Investments with Very Low Correlation to the Stock Market

See our Free Money page for the best ways to get free money now (sign up bonuses, missing money, and more).

So far, 2020 has been extremely turbulent for investors. We’ve seen historic highs as well as steep rises and declines in single days. It’s been a roller coaster ride for sure.

While the stock market and traditional investments like mutual funds and ETFs remain popular and effective options, it’s very possible that you’re interested in having a portion of your portfolio invested in something that isn’t subject to the wild swings that we’ve seen recently with the stock market. 

While there are plenty of alternative investments available, some of them have a higher correlation to the stock market than others. Those with low correlation will be less impacted by the up and down swings of the stock market. It’s possible that your alternative investments could continue to increase in value or at least hold steady while the stock market may be declining.

Of course, it’s important to note that low correlation doesn’t mean that it’s necessarily a good investment. All investments come with risk, but the goal is to find investment opportunities with strong track records in addition to having independence from the stock market.

Alternative Investments with Low Correlation to Stocks

If you’re interested in finding some investment opportunities that can provide true diversification from a portfolio that involves a lot of stocks and mutual funds, here are five options that you might want to consider.

1. Fine Wine

While it’s certainly not the first investment that comes to mind, fine wine has a surprisingly strong track record. The Liv-Ex Fine Wine Investables Index has been tracking the industry since 1988 and the results have outperformed the S&P 500, including during downturns. Scarcity and aging are among the factors that help fine wine to increase in value with time. 

Although fine wine has a strong track record as an investment, it hasn’t been a practical or realistic option for the average investor. The average person isn’t likely to know which wines would make a good investment or when to sell part of your wine portfolio. In fact, most people wouldn’t know where to get started.

Today, investing in fine wine has been a realistic option for just about any investor thanks to Vinovest. As an investor, you can allow the experts at Vinovest to create a custom portfolio of wines based on your own investment goals. You don’t even need to touch the wine as Vinovest will store it in its facility for you.

Unlike many other alternative investments, Vinovest is open to all investors, not just accredited investors. The minimum investment is $1,000, which is lower than many other alternative investments.

As an investor, you’ll benefit from the expertise of the Vinovest team. In addition to creating a custom portfolio of wine for you, they’ll handle everything for you (this includes buying the wine, shipping, and storing it). Vinovest will advise you when it may be the right time to sell, but it’s your decision when to sell and you can sell at any time. Whenever you decide to sell a portion of your portfolio or the entire portfolio, Vinovest will find a buyer and manage the transaction for you.

While Vinovest is a relatively new company, the track record of fine wine as an investment is encouraging for potential investors. To learn more, please visit Vinovest’s website.

2. Farmland

Real estate is one of the most popular alternative investments, and with good reason. Countless millionaires have made their fortune through real estate.

While rental properties, commercial real estate, and even rehab/renovations can all produce excellent results, there are also some drawbacks to investing in real estate. Owning rental properties can be a major commitment if you’re managing the properties yourself. Real estate values can also be significantly impacted at times by the economy or stock market, and vice versa.

Another option for investing in real estate is to invest in farmland. Instead of renting out a house, apartment, or office to tenants, you’ll be renting the land to farmers. 

Farmland is another investment opportunity that has a surprisingly strong track record. Over the past four decades, farmland as an investment has outperformed stocks and bonds (source). Not only has it produced excellent returns, but farmland has also proven to be a very stable investment with very little correlation to the stock market.

There are many reasons to consider investing in farmland, including a likely increase in demand. The supply of farmland in the United States is always decreasing, and a growing population means that more food is constantly needed. Decreasing supply and increasing demand contributes to rising property values and better returns for investors. And of course, you can also make money from renting the farmland while you own it.

While farmland may be an attractive investment option, buying a large farm may not be something that interests you. Thankfully, there are more practical ways to invest in farmland.

In recent years, some crowdfunding platforms have been started specifically for the purpose of managing investments in farmland. Two of the leading platforms are AcreTrader and FarmTogether. Both of them allow investors to own a share of a specific farm. Investors earn dividends from rental income, making it an income-generating asset. Then a final payout is made when the property is eventually sold. Most of the investments on these two platforms have a target hold of 5-10 years.

Both AcreTrader and FarmTogether are currently open to accredit investors only.

To qualify as an accredited investor, you must meet one of the following criteria:

  • Earned income of $200,000 for an individual (or $300,000 combined income if married) for the previous two calendar years, with a reasonable expectation for the same level of income in the current year.
  • Net worth exceeding $1,000,000 (individually or combined with a spouse), excluding your primary residence.

The minimum investment will vary from one offering to the next, but they are generally in the $10,000 – $25,000 range.

Those who are not accredited investors do have some options, like investing in farmland or agricultural REITs, mutual funds, or ETFs.

3. Life Settlements

If you’re looking for an investment that is in no way influenced by the stock market or the economy, life settlements may be an investment that you want to consider.

This is an unusual investment and it can seem rather morbid, but if that doesn’t turn you off, there can be a nice upside to the investment. 

An investment in life settlements is basically an investment in life insurance policies. Someone may be interested in selling their life insurance policy for a lump sum rather than continuing to pay premiums and hold the policy. The price paid for the policy is typically low