What else can I invest in?

Dear Money Lady,

Is it possible to make money without investing in the stock market? Why is this the only option provided by my financial planner?

Francis

Dear Francis,

This is a very good question – there are many other ways to make money instead of the traditional method of purchasing securities in the stock market.

Remember, the key to investing wisely is choosing an investment that will monetize itself, growing and compounding over time. You want an appreciating asset that you can rely on to provide a revenue stream once you retire. Financial planners and advisers want to do this through the stock market, encouraging most Canadians to invest in exchange traded funds, mutual funds, or separately managed accounts (institutional investments). If you don’t want to invest in securities, bankers will suggest you choose guaranteed investment certificates or structured notes, which are still reliant on the stock market.

So, what else is there?

The easiest and most effective way to increase your net worth is to buy real estate. You can certainly consider rental properties or commercial real-estate ventures if you have the extra income but, if not, why not consider simply updating your home. Shelter is a necessity of life and owning a primary residence in Canada is a great tax-free investment. Selling and continually moving into a higher-priced home every three to five years is a great way to create wealth over time. One method could be to buy new, from plans, move in for a few years, then sell and move to another new build-home again. It takes a special kind of person to uproot their family, live in the dirt of a new subdivision, and then do it again. But the stats show this is the best way to make the highest return on your investment when flipping properties.

The second option also involves buying and selling properties – since they are always assured to increase in value over time. If you’re handy, why not buy a fixer-upper home and then sell it once the home has been remodeled? This is still a very lucrative way to make money since move-up buyers can’t imagine doing improvements to a rundown home – they simply don’t have the experience or the cash to do it. Instead, they would much rather pay a little more for an updated home and put the extra purchase cost on a higher mortgage without the headaches of anticipated reno work.

The third way to make money is to invest in physical commodities – such as coins, jewelry, classic cars, or artwork. Choosing something that can retain and grow in value is a specialized skill. Should you buy something that is already established and well known, or perhaps a piece of art that is up and coming? These types of investments may be fun, but they are not easily converted into cash, and it will be difficult to predict when something has reached its maximum value.

The fourth way to invest without buying stocks is to try your hand in the cryptocurrency market. Personally, I believe this market is far too risky for someone who wants to avoid the stock market. Volatility is high and, owing to the many emerging digital currencies, it is difficult to discern which will be most-favoured. Your digital wallet, where you store your crypto assets, may be vulnerable to hacking and one can easily lose access if the platform is compromised. That said, there may still be opportunities as this is a very new market.

The last way to monetize your money over time is to invest in a franchise business. You need to ensure you do your homework on this option, since you must ensure you have the correct business and location. You will need to research the business model, ensure there is sufficient consumer demand, workarounds for competition, potential for future growth, and the adaptability to change the model if needed in the future.

Christine Ibbotson
Ask the Money Lady

Christine Ibbotson is a Canadian finance writer, radio host  and YouTuber.  For more advice check out her YouTube channel: Ask the Money lady – Your Canadian Finance Coach. Visit her website at www.askthemoneylady.ca or send a question to info@askthemoneylady.ca

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