Best Asset Classes To Invest In To Diversify Your Income

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Last Updated on November 20, 2020 by Mark P.

Everyone knows of the typical asset: stocks. From hiring a financial advisor to doing it on your own investing, stocks are the specific investment vehicle for most retail investors.

Have you ever thought about diversifying your investment income with other high-quality asset types? The new hype these days in the 21st century is cryptocurrency. Another great asset class are commodities such as gold or future contracts.

No matter what situation you are in, diversifying your income is the primary key to substantial wealth and comfortable retirement if done correctly and strategically.

In this article, I will go over other asset classes to help you build your wealth in the long term. I will also cover which asset classes to pick, depending on your risk tolerance.


What is Diversification, and How Does it Benefit You?

Diversification is critical to one’s investment success. It involves spreading your investments across all types of asset classes or industries rather than relying on one kind of asset

Why is diversification so critical? Imagine putting your eggs in one basket. The next day, your portfolio could be wiped out from only investing in stocks.

According to Money US News, “diversification is important because markets can be volatile and unpredictable. By diversifying, you reduce the consequences of a wrong  forecast.”

Now imagine investing in all different types of asset classes. Spreading out your investments will reduce the amount of risk you take on as an investor.

For instance, you have a ton of money locked up in stocks. Your financial advisor advises you to allocate some of your capital to a high-value commodity, such as gold. The market tanks and investors are moving to safe-haven assets, such as gold. Luckily, you already allocated some capital to gold, so you are In luck!

Do not spread yourself short when it comes to investing. Check out some of the best alternative asset classes to invest in to help reduce your risk if you know what you’re doing!

Best Asset Classes To Invest in Other Than Stocks

Check out some high-quality asset classes to invest in so you can take advantage of diversification!

A)      Treasury Securities, and Corporate Bonds

I know. The majority of you think bonds are so dull and have no high return on investment. Right, they have a lower return on investment. However, bonds are a great asset class.

Why are bonds a significant investment to add to your portfolio? It depends on the types of bonds. For instance, government bonds, such as treasury securities, are the safest asset because the US government fully backs them.

Another great benefit of investing in treasury securities is that you will not have to pay state income tax on treasuries’ interest. Trying to profit from treasuries is a weak spot, but they are safe and predictable when markets turn upside down.

On the other side of the range, you have corporate bonds.

What are corporate bonds?

In short, a corporate bond is a loan to a company at a preset price.  In exchange, the company agrees to pay interest, usually twice a year. Once the bond matures, the investor receives the bond’s face value plus any coupon (also called interest) attached to that bond.

These assets can be a safe investment. But you can also earn some money with corporate bonds by receiving coupon payments each year.

B)      S&P 500 Index Funds

Are you looking to achieve a high return from something else other than stocks? S&P 500 index funds are an asset class of interest.

The fund is based around a couple hundred of the countries’ most profitable businesses, such as Berkshire Hathaway and Walmart.

The S&P 500 index funds offer, you guessed it, immediate diversification for retail investors. The other great news is that these funds can be purchased with low expense ratios.

It’s an excellent choice for your beginner and experienced investors looking to reduce risk. It’s less risky than investing solely in stocks because the S&P 500 index fund comprises the market’s tops companies.

C)      Rental Properties

IF you are willing to manage properties, this can be a great diversification strategy. The mortgage market has been at all-time lows, which can be beneficial.

The reason for real estate being a great diversification strategy is its low correlation to stocks and bonds. It’s a tangible asset rather than an intangible asset. Everyone needs a property to live or work.

To go this route, you’ll have to either buy the property upfront or finance the property.

Investing in real estate is a long term option. If you are looking for a quick cashflow fix, investing in real estate is not for you. However, if you can pay down debts, up to your rents, and hold the asset over a long period, you can flow into retirement with a considerable amount of cash.

D)     Gold

The price of gold can be volatile in the short term, but it has always maintained its value over the long term. In this case, gold is a worthwhile investment to add to your portfolio.

If inflation rises, gold can protect your portfolio during trying times, such as rising inflation. Gold tends to move indirectly to the stock market. If stocks fall, many investors flee to a haven asset such as gold.

A simple example of how gold is a great diversification tool is to say you own Apple’s shares. One day you wake up, and investors get spooked into a big sell-off, and the result is your shares of Apple will probably fall. Most likely, you’ll see the price of gold rise during sell-offs.


Diversification works in everyone’s favor. Putting all your eggs into one cart is a recipe for disaster when it comes to investing. Thankfully, there are multiple asset classes to spread your capital. Haven assets are best when inflation or deflation hits hard. Also, bond prices rise when stock prices fall and vice versa.

As the late economist Merton Miller, said, “Diversification is your buddy.”