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Alternative investment platforms can help you diversify your portfolio into asset classes beyond the traditional stocks and bonds. That can be especially beneficial during turbulent economic conditions and stock market downturns.
To help you understand your options, let’s explore some of the best alternative investment platforms in 2022.
Best Alternative Investment Platforms Compared
|Platform||Costs||Accreditation Required||Minimum Investment|
|YieldStreet||1% to 4% annual fees for management and administration||Varies||$2,500|
|Roofstock||0.5% of contract price or $500, whichever is greater||No||Varies by property|
|Masterworks||1.5% annual fee and 20% of sales proceeds||No||Varies by offering|
|AcreTrader||0.75% annual fee and 2% of offering value at close||Yes||Typically $15,000 to $40,000|
|Vinovest||2.25% to 2.85% annual fee for managed accounts; None for manual trading||No||$1,000 for managed account; None for manual trading|
|Prosper||1% annual fee; additional fees for loans in collection||No||$25|
|Wefunder||2% or 3.5% transaction fee, depending on payment method||Varies by company||$100|
|Vaulted||0.4% annual maintenance fee and a 1.8% fee for all transactions||No||$10|
YieldStreet: Many Alternative Investments
YieldStreet lets you purchase a variety of alternative asset classes oriented toward growth, passive income, or a mix of both. That includes commercial real estate, venture capital, cryptocurrency, private equity, and art.
YieldStreet caters primarily to accredited investors. Only they can purchase the individual deals and assets that the platform offers. To be considered accredited, you typically must meet at least one of the following requirements:
- Have a net worth of $1 million, excluding the value of your primary residence
- Earn income of $200,000 in each of the prior two years and reasonably expect the same for the current year
- Hold a Series 7, 65, or 82 financial professional’s license in good standing
However, you can still invest with the platform without meeting these requirements using the YieldStreet Prism Fund. It’s available to all investors, regardless of net worth and accreditation status. It also has a minimum investment of just $2,500.
The Prism Fund has holdings in art, real estate, legal, corporates, and more, giving all investors the ability to diversify into alternative asset classes.
Roofstock: Real Estate
Roofstock is a digital marketplace designed to make real estate investing as accessible as possible. You can invest in various rental properties through the platform without finding and evaluating them yourself.
Fortunately, creating a Roofstock account is free and easy, and you don’t need to be an accredited investor to sign up. The platform is available to everyone, even first-time investors.
Once you open an account, you can browse through the platform’s list of properties across the United States, each of which the company has thoroughly vetted.
Thanks to that due diligence, you can filter the listings using many different criteria to isolate the deals that meet your requirements, such as by price, location, and desired yield or cap rate.
You also have everything you need to assess each deal without visiting the property in person. For example, that includes the ability to:
- Take a 3-D tour
- Explore the neighborhood
- Review local property managers
- Examine the current tenants, their lease terms, and their payment history
Once you find an investment opportunity you’re interested in, you can make an offer for free. You won’t have to pay Roofstock anything until it’s accepted. Then, they’ll charge you 0.5% of the contract price or $500, whichever is higher.
Masterworks: Fine Art
Masterworks is an alternative investing platform that specializes exclusively in fine art. However, you can’t purchase the assets directly, so don’t expect to receive any paintings or statues in the mail.
Instead, Masterworks lets you buy and sell shares representing partial ownership of what it deems the most valuable works. It works similarly to trading stocks, where shares represent partial ownership of businesses.
Like many alternative investing platforms, Masterworks does the initial due diligence to find the best artists and pieces. It uses proprietary data to find those with the best price appreciation rates, though members can review the data for their own research.
Next, Masterworks buys the best examples of its selected artists at auction for the lowest prices it can manage, then offers them to its members. At this point, members can buy shares of the artworks.
Finally, Masterworks holds onto the pieces for three to 10 years. You can hold onto your shares until they dispose of the asset and take home your share of the profits, or you can sell your shares on a secondary market with other investors before then.
AcreTrader is an online real estate marketplace that lets accredited investors buy farmland remotely. However, it works more like Masterworks than Roofstock, as you purchase shares rather than plots of land.
First, AcreTrader reviews parcels of land from across the country and then purchases those that meet their quality requirements. Next, it places them into a unique legal entity, usually a limited liability company (LLC).
Members of AcreTrader get to purchase shares of the entities that own each underlying farm. Generally, each share of an entity represents a tenth of an acre.
Once you’ve invested your funds, the process is about as passive as owning a stock. AcreTrader takes care of all the administration and property management responsibilities, working closely with the farmers.
AcreTrader aims to pay out annual dividends to investors, but your profits will primarily come upon disposal. AcreTrader eventually sells the underlying farm and distributes the proceeds to investors, but you can also sell your shares on a secondary market.
Flippa: Online Businesses
Flippa is an online marketplace that lets you buy and sell online businesses and digital assets. For example, that includes blogs, domains, e-commerce stores, affiliate sites, software-as-a-service businesses, and even mobile apps.
Notably, there’s a huge range of prices for these assets. You can find listings for as little as a dollar, while the most expensive offerings have prices in the millions.
Like many alternative investment platforms, Flippa’s basic layout is a list of assets for members to browse. You can filter the offerings in several ways, such as by price, listing status, and asset type.
You can also review details for each entry to help inform your investment decision, including average monthly profit, traffic trends, and financial statements.
Unfortunately, Flippa’s listings aren’t as well-vetted as the offerings on most other platforms, especially those priced under $50,000. As a result, scams are relatively common on the site, and investors must take extra precautions to protect themselves.
The platform is also more accessible than most. You don’t need to be accredited to purchase most of the assets on the site, and there are no fees for buyers. Flippa makes money off listing fees and commissions charged to sellers.
Percent: Private Credit
Percent is an online platform that lets investors access private credit, also known as private debt. It refers to various privately negotiated debt accounts from non-bank lenders to various borrowers, including consumers, small businesses, and startups.
Private credit is also a relatively short-term investment option compared to the other alternative asset classes on this list. Deals usually have a maturity of nine months or less, with some returning principal and interest in as little as one month.
Fortunately, Percent performs significant due diligence for its listings, including reviewing borrower operations, financial statements, and additional debts. Of course, you should still do your own research as well.
There are no fees to invest using Percent, but the platform is only accessible to accredited investors in 2022. However, Percent claims that may change in the future.
Coinbase is one of the leading centralized cryptocurrency trading platforms. You can use it to buy, store, trade, stake, and sell many different crypto assets. That includes everything from Dogecoin to Bitcoin.
One of the primary advantages of Coinbase is its ability to make investing in crypto more approachable. Investing in the asset class can be challenging, as there are hundreds of assets to choose from and uniquely sophisticated jargon involved.
Decentralized exchanges like DexGuru have intimidating user interfaces and can be hard to navigate, but Coinbase does a lot of hand-holding. It presents a more intuitive user interface and offers resources to help you learn.
Fortunately, the platform is open to everyone. You don’t need to be an accredited investor to use it. As a result, it’s ideal for people just getting started with the asset class, even if you don’t have much experience in traditional investments.
However, you’ll incur fees with every transaction, including withdrawing your assets, and investing on Coinbase can be more expensive than trading cryptocurrency on other platforms.
Vinovest is the world’s premier wine investment platform. You can use it to invest directly in bottles or cases of wine rather than buy shares. Vinovest handles the storage, but you can request that they send you some of your stock if you want to drink it.
In addition, you can use an account with an asset manager or trade wines manually. For the former account, you must provide personal background information, complete a questionnaire about your goals, and fund your minimum balance.
There are four tiers of managed accounts with the following terms:
- Starter: $1,000 minimum balance and 2.85% annual fee
- Plus: $10,000 minimum balance and 2.70% annual fee
- Premium: $50,000 minimum balance and 2.50% annual fee
- Grand Cru: $250,000 minimum balance and 2.25% annual fee
With these accounts, Vinovest’s investment manager automatically selects wines to purchase for you, using input from sommelier advisors and quantitative investment models. It’s ideal if you don’t want or know how to create your own investment strategy.
If you choose to trade wines manually, you’ll have complete control over your investment portfolio. That includes which wines to buy, when to sell them, and how much you’re willing to pay. You can also purchase bottles rather than cases.
Fortunately, both account types are available to non-accredited investors.
Prosper: P2P Lending
Founded in 2005, Prosper is the first peer-to-peer (P2P) lending platform formed in the United States and has facilitated over $22 billion in loans since its inception. A retail investor can use it to connect with and lend directly to other individual consumers.
Once again, you can choose to invest in a wealth management fund that the platform creates for you or customize your portfolio by selecting individual loans.
If you choose the latter, you can browse through Prosper’s listings, each of which is a loan between $2,000 and $40,000. While some are only available for purchase in their entirety, you can invest in others in $25 increments.
You won’t know much about the borrower besides the state they live in, but Prosper gives you a comprehensive review of their credit profile. They’ll also let you know details like the purpose of the loan, the expected yield, and the approximate risk.
Prosper charges a servicing fee of 1% of the outstanding principal balance, but it’s prorated throughout the year and taken out of your fixed income. There will be additional fees if one of your loans goes into collections.
Wefunder describes itself as “Kickstarter for investing.” It’s a crowdfunding platform that lets you invest in startups and small businesses, but it’s significantly different from the stock market.
Not only are the businesses on the private market in much earlier stages of growth than those listed on public stock exchanges, but you can also invest in several alternative debt and equity crowdfunding arrangements. They include the following:
- Debt: Rather than purchasing shares, startups on Wefunder can also request debt financing. These can be traditional installment loans or revenue-sharing agreements.
- Convertible notes: These are either unsecured loans or Simple Agreements for Future Equity (SAFE) that convert to stock shares at some point in the future, usually when the startup begins its next round of funding.
- Stock with or without dividends: These are the typical stock arrangements you find when you invest in the traditional markets. In addition to any profits from price appreciation, some pay out dividends while you hold shares.
The amount an individual investor can contribute depends on accreditation status and the regulation a company uses to raise its funds. Wefunder is open to non-accredited investors, but there are often additional limitations.
Last but not least, Vaulted is a marketplace that lets you invest in gold. However, you purchase physical gold rather than shares of gold stocks. Vaulted offers 99.99% pure gold kilo bars that are certified conflict-free.
Vaulted secures your bars in the Royal Canadian Mint for you, which the Canadian government owns. It’s insured and guaranteed against theft, damage, and other losses.
In the vault, your bars stay separate from everyone else’s gold, and neither Vaulted nor the Royal Canadian Mint can lease them out while you own them. You can also have your gold delivered to a different location, such as your home if you request it.
Vaulted is straightforward and easy to use. Anyone can make an account, regardless of accreditation status. All you need to do is connect a checking account to your profile, and you can start making purchases or set up recurring investment plans.
Buying and selling are both subject to a 1.8% transaction fee. There’s also a 0.4% annual maintenance fee based on the value of your cumulative gold purchases.
Alternative investments like gold, consumer debt, and cryptocurrency can be a great way to diversify your portfolio beyond stocks and bonds. However, they’re not suitable for everyone. Consider consulting a financial advisor before investing in them.
Nick Gallo is a Certified Public Accountant and content marketer for the financial industry. He has been an auditor of international companies and a tax strategist for real estate investors. He now writes articles on personal and corporate finance, accounting and tax matters, and entrepreneurship.