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Non-Stock Investment Options
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I discovered this very informative article, “No-Stock Portfolio,” via Tip’d this weekend and it really gave me a stronger sense of the number of non-stock investment options there are out there. So often I get stuck in the mindset that “investing” refers to either the stock market or real estate when the area is so much larger. Jeffrey Kosnett, the author and a senior editor at Kiplinger’s, goes into a sample portfolio you could build of non-stock investments, he calls it his Tofurky Porfolio (meat that isn’t meat!), and I think its value is in the investments he outlines and not in the percentages he selects.
These are not recommendations, just a listing of non-stock investment options that are available.
The investments he describes were:
- Blue-chip IOUs: These are high quality corporate bonds from companies that have been beat up lately.
- REIT Preferred: Real estate investment trust preferred stock. It’s stock but they are senior to common stock and you get dividends first. One of the companies he mentioned, COPT, owns pretty much every building I’ve ever worked in for the last 5 years (well, except my house).
- Energy: Specifically funds that track oil and natural gas commodities. Oil is down pretty big right now with the fears of a world-wide recession, but you know the black stuff can’t be held down for long.
- Tax-free income: These are tax-exempt bonds like state and local municipal bonds (muni’s). For a little while I was in Vanguard’s tax exempt money market but the yield on that baby pretty much dried up.
- Gold: Another commodity, gold is always a favorite because it’s a hedge against inflation (which we will probably see quite a bit of once the recession subsides, you don’t print money without having some sort of risk). If the idea of gold, or other such commodities, interests you, one of the better books on the subject, including detailed how-to’s, is Peter Schiff’s Bull Moves in Bear Markets.
I’ve been interested in getting more involved with higher yield bonds, either corporate or muni’s, as their yields often beat the best certificate of deposit and high yield savings accounts rates. There’s risk involved, CD’s and savings accounts are FDIC insured and bonds can default, but I would imagine muni’s are pretty safe.
I can’t, for the life of me, figure out how I can buy individual municipal bond. When I do a search, I’m inundated with mutual fund companies with Maryland municipal bond funds, but no way to buy an individual bond. Is this a sign that I should be buying individual muni’s or am I just looking in the wrong place? If Vanguard had a Maryland muni fund I’d be all over it but they don’t and the thought of opening yet another account is unappealing.
{ 16 comments, please add your thoughts now! }
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Is gold a good investment at this time? I don’t think so, I think gold is peaking and once the economy stables, gold will drop.
how hindsight gives us guidance
I thought Fidelity had a bond marketplace of some sort.
Anyone with a Fidelity account that can confirm this? Thanks!
It appears that Vanguard Brokerage will allow you to buy individual muni bonds from various states.
But not the mutual fund side… shucks.
Hey Jim,
Fidelity has a bond marketplace for individual bonds (you can search by various criteria including state) as well as state bond mutual funds. Check out the state listings: http://personal.fidelity.com/products/incomesolutions/index_content.shtml.cvsr?bar=c
Note – I haven’t actually purchased any bonds directly myself but I have my IRA with Fidelity and am very happy so far with service, options, etc. (since Jan of this year).
Thanks Inpecunious, their search functionality is really extensive, it’s really cool!
I wouldn’t invest in gold right now, everything is already priced in and once capital starts flowing into the stock market, gold will go down.
Gold is DEFINITELY a bad tip there. With its volatile spikes and subsequent falls, a person not timing a buy right will suffer. And also, the price of gold listed on the stock market is not what the average “joe investor” gets from the bank. These low-volume customers end up paying surcharges not only to get the gold, but also some banks charge to hold the gold for you…I dont see a ROI on that plan unless I was the bank!
None of the above non-stock investments are recommendations, just a list of options.
Totally understood. Just hope others skimming are aware of the hidden costs in owning a piece of gold.
That’s one good thing that Peter Schiff’s book taught me, there are some TERRIBLE ways to own gold and then some less terrible ways.
So… you’ve gone from daytrading AIG and GM to buying muni bonds?
Seriously though… checkout this site I found for researching individual muni bonds. Seems legit.
The Electronic Municipal Market Access.
http://emmaportal.org/
As a matter of fact Charles Schwab lets you purchase individual Muni Bonds. I have an investor checking account linked to a brokerage account there.
BloggingBanks
Please consider the terrible problems caused by investments in oil and REITs before recommending them in the future. REITs push up prices for homes and many of them operate shopping malls or other environmentally unsustainable properties. People depend on oil, which is something we should change and not something we should use to get rich. Retirees on a fixed income, for example, are badly hurt when oil investors push up the price.