REAL ESTATE TOPICS...When Stocks Are Volatile, These 3 Alternative Investments May be Your Best Friend

Written By: Mark Spera

The Facts: Brexit, Oil, China

The current state of the stock market is troubling to say the least. The Brexit caused the DJIA to drop 610 points in a single day (the largest drop in five years). The hangover from the U.K.'s departure may last for months. Crude oil prices were at or below $30 a barrel for most of Q1, its lowest level in more than a decade. Energy stocks have been dealt a particularly severe blow, leaving the future of many oil companies uncertain and raising questions about economic growth worldwide.

CNN reports that a bear market now exists in several European countries, including France, Germany and the UK, while the markets in the United States, Australia and Switzerland are currently in correction mode. The impact has also extended to global stocks. MSCI’s All-Country World Index, which covers 46 developed and emerging markets worldwide, has fallen 20% since peaking in April 2015.

What Are Some Alternative Investments?

Cash: Don't laugh. It's not an alternative, but I'd feel silly if I didn't mention the most durable and often-forgotten-about asset under the sun. The fact remains that wealthy Americans hold more cash by percentage than any other group (see chart below). One of the main reasons why rich people are rich is because they recognize investment opportunities when they arise and jump all over them. Holding cash gives them the ability to pounce on the next big thing and allows them to time their investments in an optimal way. 

Even more, the stock market is at an all-time high in 2016. Is 10% upside worth possibility of another 50% pullback like in 2008?

Peer to Peer Lending: Peer to peer lending is a very viable alternative for a sketchy stock market. P2P lending allows investors to loan money to borrowers at fixed interest rates and make money off of repayment of loans plus interest. 

Lenders often earn higher returns compared to savings and investment products offered by banks, while borrowers can borrow money at lower interest rates, even after the P2P lending company has taken a fee for providing the match-making platform and credit checking the borrower. Some such platform are Prosper and LendingClub.

Real Estate Crowdfunding: The volatility seen in the markets over Brexit and low yields in bonds could create opportunity for real estate investors, as people resume the hunt for investment yield and relative stability. Many investors have been drawn to real estate because of its potential as a diversifying investment class (compared to other assets like stocks and bonds). Due diligence is still required for each deal, but since the arrival of crowdfunding platforms like RealtyShares, many of the barriers to investing in real estate projects have been reduced for accredited investors.

Compared to buying an investment property, real estate crowdfunding packs a lot of appeal for investors, beginning with a much lower entry point RealtyShares, for example, offers investors the chance to get started with just $5,000, which is certainly more realistic for the average investor who isn’t working with a Donald Trump-sized bankroll.

Real estate is a fun asset to navigate. Crowdfunding platforms like RealtyShares give investors full transparency, providing dashboards, background information and funding bars to track investments.

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