Home > Investing > Options for Diversifying Your Investments

Options for Diversifying Your Investments

Gold CoinsWhile we are still basking in the possibilities of the new year, I hope you will use 2013 as the year to get serious about investing. Start by studying some basic ways to diversify your money. We all know it isn’t wise to put all of our eggs in one basket. With the ups and downs of the economy over the past several years, we’ve seen how various investments can soar and/or hit rock bottom faster than a Hollywood marriage. It’s almost enough to make you want to hide your money under the mattress, but the wise investor knows that the key to minimizing risk is to be well diversified. Obviously, most people know that you should have a mix of stocks, bonds, and cash to suit your risk tolerance, but what about alternative investments to round out the portfolio? You can check out a certificate of deposit calculator to find out the benefits of other investments. While there are many options, precious metals, real estate and peer to peer lending have been on the radar in recent years. Which, if any, should you choose?

Precious Metals

A way to diversify is to invest in precious metals like gold and silver. We’ve seen the value of gold increase to the point that people are cleaning out their old jewelry to take to the pawn shop. If you don’t have the $600,000 or storage capability to purchase a 400 ounce gold bar, you can use a service like  Bullionvault that sells small quantities of gold or silver. Investors can get started with as little as $100. Another advantage with this type of investment is that it can be sold quickly if you need to cash out.

Real Estate

One good thing about the down turn in the economy is the ability to find amazing real estate deals that can be purchased at some of the lowest interest rates in history. We took the plunge in 2012, and purchased our first residential rental property. From my experience, it isn’t easy to become a landlord. You need to research property values, rental potential in particular neighborhoods, and make sure that any property you are considering will provide adequate cash flow. You have to have enough money for down payments and to cover expenses or mortgage payments if you don’t find a tenant right away. If that all sounds like your idea of fun, it might be the year to start looking for an investment property.

If the thought of tenants keeps you up at night or if you don’t have the funds to purchase a property, you can invest in a Real Estate Investment Trust or REIT. REITs sell like stocks on the major exchanges and offer a way for investors to hold real estate investments without buying actual properties in the traditional sense. REITs also offer better liquidity as you can sell your holdings much faster than trying to list a house or property for sale.

Peer to Peer Lending

Peer to peer lending has been around as long as there have been businesses with sellers who carry the loan for buyers. When you act as the bank, you can command a higher return on your investment than you might find in traditional stocks or bonds. Average investors can now enjoy this type of return without having to own and sell a business or put up large amounts of money. With several online services, you can choose the type of loans you want to fund and how much you want to contribute toward each loan. Potential borrowers are rated as to their credit worthiness, and loan rates increase with more risky loans. With traditional commercial bank financing unobtainable for many, peer to peer lending can work well for both borrowers and investors.

Final Thoughts

As with any investment, before you spend one dollar, please determine your risk tolerance, and research which investment vehicles will accomplish your goals. Never choose or pass on investments because someone else did it that way. Hopefully, by looking at different options like  precious metals, real estate, or peer to peer lending, you can diversify your portfolio so that it can weather the ups and downs that inevitably occur.

What investments have you chosen for diversity? Would you pick a gold bar or a duplex if offered one or the other for free?

About Kim Parr

Kim Parr is a private practice optometrist, freelance writer, and personal financial blogger. You can follow her journey to 20/20 financial vision at Eyes on the Dollar.


  1. I learned a heap from this. Thanks Kim. 2013 is the year I’m getting into investing for the first time. We’ve just today sent off our application to open an investment account with Vanguard. Low cost index fund investing here we come.

    We’re going to go pure stocks for the first few years because we’re not investing with a lot and we are young so our risk tolerance is really high. In a few years we’ll add some bonds and cash.

    I’d love to have a few gold bars lying around the house, personally!

    • I’d love a few gold bars myself, but you can’t go wrong with Vanguard. I had all stocks forever, but had to spread it out as I’m getting old!

    • @James: I think you have it right. At a young age you can take some concentration in asset classes in your portfolio. If you are just starting to invest, also look at retirement plans like 401K Traditional IRA and Roth IRA. They can offer you tax advantages, which will help you get more bang for your saved dollar.

  2. Oh we’d definitely get the duplex =) But I’m interested in P2P lending, and think we might get into that after we’ve got the next $50K or so in debt paid off. Gold, not so much. I like investments that throw off cash without incurring transaction costs.

    • P2P intrigues me and is something I need to look into further, but I’m afraid we have the real estate bug and will likely try to add that way.

  3. If the Federal Reserve keeps printing money like it is going out of fashion then pretty much any investment will be a good one so long as it isn’t bonds or treasuries.

    Gold and silver should be standouts. You just don’t want to have all your money sitting in the bank being eroded by lack of interest and inflation.

    • Gold seems like such an old fashioned investment at first, but I guess it’s pretty easy to buy shares of it just like anything else these days.

  4. I think real estate and bullion are great ways to diversify your investments, and even more importantly with real estate you are diversifying income streams. Every investment comes with risks, so I agree with you that it’s important to continue to diversify as you gain more assets.

  5. I think I would go with the duplex. Real estate is something we’ve been wanting to get into for a while, but will probably be some time before we can. Right now we can get some of that exposure through a REIT in our portfolio.

    • I added a little bit of REIT into my IRA and we have an actual rental house, so I’m obviously leaning that way as well.

  6. I’m with John… real estate is what I’m aiming for… I have also dabbled in the P2P lending but am only seeing slow results so far…

  7. We do have rental properties. I hope to get a few more in the next 5-10 years. I wish it was a better time for us to buy another rental right now but it is just bad timing at this point.

    I recently put 5K in Lending Club and have yet to pull the trigger to invest it. I’ll definitely be writing about it once I get the ball rolling!

  8. I have been thinking about P2P lending for some time. I did just learn that North Carolina has a cease and desist order for both Prosper and Lending Club, so I cannot use those to invest. I can only trade notes, which does not interest me. Stupid government. This was one of my 2013 goals, but got killed early.

  9. I have a pretty healthy stash of precious metals from coin collecting. From my experience having access to it yourself is better than having it stored in a vault halfway across the country (the fees are less too)! I own a couple REITs, but am looking at buying some property here in the next 6 – 12 months. Since I live in a state where I cannot originate loans, P2P lending doesn’t interest me.

    I have also thought about buying some farmland and leasing it out, but I’m not sure if I am going to make a play on that or not.

  10. I have traded gold a few years ago but found it very stressful, along with currency trading. Now I focus on tangible investments, cattle and coconuts are one of my diversifications!

  11. It seems to me that investing in gold now would be like investing near the top. Prices are up because everyone has been so worried about the stock market and recession. Eventually the economy will recover and gold will dip.

    I’d like to own rental property one day, but that’s a long way off.

    I consider P2P lending a scam and I won’t go near it.

    Mostly, I invest in mutual funds and let professional investors worry about diversification for me.

    • My P2P will be with the doctor I have worked with for a few years, so it should work. Not everyone has that option for sure.

  12. I like real estate over commodities because I am more familiar with it. There are drawbacks to real estate and liquidity is one of them. Despite that, I think real estate should be part of every portfolio. An alternative to actually owning it is REITS. It is similar to a mutual fund in function for real estate.

  13. Thanks for this post! I’m hoping to learn as much as I can about investing this year and begin doing so aggressively once I achieve some other financial goals. I’m definitely interested in owning more properties, and I’m very interested in the peer to peer lending option.

  14. I am getting my investments reviewed this year by some pros, but am only in mutual funds ATM. I’ve heard a lot about P2P lending, sounds interesting. Precious metals are pretty variable, but have been making a killing the last 5 years. I’ll probably allocate some (less than 10%) of my investments there at some point, but for now, just playing it safe.

  15. We do the real estate but not metals or p2p. We’ve looked into p2p but it doesn’t seem to be really available in Canada. Metals – I’m just not very knowledgeable about!

  16. I’m all about the duplex. Tax writeoffs, income and appreciation? Sold!

  17. Long term goal of mine would be to get into Real Estate investing. I’m currently debating whether to sell my property or rent it out.

    • I really, really wish we’d kept our starter home as a rental. It would have been in the perfect spot and we paid very little for it, so I think the cash flow would have worked well. Hindsight is always 20/20.

  18. Real estate is one of those things I’ve heard so much about in terms of opportunity, but it also seems like a lot of work and there is a lot of risk involved. Personally, I don’t have the time for it so I’m sticking away for now. I could see myself doing something down the line for rental properties. Just not now.

    • It was lots of work for us on the front end because our house needed quite a bit of TLC. We now use a property manager, who does get a cut, but we just get a nice check every month and no worries until the current tenants don’t pay or decide to leave.

  19. After reading the book Aftershock, I was all excited about buying gold and I actually started looking into just how someone does that. It turns out that buying bullion isn’t the only way (although having some gold bars would be kind of cool). There are ETF’s that track the price of gold more closely and don’t have the same re-selling risk as holding the actual metal.

    • I have just started looking into it and I’ve seen some of those funds. I think Vanguard has one called something like “Precious Metals Fund”

  20. Duplex all the way. The bf and I have been wanting to get into real estate for a while. We bought our first place last year and are now really interested in buying an investment property. We’re thinking about one in Maine (that’s where my folks live and my stepdad would be a good “property manager” because he’s good at fixing things-we’re not so handy).

  21. I have been looking into investing in a couple of different peer to peer lending sites over the past couple of weeks. They look like pretty solid investment with some great possible returns as long as you do your homework and properly diversify.

Leave a Reply

Your email address will not be published. Required fields are marked *


This site uses Akismet to reduce spam. Learn how your comment data is processed.