Investing your money is an important part of maintaining your financial health. And while putting money in the stock market is a common way to grow your money and build your wealth, it’s certainly not the only way to invest.
Once you feel secure with your finances, you might consider diving into alternative investments. Alternative investments are asset classes that do not include stocks, bonds, or cash. For example, collectible items such as fine wines, coins, stamps, and vintage cars can be an alternative investment. Private debt and real estate are other common alternative assets to invest in.
The options can be overwhelming and you may not even know where to start. Yieldstreet is a platform that helps you get started by giving you access to many different types of alternative asset transactions and all the necessary details to guide you in your investments.
Below, Select reviewed how the site works and what you need to know to be eligible to get started.
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How Yieldstreet works
Yieldstreet provides investors with the opportunity to participate in crowdfunding for alternative investments on the platform. Crowdfunding is the process of raising small amounts of money from a large number of people. So instead of one person investing $50,000, crowdfunding allows 50 people to invest a minimum of $1,000 each to reach the same goal.
Yieldstreet also provides individual investors with opportunities to invest in private structured credit agreements, which is an agreement in which an investor will earn a guaranteed minimum return and the risk of a decline in earnings is protected. However, these offers are generally only available to institutional investors or hedge funds. The platform secures investments in deals including commercial real estate, art, and marine projects.
Investment minimums are typically around $10,000, which may not be the best for those who don’t have a lot of extra money to invest beyond their IRA or brokerage account. As of October 2022, more than $4 billion has been invested on its platform with a net annualized return of 9.61%, according to Yieldstreet.
It’s also important to note that most offerings on Yieldstreet are only available to accredited investors, which the Securities and Exchange Commission (SEC) defines as individuals with a net worth of more than $1 million, not including the value of your primary residence, or an annual investment. income in the last two years of at least $200,000 for individuals and more than $300,000 for couples. The other option would be to have certain certificates or credentials, such as Series 7, Series 65, and Series 82 licenses. So unless you meet these criteria, you likely won’t be able to participate in most opportunities on the platform.
However, in August 2020, Yieldstreet established the Prism Fund, which is available to non-accredited investors. The minimum investment amount for assets within the Prism Fund is $2,500, which makes it a bit more affordable.
You can sign up to start trading on the Yieldstreet website via Apple ID, email, or Google. After you choose your registration method, the site will ask you a few questions to determine if you are an accredited investor. If you meet the criteria, you can start tailoring your Yieldstreet dashboard to your investment preferences and needs.
What types of investments are offered?
You can find details about each of the investments Yieldstreet offers on their website. Currently, it offers investments in Real Estate Investment Trusts (REITs), art, supply chain financial investment and more. You can find details on the size of the offering, the maximum and minimum acceptable investments, the expected annual return on investment, and the duration. The platform will also explain the risks of the investment and any favorable highlights.
Notes are another form of alternative investment offered by Yieldstreet. A note is an obligation for a borrower to pay back a sum of money with interest within a set period of time, such as six months or a year, similar to the way a loan works. In this case, people are investing in the probability of earning a return for lending money to a borrower.
Those who invest money in short-term or structured notes offered by the site get a return on their investment and interest payments over the life of the loans, but it’s important to note that there is always a risk of default. Because of this, every investment offering on Yieldstreet is backed by underlying assets, such as a legal agreement or real estate, meaning the company will have the means to potentially recover any non-performing loans to finance investments.
For those interested in investing in art, Masterworks is another platform that allows you to invest in pieces by famous artists. You can buy fractional shares of art for as little as $20. Read more in our Masterworks review.
Yieldstreet has an annual administration fee that ranges on average between 0% and 2.5%. There may also be investments with fixed annual fees; such fees are reported on the individual offer pages. Annual fund charges may also be charged to investors depending on the legal structure of the offering, and specific information on these charges can also be found on the individual offering pages.
Yieldstreet is ideal for accredited investors who want to diversify their portfolios through alternative investments. Non-accredited investors are also accommodated on the platform through Prism Fund, however it is important to ensure that you have already exhausted other traditional investment accounts first.
Because you may need to keep your cash under lock and key for potentially long periods of time, you’ll want to remain relatively stable in your current financial situation. It is important that before you get into alternative investments, you should have a fully funded emergency fund, contribute at least enough to receive an employer match for your 401(k), contribute to a Roth IRA, and have a cushion of extra savings.
It may be worth considering using an automated advisor, such as Wealthfront or Betterment, to invest your money before you start shopping for alternative investments. The platforms will create a diversified portfolio of ETFs for you based on your risk tolerance and investment time horizon.
Another crucial thing to keep in mind is to make sure that less than 10% of your portfolio is made up of alternative investments like those offered by Yieldstreet. In this way, you maintain a diversified balance of all your assets.
Yieldstreet’s advantages include broad access to alternative investments that are asset-backed, providing a form of protection in the event of default. Disadvantages include the fact that most offers are only open to accredited investors and there are only a limited number of investments available. In general, Yieldstreet makes the most sense for those who have already exhausted other traditional investment accounts, such as brokerage accounts and retirement accounts, and have larger amounts of money to invest in alternative assets.
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Editorial note: Any opinions, analyses, reviews, or recommendations expressed in this article are solely those of Select’s editorial staff and have not been reviewed, approved, or otherwise endorsed by any third party.