Friday Finance: weird and wonderful investment ideas

This is an extract from The Poor Man’s Guide to Financial Freedom: A Realistic, 10-Step Manual for Building Liberating Wealth on a Low to Medium Income.

Growth Assets 3: Alternatives to Shares and Real Estate

Most people trying to build wealth content themselves with simply investing in shares, or in shares plus their own home.  A few purchase an investment property.  Such conventional options are fine.

However, there are alternatives.  Here I list a few for the more adventurous or unconventional investor.  Like enlightenment, there are different paths to financial freedom.  If the Roman Catholicism of shares and real estate is not for you, perhaps these Hare Krishna options might be of interest.

Peer to Peer Lending

Executive summary:

The jargon: Peer to peer lending, or P2P, means that you lend money at an agreed rate of interest, for an agreed period of time, to a stranger via an online platform. 

Risk:  High, especially if lending for higher rates to those with a poor credit rating.  A borrower might not return all the money, or not on time.  Some countries have special laws for borrowers facing hardship, giving them extra time to meet repayments or reducing the interest rate.  Borrowers usually repay because there are consequences if they don’t, depending on the jurisdiction, but do not assume that the police will go knock on his door and get all your money back for you if anything goes wrong.  It doesn’t work like that.  Rather, the defaulter will lose his credit rating.  You may lose your money.  Some platforms have a type of insurance that covers lenders in the case of a loan gone bad, but if many borrowers all default at once then this insurance will be insufficient to cover the total cost.

Return:  There are different rates of return depending on how secure the borrower is considered to be, ranging from around 2-10% at the time of writing.  Some P2P platforms lend to businesses at higher rates but these seem unsuitable for novice investors like you.

The details:

Peer to peer investments are a very new form of growth asset, only about a decade old.  Some of the biggest players include Lending Club, Prosper, Zopa, RateSetter and Plenti, plus there are many smaller players.  These online platforms match borrowers to lenders in order to make the process simpler and to distribute risk.  They make their money by taking a cut of the interest rate, through fees, or a bit of both.

Borrowers wanting money for some reason – for a car, a consumer purchase or whatever – will sometimes use this service as they can get a better rate than from a conventional lender. Edit: or if banks won’t lend to them.

So far, these investments seem to be working pretty well – most borrowers are repaying the loans with interest as intended, so there is no shortage of potential lenders to keep the process going.

A couple of things to consider: first, at the time of writing (2019) we have had a long period of economic growth.  What happens to these sorts of investments in an economic downturn when lots of people are losing their jobs or are otherwise tightening their belts?  It is too early to say.

Second, the platforms I looked at do not examine the credit scores of potential borrowers in the same depth as other lenders like banks and credit card companies, which might make these investments a bit riskier than they appear.

So far, P2P looks like a good form of alternative growth asset for those who don’t want all their money in shares.  However, don’t forget that this is a high risk, high return investment.  It is for a shorter time period than other growth assets but no safer.  If you choose this path only put a fraction of your wealth here.

Personally, I am concerned that P2P might perform poorly at the same time that shares are suffering, thus defeating the purpose of diversifying into them in the first place.  I’m keeping my money out for now.  I’ll watch what happens to them during the next recession, then I’ll decide if I’d like to get involved.  You can make your own decision once you’ve read the section on asset allocation and have sought independent advice as per Step 9.

Edit: lower-return P2P platforms domiciled in developed countries generally got through 2020’s financial turbulence in one piece, i.e. Lending Club in the US, Plenti in Australia and Ratesetter in the UK. That is a positive sign and I reckon this asset class has legs as part of a diversified portfolio.

However, FOUR international platforms based in Eastern Europe collapsed, some because the financial crisis exposed them as scams. Some investors lost all the money they had tied up there. In contrast, it’s virtually impossible to lose all your money in a diversified shares portfolio, and if you are investing for 10+ years there’s a low risk of even suffering a loss.

I’ve since looked into other big lenders in Europe and, erm, some look better than others. One large platform seems to be writing off loans to companies owned by its CEO and is not following the fine print of its terms and conditions. Check reviews on Trust Pilot. The overall lack of regulation and scrutiny in the Wild Wild East is an ongoing problem.

So far, Latvia-based PeerBerry is standing above the rest as a success story. However, it is still fairly new. I’ll watch and wait for now. See here for reviews of other platforms that survived the decimation.

These are high risk, high return assets and if you invest abroad, the potential risks and returns further increase. Do your homework, stick with solid platforms that have been around at least 5 years and only keep a small percentage of your growth assets in this class.

Remember: risk management comes before chasing higher returns. If one platform is offering 6% and another is offering 15%, there’s probably a reason for that. Don’t be greedy and risk losing your whole investment as it may turn out to be a castle built of sand.

Investing with Friends and Relatives [info box]

Sometimes a friend or relative might be starting up a business and ask you for an investment.  What should you do?

Here the dangers are twofold: you might lose the investment and lose your relationship with that person if it all goes pear-shaped, as many new businesses do.

A word to the wise: consider investing an amount that is enough to show your moral support for their venture but not so much that losing it would cause a rift in your relationship.  How much that amount is will depend on your circumstances.

Or tell them plainly ‘no’ if you’re an insensitive old grump like me.

Other Alternative Growth Investments

The number of potential growth investments is infinite, and clever entrepreneurs are inventing new ones every day.

You might put your savings into buying a café, or starting an ostrich farm, or investing in art or Dr. Who memorabilia.  You could turn your shed into a workshop and start building high-end timber furniture – or you could rent out your empty shed as storage space.  You could upgrade the machinery you use for your gardening business.  The possibilities are endless.

This book focuses on managing the money you already have, rather than on how to earn money or run your own business.  If that sort of thing appeals to you, read specific resources on the topic and take it from there.  If you make a bit of money and want to know what to do with it, then you can come back to this book.

Let’s briefly look at a few common, alternative investments and glance at their pros and cons.  The difference between these suggestions and those offered in Step 5: Increase Your Income is that these mostly require an investment of capital, while those earlier ideas primarily involve an investment of time and labor.  These will probably not require a loan as for an investment property – you can save and invest in small chunks over time.

Laundromats/automated car washes and car parks/vending machines/that sort of thing:  These can be a good way of receiving a passive income, but ‘passive’ only means you don’t have to be there all the time.  You do need to maintain the equipment, monitor security, collect the cash regularly, manage local rates, insurance and so on.  According to accounts that I have read, these investments don’t pay fantastic returns, can be more work than you might think, and the customers who use them are often idiots who break everything or make a mess.  On the other hand, this sort of investment might suit a person who doesn’t want all their money floating around in the ether of the share market and who would prefer a tangible, hands-on asset that they can maintain and improve themselves.

Bars:  I know a few people who’ve run bars, usually tiny, hole in the wall places, for some extra cash.  While you don’t have to be there all the time if you can find good staff, this investment best suits drinkers and night owls who would enjoy hanging out there quite a lot to ensure that everything is running properly.

Royalties:  You can go to a place like and buy the rights to a song, like how Michael Jackson bought up the rights to those old Beatles tunes.  You can also buy the rights to other intellectual property.  If someone uses your song then they have to pay you royalties.  Sweet, hey?  I had a quick look and at the time of writing, the highest bid for a mix album with tracks by Kiiara and others was up to $345,000.  A more obscure album was going for $40,000.  Confession: I have never tried this and don’t know anyone who has.  The site gives you a suggestion about what the return might be based on recent earnings, but I don’t know how you’d judge if that is reasonable, nor how to protect the asset against pirates.  If you think you do, I guess you could give it a go.  Good luck!

Summary of Alternative Growth Assets

I certainly encourage any of the above if you know what you’re doing and it suits your personality and goals.  Your return will depend on how good you are and a fair swag of luck.  As discussed back in Step 2, be wary of getting into a lot of debt to start up your idea.  If it all seems a bit strange and effortful, stick with plain old shares.

Also available on many other platforms.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s