ScaredyCatGuide to the 401(k) - Part 10: Alternative Investments

So far in this series we have mainly referred to stocks and bonds when it comes to your 401(k) investing. Obviously there are other investments out there and mutual funds and index funds that invest in them.

Alternative Investments:

Commodities:

This asset class consists of gold, silver, oil, coffee, wheat, sugar and so on. Gold is the most well known commodity and is viewed as a safe haven against inflation and during times of economic recession. It is considered a “defensive” play for times of uncertainty.

There are many funds that invest in commodities and commodity related companies. You will likely see them offered in your 401(k) plan options.

Currencies

The US Dollar is one of 180 currencies in the world. Investing in other currencies against one another is a strategy that traders and funds have taken part in for decades.

Currency investing is speculative my nature, because in the end one dollar is worth one dollar. However, the value of a dollar vs. the euro, for example fluctuates up and down, which is where money can be made.

There are many different types of currency related funds out there, be sure to read up on the prospectus so you know exactly what currencies are being invested in. This type of fund fits in the riskier side of your asset allocation.

Real Estate:

There are many ways to invest in real estate. When it comes to your 401(k) the most common option is investing in a mutual fund that holds homebuilding and real estate related stocks, but in the end you are still investing in stocks.

Another option is a real estate investment trust (REIT). REITs are companies that own, operate or finance income producing real estate. The main reason people invest in them is for the steady income stream produced as opposed to capital appreciation.

Those are just the two most readily available ways to invest in real estate within your 401(k). However, there are several other real estate investment strategies that can be beneficial, some of which are accessible to you depending on the situation.

We will dig into this more in the next post....

Posted Using LeoFinance