Alternatives To Trading Stocks

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Jemma Grist
Jemma is a writer, editor and fact-checker focused on retail trading and investing. Jemma brings a unique perspective to the forex, stock, and cryptocurrency markets and works across several investment websites as a researcher and broker analyst.
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James Barra
James is an investment writer with a background in financial services. He has worked as a management consultant, where he delivered large-scale operational transformational programmes at some of Europe's biggest banks. James authors, edits and fact-checks content for a series of investing websites.
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William Berg
William contributes to several investment websites, leveraging his experience as a consultant for IPOs in the Nordic market and background providing localization for forex trading software. William has worked as a writer and fact-checker for a long row of financial publications.
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There are many reasons why traders may want an alternative to stock market investing, including diversification and hedging purposes, round-the-clock trading potential and greater (or perceived greater) stability. This article covers the best alternatives to stock market trading, focusing on comparable markets that do not require significant specialist knowledge. Read on for the pros and cons of different alternatives to trading stocks.

Key Considerations:

There is no shortage of goods that can be bought and sold for profit, whether in the short, medium or long term. However, we are excluding collectables such as watches, art and Lego from this list of alternatives to stock investing.

This is because these markets often require specific knowledge and unique investment strategies that will be unfamiliar to stock traders. Instead, we focus on comparable markets with different strengths to stocks.

Commodities

Commodities are a good alternative to stocks for individuals that want to trade tangible assets with real-life applications. Investors can choose from trading derivatives using CFDs, futures and options contracts or purchase physical commodities such as gold or silver bullion.

Commodities refer to a range of products, which can be broken down into three main categories. These are soft commodities, energies and metals:

Best Commodities Brokers

#1
AvaTrade
#2
Deriv.com
#3
Exness

Bonds & Cash Savings

Another alternative to stock investing is fixed-income products, such as bonds and cash savings accounts.

These products tend to have lower yields than stock investments, and can sometimes effectively lose money versus inflation, but are far more stable investments than stocks, with often limited chance of losing the invested stake.

Many investors favor bonds or cash savings as alternatives to the stock market for retirement due to their stability and potential to pay out a fixed income for retirees to live on.

Individuals could consider transitioning some of the growth stock allocation in their portfolio as retirement gets nearer to reduce risk. However, individuals that transition to fixed-income or low-risk products too soon miss out on the compound interest that can be crucial for growing an adequate retirement pot.

Best Bond Brokers

#1
AvaTrade
#2
IC Markets
#3
CityIndex

Forex

Another popular alternative to the stock market is forex trading. The foreign exchange market is very liquid, with a daily average of over $6.6 trillion worth of currency traded. There are also plenty of assets to choose from, ranging from major pairs like the EUR/USD to exotic products such as the GBP/SGD.

A key advantage of currencies is that markets run 24/5, making this type of investment accessible to traders around the world. In addition, the leveraged instruments often used to trade forex, such as CFDs, offer substantial and potentially unlimited returns.

Best Forex Brokers

#1
OANDA US
CFDs are not available to residents in the United States.
#2
Vantage
Bonus
50% Welcome Deposit Bonus, earn redeemable rewards in the Vantage Rewards scheme
#3
IC Markets

Cryptocurrency

Cryptocurrency is relatively new in the trading sphere and has been a lucrative form of investment and passive income generation in the last ten years. Investors can trade crypto 24/7 and use some tokens as a decentralized, alternative currency in addition to trading them online.

However, the trade-off to the vast potential returns of crypto investing is the significant risk of the digital asset market. Coins such as Terra (LUNA), FTX token (FTT) and many others have lost 90% or more of their value following collapses. Those in search of safe alternatives to the stock market should look elsewhere.

For traders with a healthy risk appetite, consider products such as CFD crypto trading, where you can speculate on the price of tokens like Bitcoin without actually owning or having to store cryptos on centralized exchanges.

Best CFD Crypto Brokers

#1
AvaTrade
#2
Deriv.com
#3
Exness

Peer-To-Peer Lending

Peer-to-peer (P2P) lending is a form of lending that connects borrowers directly with investors through an online platform, bypassing traditional financial intermediaries like banks.

Similar to dividend stocks or bonds, traders put money down and receive interest payments on their loan and theoretically, the loan is returned at the end of the term.

While returns can be lucrative for investors, many turn to peer-to-peer lending as they do not have the credit score for traditional forms of borrowing.

As a result, P2P lending can be risky for investors, and we urge traders to diversify their lending and consider more than just the interest rate when picking borrowers.

Real Estate

Our final investment alternative to the stock market is real estate. While this is the least similar form of investing to the stock market, real estate is one of the most accessible markets to learn.

Whether through purchasing properties and improving them to sell for profit or by renting housing out to tenants for regular monthly income, real estate is a lucrative market to get involved in.

Of course, the main disadvantage of real estate investing is the significant capital required to enter this market.

In times of economic boom, banks are willing to allow speculative investors to create a portfolio based on loans and mortgages. However, using excessive leverage in this market is particularly risky and can lead to the loss of your properties.

Other Considerations

When considering alternatives to the stock market, there are some other elements to consider:

Taxes

Taxes are highly specific to a trader’s specific region and chosen products. However, it is worth thoroughly researching each market’s tax rules and implications before investing.

Individuals can discover tax advantages in markets such as real estate or specialist accounts when looking for alternatives to the stock market for retirement.

Passive Vs Active Investing

Another aspect to consider when investing is the time and effort you need to put into a market.

Stock investing can be as active or passive as an individual investor chooses, from short-term intraday strategies to long-term automated investing.

However, some of the alternatives to stocks are geared towards a particular approach. For example, fixed-income products are almost all passive investing options, while even the most hands-off landlord will need to actively organize their properties’ upkeep.

Consider your personal investment preferences before deciding on a particular stock market alternative.

Capital Requirements

As we discussed in the real estate section, some markets require more capital than others to create profit opportunities.

While the stock market has a low financial barrier to entry, ventures such as real estate and peer-to-peer lending have higher capital requirements to get started.

Stock Market Basics

The list above details the best alternatives to trading in the stock market. However, it is also worth understanding how stocks work to help you find a comparable market and strategy…

When a company wants to raise money, it can do so by issuing stocks onto a stock market. When an investor buys a stock, they are buying a piece of ownership in the company, which they can later sell on for a potential profit, or hold to receive a portion of the company’s profits through dividends.

Stock market trading is essentially the buying and selling of these equities. Participants include companies, that can issue more shares to generate additional revenue or buy previously sold stock back to increase the value of their shares, individual investors, also known as retail traders, and institutional investors, such as hedge funds.

Opening Hours

The majority of stock markets trade for around seven hours per day, following the business hours of their local region. Examples of this include the NYSE and Nasdaq, which are open from 9:30 am until 4:00 pm Eastern Time.

Some markets take a midday break, while others trade continuously through this period. All stock markets are closed at the weekend, and on local public holidays. In contrast, some of our top alternatives to stocks, such as cryptocurrency, are available to trade 24/7.

Some stock markets also have pre-market and after-hours sessions, where retail investors can trade for a couple of hours on either side of standard opening times. These sessions often feature higher spreads and low liquidity, while retail traders are limited to market orders.

Advantages Of The Stock Market

Disadvantages Of The Stock Market

Despite these advantages, there are also several reasons for traders to favor the investment alternatives to the stock market:

Final Word On Stock Market Alternatives

There are plenty of alternatives to stock investing for traders, meaning that most goals can be met through trading in one or more markets. Whether investors are looking for diversification or to avoid stocks altogether, trading online has never had more options than it does today. Use our list of the best alternatives to stock trading to find a suitable investment vehicle.

FAQs

What Are The Best Alternatives To Stock Trading?

Among the top alternatives to stock trading are forex, commodities, bonds, and cryptos. These popular global markets offer opportunities for beginner traders and experienced investors. These products are also widely available at the best brokers.

With that said, some investors prefer other alternatives to stock investing, including peer-to-peer lending and real estate. Our full guide breaks down the key considerations when exploring the different alternatives to stocks.

What Are The Safest Alternatives To The Stock Market?

Fixed-income products such as bonds or saving accounts are considered among the lowest-risk investment choices available. However, the trade-off for greater safety is lower yields than risker products, such as cryptos.

What Are Good Alternatives To The Stock Market For Retirement?

When accumulating funds for a retirement pot, investors can use any number of products to create gains, including peer-to-peer loans, commodities and currency trading. However, once retired, many traders should look for regular, stable income from sources such as rent and fixed-income products.