Sick of financial services companies? Non-traditional options for disgruntled investorsBlog added by Paul Wilson on August 7, 2012
Paul Wilson

Paul Wilson

Denver, CO

Joined: May 30, 2007

My Company

I don’t need to tell you that a growing number of Americans are fed up with the uncertainty of the stock market and the doings of shady advisors and seemingly indifferent financial services companies.

And as if scams, deceptions and general unpredictability weren’t enough to deal with, investors must now mull the possibility that something as humdrum as a software glitch could significantly harm their portfolio.

In a recent New York Times piece, Ron Lieber discusses why so many have had enough with the traditional American financial system. “Perhaps it’s because the unfortunate events seem to be happening with increasing frequency,” he writes.

Americans fleeing traditional investments are “not fringe characters living in fantasy land,” Lieber writes. “They know they need to continue to save 15 percent or more of their income and invest it in something that earns a reasonable rate of return if they’re going to have any hope of retiring. But they don’t want to own stocks or do business with traditional financial players to achieve their goals.”

The piece goes on to outline a rough framework for a model investment portfolio that largely avoids financial services companies.

Here’s is Lieber’s list of potential alternative strategies for the “opt-outters”:

Store your own money
  • Start a checking account at a credit union
  • Continue to take advantage of your employer’s 401(k) match and save enough to match, even if it’s in cash.
  • Store investments in a brokerage firm that is member owned or pays dividends to customers
  • Consider municipal bonds (local, socially responsible investing)
  • Investigate long-term, tax-exempt funds (have averaged 6.23 percent and are very liquid)
  • Look into mutual funds where bonds help banks to fulfill social-conscious requirements, such as investing in affordable housing and community services
Real estate
  • Purchase property and rent it to farmers, businesses or individuals
  • If purchased in middle age, rental income can help supplement retirement savings, similar to an annuity.
Peer-to-peer lending
  • Though relatively new, the services are delivering returns of approximately 7 percent
  • Nearly half of loans were to people consolidating and paying off high interest credit cards
Slow money
  • “A little like bond investing, a little like real estate investing and a little like the peer-to-peer approach,” this strategy involves investing money locally in things investors understand, like food.
  • Although some describe the strategy as “high-risk, low-return investing,” advocates ask, “Slow compared to what?”
Lieber concludes with a warning for prospective “ultra-alternative investors: A single percentage point in a portfolio’s average return can translate into a significant gain (or loss) over the years.

“Perhaps that’s fine with you,” he concludes. “But before you make a risky bet on a portfolio that looks anything like the one I laid out above, think about whether you’re prepared to save even more, spend less and work several years longer to make up for any shortfall in returns.”

So, what are your thoughts on these alternative investment strategies? Out-of-the-box thinking with some potential or pie-in-the-sky trendiness?
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