9 best alternative investment platforms
These days, alternative investments are becoming more popular than ever. With rising inflation and a rough year for the markets, more investors are looking to alternative investing to build wealth.
However, figuring out how to select the best alternative investments can be challenging for beginners. This is especially true for securities that aren't listed on any stock exchange, like sports cards, wine or rare collectables.
Thankfully, there are numerous alternative investment platforms that you can use to easily invest in a variety of asset classes.
The best Alternative investment platforms
- Best for asset variety: Yieldstreet
- Best for easy REIT Investing: Fundrise
- Best for artwork investing: Masterworks
- Best for residential real estate: Arrived Homes
- Best for sports memorabilia: Collectable
- Best for fine wine: Vinovest
- Best for niche collectibles: Rally Rd.
- Best for peer-to-peer loans: Propser
- Best for small business debt: Mainvest
If you want to get started with alternative investment platforms but want to work through platforms that specialize in these assets, you're in luck. Here are our picks for the top alternative investment platforms you can use to spice up your portfolio.
Yieldstreet
- Best for: Asset variety
- Minimum investment: $2,500
Why we chose Yieldstreet
Yieldstreet is one of the best alternative investments because of the variety it offers. It has a variety of individual deals and funds covering assets like cryptocurrency, artwork, private equity, real estate and structured notes. Plus, its flagship Prism Fund provides exposure to a variety of assets and has a $2,500 minimum investment requirement.
We also like Yieldstreet because it helps you create goal-based portfolios depending if income, growth, or balance is your goal. The main downside is that many deals and funds require being an accredited investor with the exception of the Prism Fund.
That said, Yieldstreet has an immense amount of variety out of any alternative investment platform. In terms of fees, most offerings have up to 2.5% in annual management fees, which is fairly standard for alternative assets.
Fundrise
- Best for: Easy REIT Investing
- Minimum investment: $10
Why we chose Fundrise
If you want to invest in real estate without much money, it's hard to beat Fundrise. This real estate crowdfunding platform lets you invest in income-generating eREITs with a minimum of $10. Shareholders then earn quarterly dividends, and historically, Fundrise returns around 8-9% annually.
Fundrise is also a leader in the alternative investment space because it only charges 1% in annual fees (0.85% Annual management fee/ 0.15% Annual advisory fee). In comparison, many real estate crowdfunding platforms charge 2% or even more in various fees. Overall, Fundrise is a simple-yet-effective way to add real estate to your portfolio.
*We earn a commission for this endorsement of Fundrise.
Masterworks
- Best for: Artwork investing
- Minimum investment: $20 increments, varies
Why we chose Masterworks
When it comes to artwork investing platforms, Masterworks is pretty much the undisputed king. This alternative investment platform lets you buy shares in artwork from the likes of Banksy, Monet and Van Gogh. And, shares often start at just $20 and there's no accreditation requirement.
Once it acquires and securitizes artwork, Masterworks has a three to 10-year target holding period before it sells art for a profit. Masterworks takes 20% of profits as a fee plus a 1.5% annual fee, and investors split the remaining profits.
Overall, it's an interesting platform and way to invest in blue chip artwork. And U.S. investors have access to a secondary marketplace for shares which helps improve liquidity.
See important information about Masterworks HERE
Arrived Homes
- Best for: Residential real estate
- Minimum investment: $100
Why we chose Arrived Homes
Although Fundrise is one of the best alternative investing platforms if you want to invest in REITs, Arrived Homes is one of our favorites when it comes to individual, residential real estate investments.
Arrived allows you to buy fractional shares of individual, single-family homes starting at just $100. From there, shareholders earn quarterly dividends from rental income. There's a 1% annual management fee. To date, Arrived Homes has paid 3.2% to 7.2% in annual dividends to investors, although this doesn't include property appreciation since the company is so new.
Collectable
4.3
- Best for: Sports memorabilia
- Minimum investment: $5
Why we chose Collectable
If you're a sports fan, Collectable could be the perfect alternative investing platform for you. It lets you buy fractional shares of iconic sports memorabilia like rare trading cards, signed jerseys, worn sneakers, and other highly collectable items.
Normally, rare sports memorabilia can go for hundreds of thousands of dollars. But Collectable securitizes assets and offers shares to investors starting at just $5 in some cases. The only fee investors have to worry about is a 1% trading fee if they ever buy or sell shares through the platform.
That said, this is a highly speculative alternative asset class. And rarity doesn't guarantee appreciation or liquidity either. Ultimately, Collectable is an excellent platform for super fans and collectors, but consider the risks before investing.
Vinovest
- Best for: Fine wine
- Minimum investment: $1,000
Why we chose Vinovest
While it's certainly niche, another leading alternative investment platform that's perfect for wine lovers is Vinovest. This platform lets you invest in curated portfolios of fine wines from around the world. And, like a robo-advisor, you can invest in various portfolios that match your investing goals and risk tolerance.
There's a $1,000 minimum investment amount for the AI-powered portfolios. But Vinovest also has a separate marketplace where you can purchase individual bottles of wine, with many costing under $150.
According to Vinovest, fine wines have returned 10.6% over the last 30 years, and this asset class doesn't correlate with the market for some downside protection. Just note that you pay between 2.25% and 2.85% in annual management fees for Vinovest portfolios depending on how much you invest.
Rally Rd.
4.3
- Best for: Niche collectables
- Minimum investment: $5
Why we chose Rally Rd.
Rally Rd. is similar to Collectable, except it has a much wider variety of assets you can invest in. This includes rare collectables like comic books, luxury cars, sports cards, and even NFTs. New collector items launch under an “IPO” which is when you can buy shares. There's an initial IPO fee that Rally Rd. works into the offering, but after that, investors don't pay any fees.
Down the line, Rally Rd. and shareholders can decide to sell an asset if a collector comes along and makes an offer. But there's also a secondary marketplace where you can potentially sell shares to exit earlier.
Liquidity isn't guaranteed, and like other niche collectables, this is a very speculative way to invest. But if you want to own 0.5% of a Ferrari or 1% of a pair of Michael Jordan's Air Jordan's, it's the platform for you.
Prosper
4.0
- Best for: Peer-to-peer loans
- Minimum investment: $25
Why we chose Prosper
With Prosper, you can invest in personal loans as a form of peer-to-peer lending. In other words, you're almost acting like a bank by lending out money to borrowers in exchange for interest payments. According to Prosper, the platform has an average historical return of 5.7% per year. And, you can get started with as little as $25.
Borrowers make monthly payments, so you begin earning interest quickly. And Prosper has some requirements to reduce risk, like minimum credit score requirements plus income and bank statement proof. Investors can also pick and choose individual loans to fund or use Prosper's “Auto Invest” feature to fund loans that match preset criteria.
Just note that loans are unsecured, and borrowers can and do default. However, the low $25 minimum makes it easier to reduce risk by spreading out money across several loans.
Mainvest
- Best for: Small business debt
- Minimum investment: $100
Why we chose Mainvest
One final alternative investment platform you can invest with to earn passive income is Mainvest. This platform lets you fund small American businesses as a form of debt investing. In exchange, business owners make regular repayments back to lenders, plus interest, until the loans are paid in full.
Mainvest has a host of small businesses available on its platform, including cafes, breweries, food trucks, wineries, and restaurants. There's a $100 minimum investment requirement, and it targets 10-25% returns for investors. The highlight is that investors don't pay fees; business owners cover the costs since Mainvest provides access to capital.
Of course, the main risk of debt investing is that borrowers default and can't repay their loans. However, Mainvest's $100 minimum investment requirement makes it easier to diversify across several businesses to reduce risk.
Pros and cons of alternative investments
Pros
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Provides a way to diversify your portfolio
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Potential to outperform the general market
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Alternative investments often provide downside protection since they don't correlate with the market
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Alternative investments can also be good historical inflation hedges
Cons
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Many alternative investments don't generate income
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Some asset classes are very speculative and risky
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Liquidity is often low with alternative investments
How alternative investments perform against the S&P 500
What are alternative investments?
Alternative investments are investments in an asset class other than typical categories like stocks, cash, and bonds. There's no exact qualification for what makes something an alternative asset, but investments like collectibles, real estate, private equity, commodities, and derivatives often fall under the alternative investment umbrella.
Typically, investors turn to alternatives to diversify their portfolios. But these alternatives can also help hedge against inflation and provide some downside protection if they're not correlated with the overall market.
Examples of alternative investments
There are several popular, agreed-upon alternative investments you can consider.
1. Real estate
Real estate is one of the most popular alternative investments out there, and for good reason. For starters, real estate is traditionally a decent inflation hedge and way to diversify away from the market during downturns. Secondly, it can provide fixed-income for landlords or shareholders of income-generating properties.
There's also a range of ways to invest in real estate, including:
Rental properties – Of course, purchasing rental properties the old-fashioned way is still an option. But you’ll likely need to save several thousand dollars for a down payment and take out a mortgage to finance the property. You’ll also need to devote time and money to maintenance and other tenant inquiries. Despite these costs, rental properties can be a lucrative long-term investment.
Farmland – Farmland is an interesting alternative to rental properties for those interested in real estate investing. You won’t need to manage an entire farm, either. Platforms like AcreTrader and FarmTogether allow accredited investors to purchase a stake in U.S. farmland.
Depending on the platform you use, you could purchase shares of a farmland-focused fund, or benefit from fractional or sole ownership of a farm. Minimum investments generally start around $15,000.
REITs and fractional ownership – A REIT is a business that owns, and often operates, commercial properties. The properties may include apartments, office buildings, self-storage facilities and more. When you invest in a REIT, you can access a portion of the income these properties generate. Some REITs are available on public exchanges, while others are only accessible through private companies. You might need to be an accredited investor to invest in a private REIT, but some platforms like Fundrise allow everyday investors access.
Fractional ownership works differently than a REIT. Instead of investing in a company that owns real estate, you own a portion of a property itself. Platforms like Pacaso simplify the process of purchasing a fraction of a residential property. You can also opt to resell your portion for a future.
Between potential property appreciation and cash distributions, there's plenty of upside for this alternative investment. And crowdfunding companies and REITs are also making it easier to get in on the action without needing much capital.
2. Collectibles
Another alternative investment category that's been growing in popularity in recent years are collectibles. And, like real estate, crowdfunding platforms have joined the space to let investors purchase fractional shares of a range of assets.
Investing in collectibles can provide diversification and potentially higher returns than certain traditional investments. Linking your investments with collectables that interest you is a great way to turn a hobby into a money maker.
Art – Investing in artwork is a popular option for those looking to diversify, and doing so can provide valuable protection against inflation. According to data from ArtPrice, a company that tracks the art market, fine art has outperformed the S&P 500 considerably since January 2000.
Wine – Not only is it fun to drink, but wine can also be a valuable alternative investment. For example, the Liv-ex Fine Wine 1000 index, which tracks 1,000 popular wines across the globe, returned 22.28% over the past year. By comparison, the S&P 500 was down 18% during the same time period.
Stamps – Long regarded as a stable asset, stamps can be a smart investment if you want to diversify your portfolio. In general, rare or specialty stamps in excellent condition fetch the most value.
If you’d like to invest in stamps, you can purchase them directly through a private sale, stamp auction house, or internet dealer. To find a reputable stamp dealer, consider searching the American Philatelic Society’s member database
3. Private equity
With private equity investing, the idea is to invest in promising businesses as an angel investor and to then benefit from potential company growth and a higher valuation down the line.
Traditionally, this alternative investment has only been available to venture capital firms or immensely wealth individuals. Platforms like OurCrowd and SeedInvest let you invest in a range of startups across sectors like technology, healthcare, food, and more. And you don't need to have millions of dollars to get a seat at the table.
One downside worth noting is that private equity can be very risky. And, unless a business gets acquired or begins generating enough cash to pay shareholders, you might not see returns for years. Plus, many platforms still require being an accredited investor to join.
4. Hedge funds
While hedge funds are traditionally only open to accredited investors willing to invest large sums of money, they're still one of the most popular alternative investing options. This is because a hedge fund can invest in pretty much anything, ranging from regular stocks and ETFs to alternative assets like crypto and real estate.
Hedge funds “hedge” portions of their portfolios by shorting certain positions, which helps reduce risk and provide more stable returns, even if the overall market is down.
This is a fairly simple explanation, and different hedge funds and fund managers may use different techniques of varying risk levels. But ultimately, hedge funds make money by taking management fees and performance fees, so their goals are aligned with investors.
5. Cryptocurrencies
Cryptocurrency is one of the stranger alternative investments. This is because crypto isn't as good of an inflation hedge as previously thought, and Bitcoin has become increasingly correlated to the stock market over time.
That said, you can still consider diversifying some of your portfolio with crypto if you believe in the underlying blockchain technology and that crypto is here to stay. And major crypto exchanges let you buy crypto with funds right from your bank account, so getting started is simple.
6. Commodities
Another classic alternative investment people often turn to during periods of high inflation or to diversify are commodities, like gold and silver. But you can also invest in commodities like agricultural products, oil, livestock, and similar raw materials.
One advantage of this alternative investing strategy is that commodities don't always correlate with market movements. So, you can park some of your portfolio in assets like gold and potentially ride-out a downturn.
However, one disadvantage of commodities is that they don't typically produce income. Thankfully, you can get around this with options like gold ETFs or investing in companies directly involved in commodities that pay dividends.
7. Private debt
While sometimes on the riskier end of the spectrum, debt-based investing is another alternative investment you can consider.
Peer-to-peer lending is one popular example whereby investors lend money to individuals instead of going through an intermediary like a bank.
Venture debt is another example that harkens back to the startup investing idea. But the overall idea is the same: you can potentially generate returns by lending out capital. The main risk is that your borrower defaults and that you can't recover any or all of your loan.
8. Derivatives
One final alternative investment you can consider are derivatives. These are financial contracts where the value depends on an underlying asset or group of assets. As the underlying asset changes in price, so too does the derivative.
Futures contracts, swaps, and options are popular examples of derivatives. Derivatives are often used by hedge funds or traders to help manage risk. However, retail investors can also experiment with options trading or futures through many leading online brokers.
Just note that there can be immense risks with derivatives since value depends on the underlying asset value. So, if you hedge your bet incorrectly and prices change inversely to what you thought, you could lose an astounding amount of money. And if you're trading on margin, you could lose even more money than you invested in the first place.
Important considerations before investing
Now that you know the best alternative investment platforms, there are several more factors to consider before making an investment:
- 1 Risk tolerance: As with any investment, it's important to consider your risk tolerance before diving into the world of alternatives. Some of these assets are more speculative and can have large price swings. More conservative investors may prefer fixed-income options like bonds or middlegrounds like dividend stocks.
- 2 Timeframe: Since many alternative assets are illiquid, you generally have to hold them for the mid to long-term. This makes them a poor choice for short-term investments or parking extra cash you might need in the near future.
- 3 Due diligence requirements: Researching various alternative assets can take a lot of work, especially if you're buying from another individual instead of a platform. But even on alternative investing platforms, doing your own due diligence and weighing the pros and cons is important. This all takes time, so alternative assets aren't always so passive upfront.
Bottom line with alternative investments
Alternative investments aren't the right choice for every investor. And at Moneywise, we still love good old fashioned stocks and ETFs. But if you want to diversify your portfolio with some non-traditional assets, alternatives could deserve a spot in your portfolio.
It's still important to consider the pros and cons and how alternatives fit into your overall asset allocation. However, with alternative investing platforms, it's never been easier to add assets like fine wine or luxury cards into your portfolio.
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Tom Blake is a staff writer who specializes in cryptocurrency, investing, and passive income.
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