure to the real estate market but weren’t ready to buy another rental property yet.
Fundrise lets us invest in private real estate investments directly. There’s no fuss over house maintenance or upkeep, which keeps our costs of owning real estate low.
Since the historical returns are good, we hope to earn some pretty stellar returns for ourselves over time.
4. We Invest in Our Business
Above everything else, our online businesses have been our greatest investment of both time and money. Of course, even an online business takes a lot of work.
We started our blog, Club Thrifty, in 2012. It didn’t make much money at first, and Holly was looking for something better than the daily grind of a 9-5 job. So, she started freelance writing…and boy did that change our lives.
Balancing full-time jobs with two side businesses was really tough in the beginning. Although there were times when we wanted to give up, we kept investing our time and effort – knowing that having our own business would give us the freedom we so desperately wanted.
After a year of Holly taking on various writing jobs, she was earning enough to replace her income and walk away from her full-time career. I left my job a couple of years later to work on Club Thrifty full-time.
Since then, our continued investment in our business is paying off big time. In addition to making multiple six-figures a year and being more available for our children, having the freedom to travel is the biggest change to our lives. These days, we travel about four months out of the year.
Obviously, that is way more time than we could ever take off from a “real job” to travel.
5. We Have Fully-Secured Corporate Bonds
Another way Holly and I invest outside of the stock market is with bonds. We choose to put our money toward corporate bonds since they tend to earn a higher interest rate than Treasury bonds.
Personally, we like investing in bonds through a platform called Worthy. There, we can buy bonds in $10 increments and they come in 36-month terms – although Worthy lets you cash out anytime without losing any of the interest you earned.
Here’s the best part: Worthy pays 5% interest. It’s hard to find a CD that pays that high of a rate! The money we invest is used to help fund loans for American small businesses – so we feel good about that, too.
6. We Plan Ahead with College 529 Plans
College costs are skyrocketing, but we want to provide our kids the opportunity to earn a college degree without taking on a ton of debt. That’s why Holly and I invest in a 529 college savings plan.
Our home state of Indiana offers one of the best 529 plans out there, and we have two – one for each of our girls.
If you don’t think you have enough money to put in a college savings account for your kids, I encourage you to do what you can with what you have. When we opened our accounts when the girls were babies, we could only afford to put $25 a month per child in them. Believe me, every little bit helps!
Obviously, we’re very fortunate to be in a much better financial position now. As such, our contributions have increased significantly. Since our state provides a 20% income tax credit on the first $5,000 we save annually, we now max that out so we can take full advantage of the tax benefits.
Investing goes beyond stocks, bonds, and mutual funds. Although we certainly invest in all of these, we also believe diversification is super important. That’s why we’ve focused on building investments outside the market, as well.
Some of these investments lead to passive income. Others require a bit more work.
Still, we love investing. When you balance the risk against the reward, stepping outside the stock market can be a lucrative way to invest your money, create additional income streams, and more easily protect your hard-earned investment dollars.
Do you invest outside of the stock market? What’s your favorite investment?
Greg Johnson is a personal finance and frugal travel expert who leveraged his online business to quit his 9-5 job, spend more time with his family, and travel the world. He is the co-owner of the popular blog Club Thrifty, where he teaches others how to spend less and travel more.