Ask Commerce: Investing is a given. But what else can I do to be set for retirement?

Without a doubt, the most common way for Americans to build wealth is through the stock market. In fact, a 2023 Gallup poll found that 61% of U.S. adults said they own stock. However, the stock market isn’t the only pathway to establishing a strong nest egg. Alternative investment opportunities exist, and the upside for some of them can be considerable.

Let’s look at a few ways to invest outside of the stock market.

Invest in rental property

According to the Census Bureau, as of the first quarter of 2023, about a third of Americans rented their homes. At the same time, more than 93% of rental properties were occupied. Put together, those numbers indicate an opportunity to boost your income by purchasing a rental property.

Buying a second home is expensive, of course, and depending on the state of the property you buy, you may need to make improvements to it in order for it to attract renters. On top of that, once the property is rented, you’re a landlord — if there’s an issue, it’s your phone that’s going to ring. If you don’t want the hassle of responding to late-night calls about a malfunctioning heater on a cold evening, there are companies that will manage the property on your behalf. Of course, that costs money and will reduce your profit margin, so you have to take that into account when deciding which approach is better for you.

The upside to rental property is that you could make money each month, in addition to the equity you gain over time. You may eventually be able to sell the property for considerable profit or borrow against the equity to purchase another rental property.

Rental property can be profitable, but as with any investment, make sure you do your homework first.

Invest in a small business

Small businesses are a big part of the U.S. economy, but many lack the resources necessary to keep growing. Investing in a small business can be very rewarding in that you would likely be one of only a few investors, and your investment would make a greater impact on a small business than it would on a big corporation. You’re also investing in your community, assuming you are involved with a business in your area. There’s the potential for high returns if the business does well, and it opens the possibility of getting involved with the business’ strategy, if that interests you.

The downside is that small businesses often fail. The U.S. Bureau of Labor Statistics reports that 20% of businesses fail within one year, half fail within five years, and only about a quarter survive 15 years or more. If you invest in a business and it closes, you may lose all of your investment. Even when a small business does well, the return on investment may take years to materialize.

Start your own business

This isn’t a form of investment — other than perhaps an investment in yourself — but owning a business does offer the potential for building long-term wealth.

Different types of businesses offer different earning potential and profit margins, and owning a business is a lot of work, so it’s not a decision to be made lightly or quickly. You’ll want to take the time to do a lot of research, build out a strong business plan, and talk to other small business owners to learn from their experiences.

It’s important to focus on building a business you’re passionate about; that passion will be necessary to make the long hours and potentially long road to success feel worth it. For businesses that do well over time, however, the wealth-building potential for owners can be substantial — and comes with the satisfaction of having truly earned it.

Invest in commodities

Commodities can include physical materials like gold, silver or even livestock, or they can be as complex as futures contracts or mutual funds. Investing in commodities can serve as a hedge against inflation, as they tend to do well as investments when inflation rises. If you’re invested in a commodity that becomes something that’s in short supply, the potential return can be high. On the other hand, commodities can also be unpredictable, as their returns can be impacted by a variety of factors, such as politics or supply constraints.

Regardless of how you want to invest, you have plenty of options at your disposal as you identify the strategy you want to take toward building long-term wealth. What’s perhaps most important is that you do a lot of homework, consult with experts, and make choices you feel most comfortable with. After all, it’s your money, and you should invest it in the way that makes the most sense to you.