The website for the Federal Deposit Insurance Corporation states that "no depositor has ever lost a penny of insured deposits since the FDIC was created in 1933." FDIC insurance covers $250,000 per bank account and applies to both the initial principal and any interest earned. Meanwhile, investments in the stock market have yielded an average return of about 10% over the past 50 years.
Still, such reassuring facts go only so far for some. Mistrust toward banks and other financial institutions prompts more fearful individuals to seek alternative venues to park their capital. Others may be avoiding the banks on principle, given their participation in the reckless lending that led up to the housing bubble to burst and triggered the Great Recession.
As for stock markets, their long-term record for solid returns is dotted with downturns that shake the confidence of some investors. Most stock indexes dropped by 4 to 6% overall in 2018, for example, the worst record in 10 years.
If you're looking for alternative places to park your money, here are seven possibilities:
1. Federal Bonds
The U.S. Treasury and Federal Reserve would be more than happy to take your funds and issue you a security in return, and a very safe one at that. A U.S. government bond still qualifies in most textbooks as a risk-free security.
Unfortunately, many individuals and institutions already know that and have entered the bond market ahead of you, which has bid bond rates to very low levels. In early January 2019, the yield from a 10-Year Treasury Note was around 2.730%, which is close to a record low.
2. Real Estate
In disquieting times for the banks and the stock market, the allure of real estate investment can be strong. Become a landlord. Put down some of your principal on a property, fix it up a bit, rent it out, and have your tenants pay off the mortgage. Or, if you're interested in a shorter-term opportunity and have more experience, maybe try flipping houses.
Done right, real estate can have a huge financial upside. Yet it can also be a risky and sometimes fickle investment. True, residential and diversified real estate investments have averaged about a 10% return in the past 20 years, which is slightly better than the S&P stock index in that period. But real estate can also be an unreliable investment, especially in the short term.
Take the years following 2006 as an example. Nationally, residential real-estate prices fell in 2007. They fell again in 2008 and yet again in 2009. By mid-2010, housing prices had fallen back to 2004 levels in a stagnant market. What had for decades seemed like a surefire route to growing profits had dropped by more than 30% in just a few years, according to Standard & Poor's data.
3. Precious Metals
One doomsday scenario in which financial markets cease to function holds that, gold, silver, and other metals such as platinum or copper will continue to retain their value, if not appreciate.
The likelihood of having to return to a barter system with physical goods is minimal, but it may make sense to hold a certain percentage of your assets in this form. For one, precious metals have historically provided a low or negative correlation to other asset classes like stocks and bonds—which is to say, when those investments go south, metals are unlikely to follow, at least very far, and may even increase in value.
4. Luxury Assets
This category of tangible assets encompasses fine art, cars, watches, diamonds, and other jewels, and just about anything that qualifies as a collectible. In their favor, they're objects that can be touched and seen, compared to a bank account statement that could be hard to collect on if the financial institution that housed it ceases to exist.
That said, luxe investments are hardly a sure bet. While data on their historical returns are elusive, they are generally thought to have lagged stock market returns, while having periods of rapid appreciation due to either strong financial market performance or periods of popularity, which increases underlying demand and resulting prices.
5. Cash, Hidden Away
Although stuffing money under your mattress has become a cliché, it unquestionably keeps your funds close at hand, if not necessarily secure. (You could, of course, also hide your assets in a safe deposit box or safe.)
Again, this method probably qualifies only for a doomsday scenario, or for times of a short-term liquidity crunch. Even then, keep only a small stash, not least because inflation steadily erodes the value of currency over time.
6. In a Business, Perhaps a Farm?
Buying a business can ensure a return on your investment, provided of course that the enterprise generates a profit. A farm can be a particularly tangible business, if not a reliably profitable one.
You don't necessarily need to get our hands dirty, either; with a so-called investment farm, you hire staff to handle the actual agricultural operations. Owning farmland is a good fit with a survivalist mindset, too, since the land can produce food on the off-chance of a global calamity or meltdown of the global financial system.
Cryptocurrencies are another alternative investment option. There are a number of choices; Bitcoin is just the best known. So-called "cryptos" offer individual investors a unique opportunity to get into what is still very much an emerging technology.
Of course, this is also a high-risk, high-reward opportunity. For example, after soaring to stratospheric highs, bitcoin lost about three-quarters of its value in 2018. You shouldn't invest much, or any, funds in cryptocurrency that you'll rely on for your future. Yet most analysts believe these alternative currencies are here to stay and brave investors may want to pitch a stake on the off-chance of hitting it big with one of them.
The Bottom Line
Although the subprime mortgage meltdown is more than a decade old, the financial industry is still looked upon with some suspicion these days, at least by some skeptics, and the stock market may be no less of a concern for such people. For the especially wary, the above alternatives to a traditional bank or stocks may make sense for at least a percentage of net worth. But given their risk, none should be too big a component of your investments.