2755: [Part 1] 10 Ways To Invest Without The Stock Market by Kalen Bruce of Freedom Sprout on Alternative Investments

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[00:01:07] treat, cure, or prevent any disease. This is Optimal Finance Daily, episode 2755.

[00:01:14] 10 ways to invest without the stock market. Part 1 by Kaylin Bruce of freedomsprout.com.

[00:01:20] And I'm your host and personal finance enthusiast, Diana Merriam. This is the show

[00:01:26] where I narrate posts from thought leaders in personal finance every single day of the year

[00:01:30] in 10 minutes or less. And I have a bit of a longer post today. I'll read the first half today and

[00:01:36] then finish the rest for you tomorrow. So let's dive into the first half and start optimizing

[00:01:41] your life. 10 ways to invest without the stock market. Part 1 by Kaylin Bruce of freedomsprout.com.

[00:01:52] The US dollar is going to collapse. Don't put money into the stock market.

[00:01:57] Have you ever heard similar advice? I'm sure you have, and for good reason. The US dollar

[00:02:02] is economically weak but politically and realistically strong. A weird combination,

[00:02:08] but it's true. We often hear we should diversify because we don't want all of our eggs in one

[00:02:13] basket. But diversity in four stock mutual funds isn't diversity. It's diversity within the stock

[00:02:21] market, but it's still within the stock market. What diversity really means? I love the stock

[00:02:29] market, but I also love diversity because I love investing and investing without diversity

[00:02:34] is illogical. There's diversity and then there's diversity within diversity. Diversity in investing

[00:02:41] means owning several types of investments. Diversity within diversity means owning several

[00:02:47] types of each investment. Owning stocks across several sectors, different types of bonds and

[00:02:53] cash accounts is great diversity within the paper asset class, but that's all it is.

[00:02:59] True diversity has to span asset classes and forms of investments.

[00:03:04] Warren Buffett has been one of the most famous and longest running advocates for the stock market.

[00:03:09] That's where he made his money and he recommends it as the easiest way for you to make money on

[00:03:13] your investments. But even Buffett has diversification outside of the New York Stock Exchange.

[00:03:19] Buffett's investing rules. Buffett's famous letters to his Berkshire Hathaway shareholders

[00:03:26] have not only been valuable for learning how to pick stocks, but they've been valuable in making

[00:03:31] any investment decision. Here are a few examples from Buffett's letters.

[00:03:37] Focus on the future productivity of the asset you're considering. If you don't feel comfortable

[00:03:42] making a rough estimate of the assets future earnings, just forget it and move on.

[00:03:49] Many of these comments pertain to Buffett's farm and the piece of commercial real estate he bought

[00:03:54] in New York. Whether you're talking about a dividend stock or a farm, there are plenty of

[00:03:59] universal investing principles. There are also two basic types of investments. Investments that

[00:04:05] produce and investments that don't. That means you have three ways to make money when you invest.

[00:04:11] One, you can make money from what the investment produces. Two, you can make money from what the

[00:04:16] investment becomes worth. And three, you can make money from a combination of the two.

[00:04:22] That covers any investment I can think of. The terms may change, but in the end, you'll be

[00:04:27] earning money on one of the above three ways. The stock market gives you the opportunity to use one

[00:04:33] or all of these ways to make money and so do plenty of other investment opportunities.

[00:04:38] Back to what Buffett says about his two non-stock investments mentioned earlier.

[00:04:44] With my two small investments, I thought only of what the properties would produce and cared not

[00:04:49] at all about their daily valuations. According to Buffett, what an investment produces is much

[00:04:56] more valuable than what the investment itself is actually worth. This idea is easily explained in

[00:05:02] the stock market by looking at dividend stocks. But how do other types of investments produce?

[00:05:08] Investments can produce in several ways. A farm produces a crop, meat, dairy, or something along

[00:05:13] those lines. Real estate can produce cash flow through rental income. There are all kinds of

[00:05:19] ways investments produce. Let's look at one more universal investing principle from Buffett,

[00:05:25] and then we'll get into how you can start investing without the stock market.

[00:05:29] Quote, my two purchases were made in 1986 and 1993. What the economy, interest rates,

[00:05:36] or the stock market might do in the years immediately following 1987 and 1994 was of

[00:05:42] no importance to me in making those investments. I can't remember what the headlines or pundits

[00:05:47] were saying at the time. Whatever the chatter, corn would keep growing in Nebraska and students

[00:05:51] would flock to NYU. End quote. It's funny how these ideas that are often thought of as

[00:05:57] stock market investing tips can span asset classes. That's my point. Look at most

[00:06:03] investing principles universally and apply the principles to the following ideas.

[00:06:08] Investing without the stock market. I highly suggest diversifying your portfolio to include

[00:06:14] some of the following. You don't need everything here, but I recommend at least trying a couple.

[00:06:19] If you're investing outside the stock market because you're afraid the market or the US

[00:06:22] dollar is going to collapse, I have bad news. If the dollar or the stock market collapse,

[00:06:27] it's going to affect other investments. It would affect everything in the world.

[00:06:33] If you're truly worried about the dollar collapsing, I suggest investing in skills and

[00:06:37] friends. Skills will always be valuable even if the world economy collapses. If something

[00:06:43] catastrophic happened, you would want to know how to do things that people will pay you for

[00:06:48] and you would want people on your side. However, my advice is worrying helps nothing.

[00:06:53] And don't forget, quote, for the spirit God gave us does not make us timid, but gives us power,

[00:06:59] love, and self-discipline. 2 Timothy chapter 1 verse 7. Whether you're afraid of the stock market

[00:07:05] or just looking for some more diversity, here are some options you have for investing.

[00:07:10] One, hard assets. Commodities like gold and silver are the old go-to alternate investment

[00:07:17] options. The only problem with these is that they don't produce. The hope is that the value

[00:07:23] increases, but it doesn't always. It's good to have some hard assets, but I personally wouldn't

[00:07:28] go as far as backing a 401k with them. Between gold and silver, I personally prefer silver,

[00:07:34] but the choice is up to you. Gold is definitely the most popular way to invest in hard assets.

[00:07:40] Here's what Investopedia says about gold. Gold bugs have often encouraged investors to own the

[00:07:46] precious metal as part of a diversified long-term investment portfolio. Gold is seen as a hedge

[00:07:51] against inflation and a store of value through thick and through thin. Holding gold, however,

[00:07:56] comes with unique costs and risks. And the data show that historically gold has disappointed on

[00:08:02] several of its purported virtues. Number two, hear that in tomorrow's episode. You just listened to

[00:08:13] part one of the post titled 10 ways to invest without the stock market by Kaylin Bruce of

[00:08:18] freedomsprout.com. And I'll be right back with my commentary. Looking to part ways with complicated,

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[00:09:28] made possible. Learn more at evernorth.com slash wonder. I thought this was an interesting article

[00:09:34] because it's great to consider some alternative narratives when it comes to investing strategies.

[00:09:40] While I agree that you can invest outside the stock market, fear over the dollar collapsing

[00:09:46] as a rationale to not invest in the stock market seems like a weak argument to me. And Kaelin even

[00:09:52] says himself later in the article that if the dollar actually collapses, it would affect all

[00:09:57] investments. So again, this isn't a good reason to not invest in stocks. The other reason stated

[00:10:02] here is the need to diversify. But I've felt for myself that I've been able to achieve the diversity

[00:10:08] I need through a combination of index funds, cash, real estate, and eventually I'll add bonds to my

[00:10:14] portfolio. It's pretty common knowledge that investing in the stock market with discipline

[00:10:20] and patience over decades is generally the best way to build wealth because returns in the stock

[00:10:26] market have generally outperformed other asset classes over the long term. While I have explored

[00:10:32] diversifying into other assets over time, for me personally, fully leveraging tax-advantaged

[00:10:39] retirement vehicles was the best place to start investing. The tax advantages plus employer match

[00:10:46] plus the relatively low effort it takes to invest your money this way is too good to pass up. I

[00:10:52] mention this because I worry this article sends the impression that you shouldn't invest in the

[00:10:57] stock market and I strongly disagree with that. Furthermore, Kalyn makes a statement about

[00:11:03] investing in skills and friends which is important for ensuring that we're in a position to earn an

[00:11:08] income. But I don't think that we can replace the need we all have to invest the money we earn

[00:11:14] because then we'll be forever required to trade time for money. In order to build real wealth,

[00:11:20] we need to get our money working for us. Well, that should do it for today. Have a happy rest

[00:11:26] of your day and great weekend and I'll see you on the Monday show tomorrow where we'll finish up

[00:11:30] this post and where your optimal life awaits.