Three Unusual Investment Options to Help You Retire Early

Published on May 25th, 2010

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This guest post was written by Go Banking Rates, bringing you informative personal finance content and helpful tools, as well as the best interest rates on financial services nationwide. Follow them on Twitter at @GoBankingRates and on Facebook at /GoBRates.

The average consumer is familiar with savings accounts. They safely store your money until you need it. If you’re lucky, they even offer a little interest on deposits. However, for those looking to retire early, savings account interest rates are just not going to cut it.

Sometimes, you have to be a little more resourceful if you really want to make your money work for you. The following are a few investment ideas you may never have considered, ranging from the lesser-known to truly unique.

Certificates of Deposit
The key to earning high interest rates on savings is to deposit your funds and not touch them for a while. Banks reward customers who commit to longer-term investment periods with attractive annual percentage yields.

A CD is basically a savings account that accomplishes just this. Terms can vary from a few months to several years and the longer you choose, the higher the rate. There is virtually no risk involved and the only downside is you can’t make any withdrawals until the account matures, or else face early withdrawal penalties.

Savvy investors can address this issue by employing a strategy known as “laddering” to maintain a level of liquidity in their portfolio while taking advantage of the high rates associated with longer-term CDs.

Gold
The great thing about gold as an investment is that the world supply is limited and therefore, it holds value. Gold prices tend to rise when the value of the dollar drops. So, considering economic conditions as of present, adding gold to your portfolio can be especially lucrative.

If you want more tangible assurance of your investment, it is possible to buy actual, physical gold bars or any of the popular bullion coins from a reputable seller and stockpile them away somewhere.

The easier and safer way to invest is to buy gold exchange traded funds (ETFs) or mutual funds that invest in gold mining companies. Keep in mind, gold funds help you avoid the markup associated with buying gold but are also subject to special tax rules.

Trees
Yes, trees. The larger they grow, the more valuable they become.

You probably had no idea that investment opportunities exist in trees, but timber and hardwood investments actually offer a high return while eliminating the unpredictability of today’s markets. In fact, investments in trees have continuously outperformed the stock market over time.

Granted, trees are a long-term investment. The upside is there will always be a demand for wood, especially when you consider that the current rate of tropical deforestation means that our rain forests will eventually disappear. The economic and ecological need for, and corresponding price, of trees is rising and making buying and planting them increasingly profitable.

Daily Yakezie Short Carnival: Diversification @ Budgeting in the Fun Stuff, Yield On Cost @ The Wealth Artisan, & Gold as an Investment: Performance over Time @ Invest It Wisely

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Robert Muir said,

Trees? Ok, my interest is piqued. How the heck do you invest in trees without buying a bunch of land?

I have four large fur trees on my property that I’m going to be looking to get rid of in a few years; anybody want to invest in them?

Jacob said,

@Robert – Try RYN (I own shares) or PCL. Those are both REITs. Eventually, I’d like to get in on the real deal though (buying land).

Surio said,

@Jacob,
You write guest posts for Go Banking Rates? Couldn’t look you up on their website…

Jacob said,

@Surio – They’re not up yet.

bob said,

BE AWARE OF INVESTING IN TREES. Before anyone invests in trees, please read the history of Great Southern Group collapse(only in 2009) and Timbercorp collapse (also 2009), which were two of Australia´s largest agricultural business collapses.

Several billion dollars has been lost in tree investments by more than 40 000 investors in Australia.

Know the risks. I didn´t invest in trees, but have been affected by the bombardment of news in Australia related to the billions of dollars lost in forestry.

Macs said,

Hmmm, I find the section on gold a little bullish. Don’t get me wrong, I am bit of a goldbug, I admit it, but I see it as insurance not investment. Sure it holds value and it’s an excellent form of emergency fund to lay up against all sorts of emergencies (such as fiat collapse ), but it’s not an income generator either.

And I’d definitely endorse trees. Hit tip: go LOOOONG on walnut – luxury timber product with a nutty ‘dividend’ along the way. Best trust fund ever for your grandchildren…

Seriously, I’m looking for a bit of woodland, too.

dlm said,

In Canada, CDs are now GICs (Guaranteed Investment Certificates) for up to five year terms. They can be used as security for a line of credit (if you’re lucky the interest you earn is higher than the interest you have to pay on the line of credit).

Mo said,

@Macs, Help me figure the gold thing out, I really don’t get it. What would you really do in a case of “fiat collapse”? Who buys your gold, and what do they buy it with, and why would they buy it? Also, aren’t profits on gold investing typically taxed as income? Lastly, how much do you typically pay in transaction, storage, and insurance costs?

Kevin M said,

No offense, but they’re going to have to write better posts than this to get people to click over.

Trees? I should be rich someday – I have 17 in my backyard alone! Maybe I should look into selling the thousands of acorns that fall from my mighty oak every year!

Seth Miller said,

A friend of mine planted black walnuts as part of his retirement portfolio on family land. I thought he was a little crazy until reading this.

RMom said,

It would’ve been nice if the writer of this piece had provided some definitive info and research on the specific sorts of funds/stocks available for each of these investments instead of just writing ‘buy CDs’….’buy gold’….’buy trees’.

Debbie M said,

Ha! We planted walnut instead of pecan because it has better wood. So long as the walnut lives, we get nuts. When it dies (or limbs fall off), then we get wood.

We also have a peach tree, and I think it’s going to pay dividends (peaches) this year. The peaches are already bigger than golf balls.

Josh said,

I would be interested in hearing more about what type(s) of trees provide the best return, and even a few different methods (timber, fruit, nuts, etc…).

I know black walnut is supposed to have some of the best resale value (for timber) but they also take forever to grow, and can make your soil to acidic if you ever want to replace with other plants. Would faster growing trees that might not be worth as much, but can be grown and resold multiple times over the life of what a black walnut be provide better returns? Would creating fruit orchard that provides annual income be better? Lots of options, and something I think I would thoroughly enjoy.

alex said,

CDs (even long run CDs) have horrendous interest rates that don’t cover the likely rate of inflation.

Gold is near all-time highs and has exactly one place to go: down. Historically, gold has not been a good long term investment.

Wood: I have no idea about, but given that its the third option after two awful ones, I would be skeptical.

George said,

CDs are for protecting near-term capital.

I’m with Alex on gold.

Trees are an investment for the young unless you’re trying to leave a legacy. Walnut trees take 50 years to grow to harvestable size, though an annual nut crop provides some cash flow (it will be about 50% smaller harvest than if the trees were managed for nut production rather than timber). Fast growing hybrid poplar trees are popular in Oregon & Washington, only 15 years to maturity, but you’ll need 30+ acres to achieve a decent return. Personally, like Jacob, I go with RYN as an entry-level tree investment.

George said,

Danger of trees as an investment is that they burn. You can easily lose the entire investment in a fire!

Robert Muir said,

@RMom +1

I’m also agreeing with alex, this is about as general and vanilla a blog post as you can get. CDs, especially currently, have very limited applications; Gold, while also having very limited applications, is currently in a bubble; and “wood” is the wild card. Perhaps the author is planning on three follow-up articles on each of these? If so, they should have mentioned that in the post.

A quick look at the two Jacob mentioned, RYN and PCL, shows a couple of pretty decent income stocks. Both are paying well north of 4% annually and definitely worth considering adding to my income stock percentage. I obviously have a lot to learn about REITs and income stocks in general. Along with wood, I’m thinking that virtually any commodity should be considered for inclusion in an income portion of a portfolio.

ghandy said,

For what it’s worth I’d much rather see the google ads you tried a while ago than read posts like this.

On the topic of trees, I recall reading that David Swensen included standing timber as part of Yale’s asset allocation.

Maus said,

Gold is awful for ERE. Whether you hold it as bullion or through at ETF, gains are taxed as the sale of a collectible at 28%.

Make sure that any timber company you invest in has an approved timber harvesting plan because the days of clear cutting are over. You don’t want to be exposed to the risk that a fully mature timber stand is the subject of environmental litigation to prevent or delay its harvest. This is not a risk-free investment.

Jacob, I’d be wary of this Go Banking Rates outfit. Their first foray has not been impressive.

Macs said,

@Mo – I can’t really help you figure out ‘the’ gold thing, only *my* gold thing

In the (admittedly extreme but not unthinkable) case of fiat collapse, then I wouldn’t be *selling* my gold, I’d be *buying* with it those things that fiat no longer could buy, ie I would be reverting to historical usage of gold as a medium of exchange. For all the various crises we’ve had throughout history, there’s never been one yet where gold didn’t maintain that role.

Regarding the tax issue, I should point out I’m in the UK and our tax regime is different to the USA (I realise I’m making an assumption that’s where you are, apologies if I’m wrong). Also, reference to my first post should tell you I have no intention to trade in gold except in extreme circumstances – it is backstop insurance, and not an investment.

If it’s needed in an emergency that is personal and not systemic then I can cash in within 24 hours for cash. I hold in a form not subject to capital gains tax, and not enough of it to trigger CGT anyway (but there’s a regulatory risk as tax laws and thresholds may change, of course…)

Transaction charges – I’ve managed to whittle premiums down to about 1% over spot, storage costs are nil, and insurance is rolled into policies I would have anyway, so nil marginal cost there, too. I wouldn’t touch an ETF with a bargepole, because they do not fulfill the function I require of gold.

(For clarity, you can read ‘gold’ as also including silver, in case you are thinking ‘But what about low-denomination use?’)

The Passive Income Earner said,

What about privilege shares? Does it fit along side ‘Certificate of Deposits’? Some privilege shares from banks guarantee the value of the share at the end of the term with a decent rate of return.

Note that if you have a relationship at a bank, there are often people who want to get the money from their ‘Certificate of Deposits’ and you could buy it from them and retain a higher rate without the time.

Cheers.

CindyT said,

wow, are u serious? Trees?

Debbie M said,

I agree that these are not actually three unusual investments that can help you retire early:
* CDs are not unusual, plus they’re not even as cool as they used to be now that higher-interest online savings accounts and rewards checking accounts exist.
* Gold may or may not be an “investment,” but investing in it NOW seems quite unlikely to help you retire early.
* And can you really start harvesting lumber after, say, 5 years?

So what ARE some unusual investment options that could help you retire early?
* skills – cooking, mending, repair, food growing, etc.
* tools – again, to help you do things easily instead of hiring out
* a trailer – as Jacob is demonstrating
* DRiPs? (Well, they’re more unusual than CDs anyway.)
* remodeling – fix up your house to suit your needs instead of moving up

More ideas?

Evolution Of Wealth said,

What about taxes? CDs are taxed as ordinary income tax (your highest tax bracket) between that and inflation the real return for CDs is usually minimal if even positive. It will usually be negative if you are in a high tax bracket.

stiffler said,

Is this post a joke? Your almost 2 months late for April fools.

Joe said,

I also thought this post was a joke, sorry…

This is WAY below the usual quality of posts for this site – I’m confused?

Gold isn’t an income producing asset, but at least governments can’t PRINT it!

namesarehardtopick said,

I’ll take silver over gold for a store of value and to encumber government’s feckless printing presses. The key with silver is that it’s in high use whether you’re in a good economic climate, or poor economic climate. You can sell silver to some businesses (during good times) for a decent profit, or individuals (during bad times) for a stout cut.

Otherwise, I will concede that trees were a VERY unusual investment choice. I’ve never once thought of that.

Two other investment choices my dad has: thirty chickens, two cows, and a few goats. He has free milk, eggs, and on occasion, some goat meat.

HSpencer said,

I find it odd that no one here has approached the potential of government confiscation of gold in a collapse scenario. History shows this can happen, and I think there is an executive order (among many others that screw us) on that. There is no guarantee from the gubbermint that they would pay you par value even if they bought it up rather than confiscated it.
If I were doing hard planning for retirement and had not already retired, I would take a hard look at all executive orders since 9/11. Even going back to Clinton, I would look at those as well.
There are E O’s that allow the President to invoke many things such as:

Confiscate precious metals.
” ” all public transportation.
” ” Homes and Land.
Take over: All MSM (mainstream media)
” ” All food distribution.
I could go on, but it would be better would you check these on your own.

SHTF scenario and all currency is worthless.

Robert Muir said,

Acronym def: SHTF = Sh*t hits the fan

Before I spent thousands of dollars on precious metals for use in some hypothetical future hyper-inflation event, I would research what actually happened in historical hyper-inflation circumstances.

Go Banking Rates said,

Hi Everyone,

I am the writer of the article and just wanted to mention that it was meant to be a fun piece that would generate a lot of interesting comments and investment experiences (and it has thanks to comments from readers like Bob, Macs, DLM, Mo and Kevin!). I never meant to do a complete analysis of each investment, hence why no comprehensive data.

This site has a wonderful community of readers with a lot of financial expertise, and I look forward to asking questions and learning more from everyone here.

@Alex
My bias for gold showed through a little didn’t it? I just have my arguments for why it would be good to have in your portfolio especially with the events surrounding our dollar.

@Kevin
I absolutely appreciate the criticism and will try harder to research and put together a more thoughtful article next time. Again, I only meant to generate discussion with a more open-ended article.

Thank you to everyone for the constructive feedback and to Jacob for giving us the opportunity to guest post on his blog.

P.S. In case anyone is curious about where I got the idea about investing in trees, you can find more information here:

http://www.guardian.co.uk/money/2007/may/06/ethicalmoney.observercashsection

http://www.owntropicaltrees.com/

MoneyEnergy said,

I like the idea of having trees on your own lawn that literally provide you with nuts and fruit. But yes, the problem is how long they take to grow…

I wouldn’t advise CDs or GICs yet – interest rates are too low. Buy gold in the interim until rates get back to something respectable like 4% at least. (we all know inflation is already implicitly at that amount anyway – just wait until it officially gets out of the bag!).

Kevin@InvestItWisely said,

Trees? I’m pretty interested about that. How do you invest in trees? How have they performed better than the stock market…? Any numbers or graphs?

I greatly appreciate the linkbacks, btw!

Robert Muir said,

Kevin, my understanding is that you’re no more investing in trees than you would say you were investing in gold if you bought stock in a gold mine. If you invest in a company that harvests timber, then you reap the dividends from the income of the company.

Of course, as with any individual stock purchases, there are great risks. The lumber on the land the company owns or leases could burn up or it could end up being sub-grade, the company could violate regulations and be sued into the ground, and sector-wide, changes in government regulations (NAFTA anyone?) could screw up the supply curve.

Forty2 said,

Take it from an ex-gold bug, gold is a horrible investment. It pays no interest, no dividends, and is only a “store of value” because touts/spruikers say it is. Tell me, was the gold you bought at the early ’80s peak a store of value at its bottom? Didn’t think so. This story has been written before.

You can’t eat it, plant it, grow it. It sure is pretty, though.

I made a great profit on gold a few years ago and sold too early, but anyone buying it now is a sucker especially when urged by professional hysterics/morons like Glenn Beck. Anyone who buys gold from a TV advertiser is an idiot. Never buy fancy coins; if you don’t want bars buy sad old Krugerrands that nobody wants. They have the smallest bid/ask spread and distance from spot of coins. Only buy certified bars from the 3-4 big producers. If you still want the damn stuff, buy it from apmex.com who after much research offer the best service and spreads. (I am wholly unaffiliated with apmex and only mention them to potential fools based on fair pricing and excellent customer service).

The other thing about gold is that the bid/ask spread is titanic and this never benefits anyone but the broker. It is extremely expensive to acquire and sell. Gold ETFs are cheaper but present risk that they do not have the actual metal backing it up. The same thing applies to silver. Silver bugs are even crazier than gold bugs, and that’s saying something. I’ve been in this world and so glad I got out of it.

Gold is money, until the other party says it’s not, and it is no less fiat than paper dollars/euros/shekels; the difference is in who declares it to be fiat, and in the end it doesn’t matter; if the poop truly hits the fan like the metal bugs yelp about, and it won’t, nobody will want your gold in exchange for rabbits or chickens; they want something immediately useful like clean water, fruit, milk, blacksmithing, etc.

That said, no more than 5-10% of precious metal in yer portfolio isn’t a bad idea but all-in is just plain nuts.

In case anyone gives a shit, all of my long-term money has been in GNMAs or other US bonds since oh 2007 when I smelled something bad coming. I’m the only person I know who’s made gains since then — I tried telling people but they were all “DOW 36,000!”-addled and though I was nuts. Yeah sure if I’d gone all-in on gold then and sold today I’d have made an enormous profit, but that was a once-in-a-generation trade and it’s v v unlikely to happen again for a long time.

Long story, short: forget about gold. If you really believe in the TSHTF/End Times/TEOTWAWKI nonsense, by all means, blow your load. I’ll stick with my crappy government bonds, thx.

Forty2 said,

Also: timber as an investment sucks. I’m in the declining printing industry, and we use less paper every year. Most of it is shipped over as raw logs to China for processing, we get paper and lumber back. Whee. Paper consumption is falling drastically. I don’t know how it’s feasible to put logs on a ship to China, mill it into paper then put pallets of finished paper on a ship back to the US, but I guess oil prices will finally put a stop to that. Oh noes! We demolished all the US paper mills! Ooops.

Actual ink-on-paper printing is also disappearing as an honorable profession in this country, esp. when Chinese printers can buy the assets of bankrupt US printers for nothing then fill their shops with top-end machinery from Heidelberg, KBA, MAN Roland, Komori, etc and undercut American workers by oh 90% aside from freight.

Housing? Hahahhahaaa…. “Confederated Slaveholdings, Transatlantic Zeppelin, Amalgamated Spats, Congreve’s Inflammable Powder, U.S. Hay”, and an “up-and-coming Baltimore Opera Hat Company” are better investments than timber.

Actually, all of the options presented are terrible investments. I’d fire this guest poster.

Forty2 said,

Oh BTW, speaking of Sprott:

http://market-ticker.denninger.net/archives/2352-A-Tale-Of-Irrational-Premium-And-Risk-PHYS.html

chris said,

Well let’s see…trees huh? I am gonna need some help with the math maybe?

I live in the Pacific Northwest where trees grow pretty well.

We own 2 acres where we have planted about 500 fir and western red cedar seedlings (2 years Old). They cost us about $1 ea.

We spent about 60 hours clearing brush to get a 6′ area free of vegitation around ea. tree and then planted them. (We use the cd laddering tech of planting about 150 trees a year for a total of 500 so far)I water them the first year for about another 60 or so hours total. So that’s about 120 hours sweat equity.

You lose about 1/3 to death from competition.

It would take about 50 years to get them to be ready to harvest. Each tree of mature size is worth about $500 today less one third to the logger for harvest and transportation to the mill.

How much wood is worth in 50 years is anybody’s guess. I think it won’t increase by more then 1-2% a year.

I am not going to figure anything for taxes or land because it is our home.

What am I forgeting?

NOne of this works for ERE but its fun to think it thru.

SO you math guys …..what will be my ROI?

AJ said,

@ Forty2:

You could say the same things about non-dividend paying stocks.

I think gold has its place in a diversified portfolio. Obv no one should put all their eggs in one basket.

chris said,

Here’s an interesting article:

http://westinstenv.org/itf/

Another Hot Week Passes by… | Invest It Wisely said,

[...] Early Retirement Extreme: Three Unusual Investment Options to Help You Retire Early [...]

Luca said,

@Mac Do you read any good blogs that focus on UK investing? I haven’t been able to find any so far.

mockum said,

I have a 40-acre tree farm growing timber (not Christmas trees). That is how you invest in trees. My tree farm is in the Pacific Northwest so I grow the trees most common here: Douglas Fir, Western Red Cedar, Red Alder, and Western Hemlock. Douglas Fir can be harvested in 30+ years. The 10,000 Douglas Firs planted when I was 33 should be ready to harvest when I’m around 67. The Red Alder will be ready for harvesting much earlier than that.

Another plus of growing trees on rural property is that I have place to escape from the metro crowds. I get lots of exercise clearing brush. Taxes are only $150 per year and I was able to write off the mortgage interest and all expenses.

Macs said,

@Luca – the best I’ve found so far is Monevator (http://monevator.com/) which I discovered after Jacob linked a guest post (or three) he did there. Monevator has a great series of articles on high-yield dividend investing from a UK perspective. Worth a check out, I enjoy his blogs.

Aury (Thunderdrake) said,

Gold is not at all unusual if you ask me. Being a dragon, you could safely assume I’m fascinated with this sort of thing. That and silver! But this dragon has his eyes on the little white metal moreso.

Investing is perhaps one of the best things to do with excess or indecisive money. The hard part is getting the portfolio established, but once all that’s said and done, securing financial independence becomes that much easier.

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