Interesting alternative investments to consider to achieve financial independence and early retirement.
Robert Kiyosaki, the author of the bestselling book Rich Dad Poor Dad, said it best.
“The most important word in the world of money is cash flow.”
His words are not only true when it comes to running a small business, but also when managing your own money.
As individuals, we do not work simply to accumulate a pile of cash in our savings accounts. The aim of having a job is to pay our bills and have a good amount left over to enjoy the pleasures of life with our loved ones. Whatever you might consider that to be.
Likewise, businesses need cash flow to pay their day-to-day bills. It allows them to keep the lights on, to pay their workers, and at the end of the day, to pass the profits on to their owners. It is for this very reason why business owners need to be very strategic when making credit sales. The fact of the matter is, at some point, businesses need to collect the sales that they made on credit. If they are never received, it does not matter what the total revenue figure is because expenses cannot be paid with accounts receivables. (You might also like, Residual Income: 3 Ways to Get Paid in Perpetuity.)
A proven way to determine the actual performance of your investments is to not only measure the amount of cash flow it throws off to you, but also to look at how frequent it is providing you with that cash flow. It tends to be the case that the larger and more frequent the income produced for investors, the more valuable the actual underlying asset.
That’s not to say that non-income producing investments (growth stocks, precious metals etc.) are not needed in your portfolio. Capital appreciation plays a very important role in the wealth creation process. Having said that, the reality is you cannot spend your earned capital gains without selling a portion of your investment.
If you own an income-producing portfolio, you would have the option to work less. It would allow you more time to do the things that you actually love with the people that you cherish the most.
In this article, we will take a look at three interesting investment ideas for you to consider. These ideas can help you speed up your path to achieving financial independence.
Websites are often referred to as real estate on the web. In fact, websites and property share quite a few common characteristics.
Like real estate, websites are actual assets that can be bought and sold by investors. Small sections of websites can be treated like a form of virtual rental space and monetized with ads. Website investments, similar to a property, provide their owners with sizeable tax write-offs. Additionally, the value of online sites and real estate can increase over time.
Purchasing web properties as opposed to investment real estate has its advantages. For example, buying a website requires a lot less upfront capital. Furthermore, managing websites demands much much less time by the owner. (For related reading, How to Generate $100K Per Year in Passive Income Buying Websites And Get a Tax Write Off For It.)
Income Store is our favorite company that helps investors identify and acquire revenue-producing websites. They are a subsidiary of Today’s Growth Consultants Inc. The company has appeared several times in Inc Magazine’s annual 5000 list.
They also happen to be one of our partners here at Capitalism.com. The websites that they buy are a great source of passive income for their owners.
In exchange for a percentage of revenue, Income Store manages the websites. They currently have a growing team of more than 90 employees and manage more than 700 websites. Together, these websites receive almost 1 billion annual page views.
Income Store manages three main types of web properties.
In recent years, the company’s strategy has shifted to focus more on buying online stores. This is in part due to the fact that e-commerce sites offer more dynamic reporting for their owners. They can also potentially provide higher sale values when it comes time to exit. As an Income Store investor, you get monthly reports on how your websites are performing. You also get the opportunity to speak the Income Store team on quarterly calls.
The typical purchase price of websites bought with the help of Income Store start anywhere from $100,000 and can be as much as $1 million. In the past, the company has been able to help investors realize an average annual return of 7%. In some occasions, their investors have seen returns in the mid-teens.
There is no need to worry about cashing out of your Income Store investment. Whenever you are ready to sell your website, they will guide you through the listing process to find potential buyers. If you would like to learn more about buying websites, you might benefit from reading Income Store’s frequently asked questions page.
Domain names are addresses that allow Internet users to access websites. These addresses always end with an extension. Some of the most popular extensions are “.com”, “.net”, “.org” and “.edu”.
The address capitalism.com is a domain name, while the content shown on that address is the website. Like websites, domain names (web addresses) have value, and thus can be bought and sold like real estate.
The case tends to be that the shorter and more generic a domain the more valuable it is. Earlier this year, california.com was bought for $3 million, and in 2010, Facebook bought the domain name fb.com for $8 million. People who buy and flip domain names are called “domainers”.
In addition to money, investing in domain names requires having patience. It can take some time for you to come up with ideas for domains to buy. When you found a name that you think someone else would be willing to pay for, you can list it online. GoDaddy Auctions, Flippa, and Dan.com are all popular domain listing websites.
This article on Medium provides a useful list of resources for new domainers.
Lending money to other entrepreneurs is another great way to diversify your portfolio. It is also a great way to create a passive income stream for yourself. This is definitely one option to consider especially if you are sitting on a lot of cash in your accounts. You would be able to earn a lot more interest by lending money to other entrepreneurs than you would from the bank.
Although this might sound like a risky investment idea, it does not have to be. You could limit your risks by lending to established businesses instead of startups. This could be a small business that is looking for working capital to fulfill a large order. It could also be a profitable business that wants a loan to expand with a new location or two. (See also, Passive Income vs. Residual Income: Why Not Get Both.)
Experienced business owners are more likely to make efficient use of the money you lend them. You can use the business’ past financial data to help you determine how much you should lend it and at what rate.
You can find potential borrowers through your existing network. Examples include friends, current suppliers of your own business and fellow club members. ZimpleMoney is an online platform that can help you manage your loan portfolio. There is a free plan that includes an interest and amortization calculator. It also comes with several draft loan agreements. Their premium plan allows lenders to have their borrowers pay their loans online.
The Internet has many options whenever you are ready to expand your loan portfolio. Most of these websites are based on a crowdfunding model. This means that you are not funding a loan all by yourself. As an investor, you are pooling your money with hundreds or even thousands of other lenders to fund loans. Ultimately, this adds greater diversification to your portfolio.
LendingClub, for example, is a popular online lending marketplace. The borrowers on that website tend to use the loans for consumer-related purchases. However, you can use the filter feature to find applications from business owners. Prosper is another similar website. GROUNDFLOOR and YieldStreet are other options that are tailored to real estate financing.
It is going to take more than investing in stocks and bonds to achieve early retirement. To achieve financial independence, you need to add alternative investments to your portfolio. Acquiring websites, flipping domain names and lending to businesses are all examples of non-traditional investments to consider.
To learn more about buying websites, listen to our interview with the folks from Income Store.