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As platforms like Yieldstreet continue to expand access to alternative investment opportunities, it's important to evaluate different strategies and asset classes to decide on an investing plan that works for you. Fortunately, there are more options to choose from today than ever before, and advancements in technology have led to increasingly innovative and exciting ways to invest.
5 IDEAS FOR INVESTING DURING MARKET VOLATILITY
With inflation in the U.S. still uncomfortably high, investors are increasingly in search of ideas for navigating an influx of volatility in the traditional markets. In the past, myriad strategies have been deployed in attempt to avoid losses and even capitalize on wild price swings, and today online investing platforms like Yieldstreet make it easy to take advantage of alternative options in the private market while the economy remains uncertain.
If you're looking to invest in this current environment, but aren't quite sure where to start, here are five investment ideas to spark your inspiration:
Real Estate Investing
Real estate investing is a famously popular alternative to the traditional market, and the diversity of different investment strategies makes it an attractive option during heightened volatility. While some investors might seek to actually purchase a property if the price is right, this is far from the only approach. For example, those looking to start smaller can buy into a real estate investment trust, or REIT, which delivers consistent returns in the form of dividends.
Fine Art
Fine art is widely considered to be a wise hedge against market volatility, as many works are thought to be timeless and tend to appreciate value regardless of the state of the economy. In fact, investments in fine art have collectively outperformed traditional markets for decades. And while this asset class has long been out of reach to most, almost anyone looking to invest in art can get started today on a platform like Yieldstreet.
Active Trading
While conventional wisdom tends to suggest that investors step back from high-risk assets like stocks and cryptocurrencies during heightened volatility, there are plenty of successful traders who will tell you the exact opposite. To be sure, actively buying and selling stocks or crypto in a volatile climate isn't for everyone, but those with nerves of steel who are willing to track price swings and execute trades in real-time have the potential to secure significantly outsized returns.
Peer-to-Peer Lending (P2P)
P2P lending can be an excellent way to earn passive income, as there will almost always be someone seeking a personal loan who might not have access to more traditional lines of credit. Moreover, P2P lending platforms tend to offer relatively high-interest rates on monthly payments, and investors can more or less exercise control over how much risk they're willing to take. Importantly, however, P2P loans are largely unsecured, and even the "lowest-risk" option can result in a hefty loss if a borrower can no longer satisfy their obligation.
High-Yield Savings
Finally, the most conservative approach to investing through volatility is to simply store your capital in a traditional high-yield savings account. This option is becoming more and more attractive as the Fed continues to hike interest rates, allowing investors to quietly grow their balance, and ultimately end up with more money to invest when the market turns around to the upside.
ART INVESTING VS. PEER-TO-PEER LENDING (P2P): HOW DO THEY COMPARE?
As platforms like Yieldstreet continue to expand access to alternative investment opportunities, it's important to evaluate different strategies and asset classes to decide on an investing plan that works for you. Fortunately, there are more options to choose from today than ever before, and advancements in technology have led to increasingly innovative and exciting ways to invest.
When evaluating options, it can help to narrow down your choices and compare different strategies side-by-side. To see how this works, let's take a brief look at two particularly interesting trends in the alternative investing space: Art and peer-to-peer lending (P2P).
P2P Lending - The Pros and Cons
P2P lending is often touted as a worthy alternative to credit, allowing lenders to provide personal loans to borrowers without the need to involve traditional financial institutions. The potential pros of this setup are difficult to ignore, as platforms like Upstart and LendingPoint can offer lenders interest rates as high as 30%. Naturally, this is more than attractive for investors seeking robust returns in the form of passive income, or regular monthly payments on a loan.
As for the cons, P2P lending can come with significant risks. For one thing, many individuals seeking loans on P2P platforms are those that traditional credit agencies would describe as "sub-prime," or individuals with low credit scores or minimal credit history. Moreover, P2P loans are generally unsecured, meaning if a borrower suddenly defaults, the lender is left out of the money, and with little to no recourse for recouping their initial investment.
Fine art has been outperforming popular index funds like the S&P 500 for more than 20 years, but investing in fine art hasn't always been easy for the average investor. Today, however, platforms like Yieldstreet allow investors to take a more accessible approach by adding shares of fine art to their broader portfolio, earning annual returns that can exceed 12%.
Art Investing - The Pros and Cons
Believe it or not, fine art has been outperforming popular index funds like the S&P 500 for more than 20 years, but investing in fine art hasn't always been easy for the average investor. Today, however, platforms like Yieldstreet allow investors to take a more accessible approach by adding shares of fine art to their broader portfolio, earning annual returns that can exceed 12%. Beyond impressively high returns, another pro is that the value of art isn't typically correlated to traditional markets, making it a potential hedge against periods of inflation.
And the cons? Well, art is considered a relatively illiquid asset, meaning physical works of art will be harder to sell for a profit than other assets like stocks or cryptocurrencies. Additionally, there is never a guarantee that a piece of art will appreciate, and shifting trends in the art world can sometimes tweak the value of an investment to the downside.
Overall, while both can be great alternative investing options, art and P2P lending are considerably different asset classes, and deciding between the two will depend on your ideal time horizon and appetite for risk. P2P is higher risk but can generate healthy returns in the short to medium term. Art may be less risky but could be better suited to those looking to maximize profit over the longer term.
5 ALTERNATIVE ASSET CLASSES TO INVEST IN TODAY
Amidst an ongoing economic downturn, investors are fleeing the stock market in search of alternative investment opportunities. Before the emergence of online alternative investment platforms like Yieldstreet, this would have been an incredibly difficult task for the average investor, but today it's as easy as identifying an alternative asset class that suits their objectives and finding the best option.
To help spark inspiration, here are 5 alternative asset classes available for investing in today:
Real Estate
In addition to being less correlated to the fluctuations of the traditional stock market, real estate has the advantage of being a diverse asset class that can provide investors with a wide range of opportunities. From purchasing an actual property or buying into a real estate investment trust (REIT), to renting out a vacant room in one's home, the real estate market has something to offer investors of all net worths and experience levels.
Art
Investing in art is one of the best decisions an investor can make during an economic downturn. For one thing, art investments have returned upwards of 360% since the year 2000, outperforming the S&P 500 by an impressive margin. And while almost no investor can afford to purchase the Mona Lisa, platforms like Yieldstreet provide easy access to fractional ownership of blue-chip artworks, allowing investors to gain exposure to the art world for an initial investment as low as $10K.
Private Equity
Private equity investments have a great track record for generating handsome returns, regardless of the economic landscape. And while investing in private equity often requires accreditation and a large initial investment, there are plenty of options available to non-accredited investors or those looking to get started at a lower price point. Options include online crowdfunding platforms that allow a pool of individual investors to fund a startup, or buying into an actively traded private equity ETF.
Cryptocurrencies
Despite their polarizing nature, cryptocurrencies have outperformed virtually all other asset classes on the market since their inception. Prices may not be faring well in this environment, but this can also be viewed as the perfect opportunity to gain exposure at a discount. Of course, past performance is never a guarantee of future performance, and investors who choose this asset class should be comfortable taking on a fair amount of risk, and be prepared to stomach wild price swings on a daily, or even hourly basis.
Peer-to-Peer Lending (P2P)
P2P lending has become an increasingly popular alternative to the traditional credit industry, and can be a great way for investors to earn passive income in the form of regular interest payments while they wait for traditional markets to cool off. However, investors should also keep in mind that the loans they provide on P2P platforms are largely unsecured, meaning they'll need to be comfortable taking on a loss in the event of a default.
Thanks to the growing prevalence of online alternative investment platforms like Yieldstreet, investing in private equity has become easier and more accessible than ever before.
WHAT ONE NEEDS TO KNOW TO GET STARTED IN PRIVATE EQUITY
Thanks to the growing prevalence of online alternative investment platforms like Yieldstreet, investing in private equity has become easier and more accessible than ever before. However, because access to this category has been historically limited to a very small portion of the investing community, there are still many investors who find themselves increasingly interested in the private equity space, but who may not know exactly where to begin.
To help get the ball rolling, here are just a few things investors need to understand to maximize success when investing in the private equity space:
Accredited vs. Non-Accredited Investor
In many cases, to invest in private equity, individuals will first need to qualify as an accredited investor. Until recently, achieving this status required a level of income that was largely out of reach for the average investor, but recent amendments to the rule now extend accreditation to individuals earning an annual income of $200,000, or who have a professional background in the finance sector.
However, most won't necessarily need to be an accredited investor to get started in private equity. For example, online crowdfunding sites allow nearly anyone to invest in private companies and startups at the ground floor, which can be a great way to earn positive returns over time as the company grows. Additionally, non-accredited investors can take the more traditional route of purchasing shares in a publicly-traded private equity firm or diversified private equity ETF.
What is a Capital Call?
Private equity investments can come with terms and conditions that the average investor may not be familiar with. For example, many PE funds utilize capital calls, which allow investors to commit a certain amount of capital to the fund while only paying a portion of the total investment up front. In such an arrangement, an investor may commit $100K while only making an initial deposit of $25K, but must also be prepared to deposit the remaining $75K, or "uncalled capital," when the fund requests it.
Capital calls have both benefits and drawbacks. On the positive side, investors can choose to store their uncalled capital in a low-risk investment account to earn additional returns until the funds are needed. On the negative side, investors will need to ensure the remaining amount is available to be deposited when the fund requests it.
Knowing Risk Tolerance
Finally, private equity is considered to be a relatively high risk investment category, and getting started will often require a sizable initial investment. However, investing almost always involves taking on a certain degree of risk, and it's simply a matter of investors taking the time to evaluate their own finances and personal goals to determine how much risk will be appropriate.
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