Are you seeking an alternative to the stock market? Contrary to what you may believe to be true, there are ways to save for the future without being tied to the stock market.

I speak with people every day who want to learn what options they have available to reduce their exposure to the market. I hear comments tongue in cheek like, “I want to invest but don’t want to lose any money.”

There is a lingering fear that markets could experience another 2008, which could devastate many who are planning their retirement. The majority of the people posing this question to me are people who have $200,000 or more in assets and are within 5 years or so from retirement.

And this is not a big surprise to me since this money is needed for income replacement within the next five years or so and the idea of losing money, which in turn reduces income, is something to hedge or avoid altogether.

So, what I have found is that there has been a shift in investor sentiment away from traditional investing toward finding alternatives to the stock market, which is what lead me to write this post.

But before we jump into some of your options let me first repeat something I have mentioned in previous blogs, books, and podcasts that I think is appropriate for this topic.

Many people invest in the stock market with the idea that they will earn double-digit returns. If this is you, I want to make sure you realize that there is no real evidence of this being possible and makes me wonder where this idea originated.

According to a Delbar report from 2016, the S&P 500 averaged 8.19% over the last 20 years while the average investor only made 4.23%.[1] This is far from the double-digit returns that are BELIEVED to be possible year over year.

I have actually had people come into my office and ask me how they can invest in an investment that they found doing a Google search that showed an average rate of return of 10-12%.

My response is that we can get them set up to invest in whatever the investment is but first want to clarify a few facts to help manage expectations.

For one, what produced the returns in the past is unlikely to happen again in the future.

Secondly, even if you were in the investment over the same period of time the analysis was completed, you are unlikely to have experienced the average percentage result translated into dollars.

Let me explain, let’s say you have $100 invested in a fund that made a 100% rate of return. You would have $200. Now, let’s assume that you experience a 50% loss taking you back to your original $100.

Two questions:

  1. How much money did you make?
  2. What was your average rate of return? 25%

Think about that for a second… You made nothing but had an average rate of return of 25%.

Now let me repeat my comment from before… Even if you were in the investment over the same period of time the analysis was completed, you are unlikely to have experienced the percentage result translated into dollars.

To summarize, when you see historical performance you have to realize that the average rate of return does not translate to how much money you will actually have UNLESS the rate of return was the same year after year.

So, based on what we know about averages and what the statistics show investors have actually made over the last 20 years, is it safe to say that if we can earn 4.23% or better we are outperforming the average investor? Right?

So, what if we had options available that consistently produced a dividend of 5-6-7% without the anticipated ups and downs of the stock market?

This is where alternative investment options come into play.

Now, let me state upfront that there is inherent risk with any and all things. Nothing is 100% guaranteed and nothing is 100% safe. Even putting money under your mattress carries risk such as inflation, theft and fire.

So, when I am describing an alternative investment, I am simply sharing that there are alternative options available to you other than simply investing in the stock market. I am not saying there is no risk.

The first of these is probably the most familiar and that is real estate. You can acquire real estate in a variety of ways but is an asset class worth considering.

Another popular option is private equity or private debt. This is an investment in a company that is not listed on the stock market.

Preferred stock should be familiar to many investors and usually carries a declared dividend and a fairly stable share price.

Annuities are good tools to use when you want an alternative to the stock market. They carry various features that many savers are looking for.

There are a couple of other strategic opportunities that can help with lowering your taxes that include but are not limited to oil and gas investments along with easements.

A specially designed life insurance policy is a common program used by many high-income earners because of its tax favorable treatment and consistent returns.

Now, this is not an exhaustive list but the takeaway for you should be that the stock market is not your only option.

There is an entire world of investments out there that are normally reserved for institutions, endowments, pensions, insurance companies and ultra high net worth investors.

If you haven’t heard of these alternatives or your financial advisor is not talking to you about these types of programs, let me know and I can do what I can to point you in the right direction.

Good luck!



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The article and opinions in this publication are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you consult your accountant, tax, or legal advisor with regard to your individual situation.

This material is educational in nature and should not be deemed as a solicitation of any specific product or service. All investments involve risk and a potential loss of principal. Kalos Capital nor Kalos Management offer tax and legal advice. Please consult with a tax advisor or attorney for advice regarding the impact on your portfolio.