What Are Alternative Assets?
Alternative asset investments are investments that fall outside traditional asset classes such as stocks, bonds, or cash investments.
Alternative assets can include:
- Crowdlending from individual investors
- Collectible items
- Commodities or tangible assets (precious metals, energy, agricultural goods, etc.)
- Real estate lending
- Private debt to companies
- Private equity in startups and small companies
- Hedge funds
The defining characteristic of alternative assets is that they’re not traded in the public market.
This, unfortunately, results in most alternative investments tending to be illiquid assets.
But don’t let their limited liquidity stop you from investing in alternative asset options.
As they aren’t publicly traded, retail investors can access sought-after deals that the public still doesn’t have access to.
Couple this with limited regulations (when compared to traditional investments), and you’ll find that alternative asset managers and their investors could earn far higher returns than a traditional portfolio.
8 Common Types Of Alternative Assets
Here are the top eight alternative investment options for 2021:
1. P2P Loans
Peer-to-peer lending or ‘crowdlending’ is a way for an investor to loan money out to borrowers and earn returns on the loan's interest payments.
Invest via: Groundfloor
Groundfloor is revolutionizing peer-to-peer lending in real estate and making it accessible to all.
Groundfloor loans money to borrowers in the real estate industry and lets the investor purchase pieces of those loans. This way, each time a borrower pays their monthly interest, you’ll get a portion of it.
You can start investing with Groundfloor from $10.
As an investor, you don’t have to pay any fees on Groundfloor.
Groundfloor targets a 10% return rate.
When stored in the right conditions, the value of certain wines appreciates.
Fine wine investment gives you a chance to capitalize on their steady price increase. It’s been known to beat S&P 500 over the last 30+ years and is a great way to earn more returns.
Invest via: Vinovest
Vinovest is an online wine investment platform that lets you buy and sell a wide variety of investment-grade wines.
Their AI-based technology combines with recommendations from expert sommeliers to help you pick the right wines for your investment needs.
Vinovest builds your portfolio based on a personalized investment strategy based on your preferences. You buy wines at below market prices - directly from wholesalers, wine exchanges, or wineries.
Vinovest personally authenticates the bottles and stores them safely in specially selected wine cellars. You can choose to sell them via Vinovest or get them delivered directly to your home.
You can start investing with Vinovest starting from $1,000.
You’ll have to pay a fixed annual fee of 2.85% (or 2% for a portfolio worth more than $50,000). The fee is prorated across the year based on your account balance, and you’re charged a portion on a monthly basis.
Vinovest’s annualized return on their Moderate Plan is 12.4% and 16.6% on the Aggressive Plan.
High demand for rare real assets like art, antiques, and classic cars drives their price up over time.
Invest via: Collectable
Collectable helps you invest in fractional ownership of sports memorabilia like sports cards, bats, etc.
You can purchase shares of each collectible on the platform and even trade them with other investors. The value of your shares appreciates with the item’s price.
If they receive a request to buy the item, Collectable puts the proposal to vote. If the fractional asset owners (you) decide to sell the item, you get a proportional amount of the proceeds.
Investment minimums vary based on the offering. Some start as low as $5.
Collectable charges a 0-10% sourcing fee, and a market trading fee.
Returns vary from item to item.
In 2020, Collectible users voted to sell a Patrick Mahomes rookie card for $182,500. The sale earned investors a 35% return in just one month.
4. Precious metals
Gold and silver have historically been safe investments as their value consistently appreciates over time.
Invest via: Vaulted
Vaulted gives you the opportunity to invest in solid gold, as opposed to gold ETFs.
Vaulted assigns a proportionate part of a 99.99% pure gold bar in your name for each dollar you invest with them. These bars are manufactured by and stored in the Royal Canadian Mint.
You can also sell on Vaulted via a pre-set automatic transaction or at any time during the New York Stock Exchange’s working hours.
There’s no minimum investment.
Vaulted charges a 1.8% fee on all purchases and sales made on the platform. You also pay an annual maintenance fee of 0.4%.
Gold has appreciated by over 70% over the last five years. As of February 2021, gold prices are up to $57,000 per kilogram.
5. Real estate
Real estate investments were historically only available to high networth investors due to large investment minimums and an extensive amount of due diligence needed.
Invest via: Fundrise
Fundrise is an eREIT (electronic Real Estate Investment Trust) that makes real estate investment accessible to everyone.
It helps retail investors invest in a diversified portfolio of low-cost, commercial real estate.
You purchase shares of properties listed on their platform. Investors typically earn via monthly dividends that they can reinvest. Investors also benefit from property value appreciation after a liquidity event - usually held 5-7 years after launch.
You can start investing with Fundrise from $500.
Fundrise charges a 0.15% annual investment advisor fee and a 0.85% annual asset management fee.
Fundrise reported annualized returns of 9.74% in 2019. On average, you can expect between 8.7% to 12.4% returns.
6. Private debt
Lending money to businesses has traditionally been the role of an institutional investor like a bank.
But private debt makes this an investment opportunity for all.
Invest via: Yieldstreet
Yieldstreet gives investors the opportunity to invest in debt-backed alternative investment opportunities ranging from art and marine finance to even litigation investments.
An accredited investor can invest directly in one of Yieldstreet’s Individual Offerings or in Short Term Notes for three to six months.
Unaccredited investors can invest in Yieldstreet’s Prism Fund - which lets you invest in a portfolio spread across multiple asset classes.
Investment minimums can vary on a case-by-case basis, but they’re $5,000 for most Individual Offerings and $1,000 for Short Term Notes.
Non-accredited investors can begin investing in Yieldstreet’s Prism Fund starting from $1,000.
Yieldstreet charges a 0 to 2% management fee on all funds and a flat listing fee on the Individual Offerings. There are no fees on the Short Term Notes.
Yieldstreet targets returns between 8% and 15%.
7. Venture capital
Venture capital is another popular way to access private markets. Here, investors invest directly in private companies and startups - helping them grow rapidly.
Invest via: Republic
With Republic, retail investors can invest in high-growth companies at an early stage. They already have several high networth individuals, venture capital firms, and private equity funds investing with them.
You can review the pitches of companies listed on Republic and invest in ones that seem promising. In most cases, investors earn returns if the company lists an IPO or gets acquired at higher valuation.
You can begin investing with Republic for as low as $10. However, some companies may require minimums of $50 or $250.
Private investors do not pay Republic any fees. They take a 6% share from the listed company once it meets its fundraising goal.
Since each company’s performance differs, the return on investment on Republic varies from company to company.
8. Hedge funds
Hedge funds operate like a mutual fund - where investors pool money into an investment portfolio that’s managed by a professional hedge fund manager. Their carefully-crafted asset allocation aims to yield high returns for investors.
Traditionally, this alternative investment fund was reserved for high networth individuals only.
Invest via: Titan
Titan isn’t a hedge fund - it's a robo-advisor.
However, it gives you access to investment advice by fund managers who’re experts from Wall Street. This lets you invest like a hedge fund without the expensive investment minimums or fees that a top financial advisor would charge.
Working under Securities and Exchange Commission regulations, Titan deals in responsible investment advice to help you try and beat market volatility and consistently earn returns.
Choose one of two investment strategies:
- Titan Flagship: large-cap companies to outperform S&P 500 index
- Titan Opportunities: small and mid-cap companies to outperform the Russell 200
Individual investors can start investing in Titan starting from $100. You can also invest via a pension fund or retirement account like a Roth IRA with a minimum of $500.
For deposits below $10,000, Titan only charges a $5 monthly fee. For anything above $10,000, you’ll be charged a 1% advisory fee (annual), paid monthly.
Your returns on Titan depend mostly on the nature of your financial asset portfolio. However, it had an annualized equity return of over 20% in Q2 of 2020.
On average, Titan targets a 15% return on your investment.
Alternative Assets For A Better Future
Many retail investors have stuck to traditional investments due to their steady return rates and low minimums. But they’ve also missed the wealth creation and diversification opportunities that alternative asset class options give you.
Alternative asset investing is now as popular as ever - helping investors like you capitalize on this profitable asset class.
And if you want to learn about the best options out there, just go through Moneymade - it has all the information you’ll need to make an informed investment decision!