Mistrust toward financial institutions and banks prompts more fearful individuals to seek alternative venues to park their capital. Given their participation in the reckless lending that led up to the housing bubble bursting and triggered the Great Recession, others may be avoiding the banks on principle. Of course, banks look safer than the wildly volatile stock market since the coronavirus outbreak. But all the same, it’s worth looking at these seven alternatives.
- Coronavirus outbreak, but there are alternative places to put money.
- The FDIC protection for deposits makes banks look appealing in difficult times, such as the
- Real estate can produce income, but can be risky.
- Federal bonds are considered very safe, but have very low returns.
- Luxury assets are tangible, but lag stock market returns.
- Precious metals, especially gold, offer an alternative to stocks and bonds.
- Businesses are another place to put money, including farms.
- Hidden cash isn’t secure and loses value over time, if there is inflation.
Why Keep Money Outside of the Bank?
FDIC states that “no depositor has ever lost a penny of insured deposits since the FDIC was created in 1933.” However, FDIC insurance only covers $250,000 per bank account. This applies to both the initial principal as well as to any interest earned.
Meanwhile, over the past 60 years, investments in the S&P 500 Index have yielded an average return of about 8%. However, the long-term record for great returns in the markets is dotted with downturns that shake the confidence of a few investors. Overall in 2018, most stock indexes dropped by 4% to 6%. That was the worst record in 10 years until we got to the market drops triggered by the coronavirus outbreak.
If you’re still looking for alternative places to park your money, here are seven possibilities:
- Precious Metals
- Real Estate
- Federal Bonds
- Luxury Assets
- In a Business, Perhaps a Farm?
- Cash, Hidden Away