One of the things that might be frustrating to newer investors is learning the importance of diversifying your portfolio and then finding out there are different asset classes required and special guidelines to be met in order to do so. This is the case with a lot of alternative assets, such as commercial real estate, fine art, litigation finance, marine finance, and even investment opportunities in commercial companies through short-term notes.
Traditionally, all of these sorts of investment options would require you to be something called an accredited investor. An accredited investor is someone who meets certain financial criteria and is thus allowed to invest in certain financial products. Typically, accredited investors are individuals who have high liquidity and net worth, earning at least $200,000 year-over-year for 2 years or more – or having a net worth of $1M or more (not including the value of your primary residence).
As you can imagine, it can be difficult to reach this sort of network level if you’re only investing in a self-directed IRA or the stock market. Adding real estate investments and other types of investments to your portfolio can be a major boon when it comes to diversification. Yieldstreet offers an investment platform that lets individual investors have a piece of the pie without being an accredited investors. Learn more about how Yieldstreet works in this review so you can get started investing in real estate and other alternative asset classes.
As you’ve already read, Yieldstreet is an investing platform that offers a wide range of alternative asset classes to individual investors without the need for applying for accredited investor status. Yieldstreet does this by functioning similar to various crowdfunding platforms and leveraging the power of the collective to help you gain access to high-yield investment categories like real estate, art, and more.
Yieldstreet was founded with the belief that hedge funds and the wealthy shouldn’t be the only sorts of investors able to enter the lucrative world of real estate investing, as well as commercial investing and other areas of alternative investment like art and litigation finance. Yieldstreet’s website proudly proclaims that they’re “creating a fundamental paradigm shift by providing investors access to investments previously available to the top 1%.” As such, many of the asset classes you can invest in on Yieldstreet are aimed at generating passive income later in life without the annual income requirements typically required of accredited investors.
How does Yieldstreet work?
Getting started with Yieldstreet is relatively simple and straightforward. It all starts with creating an account by signing up for the platform on the Yieldstreet website.
When you first start to create an account, you’ll be asked if you’re familiar with alternative investments or not. This question helps ensure that you get the sorts of materials and resources necessary to make the best use of Yieldstreet and understand what your investment decisions mean. The three options you have to choose from are “I’m new to alternatives,” “I have some experience,” and “I’m a seasoned investor.”
If you select that you’re new to alternative investments, you’ll first be sent to a page that explains a little bit more about what alternative investments are and how Yieldstreet helps you take advantage of them. From there, you’ll be asked what your primary financial goals are for using Yieldstreet. If you’re familiar with alternative investment classes or are a seasoned investor, this is the page you’ll be sent to immediately from the previous screen.
Yieldstreet offers four main goals or reasons you may be interested in using their platform: generating income, diversifying your portfolio, investing outside of the stock market, or generating long-term growth. Once you’ve answered this question, you’ll be prompted to provide information about the approximate size of your investment portfolio.
Finally, you’ll be asked whether or not you’re an accredited investor. It’s worth noting that although Yieldstreet makes their investment assets more accessible to individual investors without accredited status, the platform also features lots of assets only for accredited investors. This means that if you’re already accredited — or become accredited during your investments on Yieldstreet — you’ll have access to even more investment opportunities.
After you’ve answered these questions, Yieldstreet will recommend one of several funds or investment opportunities for you. The most commonly recommended fit is the Yieldstreet Prism Fund, which is a multi-asset class fund offering that’s set up for generating passive income. Yieldstreet also offers individual offerings and short-term options if you’re already an accredited investor.
Once you’ve selected the right account type and fund for your goals, Yieldstreet asks for some basic personal information to create your account. This includes entering your legal first and last name, as well as entering an email address and password to use to log in to your account. You’ll then be asked whether you want to set up an investment account now or keep learning about alternative investments. If you set up your investor account at the same time you register for Yieldstreet, you’ll be asked whether you’re looking to create an individual account, Yieldstreet IRA, or an entity account for your business.
You’ll then need to confirm your identity. YIeldstreet lets you verify your identity by entering your legal name, address, date of birth, and social security number. You’ll also enter your phone number on this page, which can be used to receive updates about your Yieldstreet investment account via text message.
Once you’ve completed the account creation and identity verification process, you’ll be ready to start funding your investment portfolio with Yieldstreet.
How much does Yieldstreet cost?
One thing to note about Yieldstreet is that when you’re looking at its estimated returns, those returns are inclusive of their fees. This means that you don’t have to do the math yourself, but it is important to recognize that Yieldstreet does charge fees to its users.
Typically, Yieldstreet charges a management fee of about 1% or 2% on all offerings on an annual basis. While this is generally the only sort of fee you’ll experience on the platform, you may sometimes be charged an originator fee. Yieldstreet’s FAQ also claims, “There are also flat annual fund expenses investors are responsible for per investment (these are paid from initial interest distributions from your investment) that vary slightly depending on the legal structure of the offering (either SPV or BPDN structure).”
Other than the minimal management fees associated with Yieldstreet, creating and funding an account on the platform is completely free of charge. That being said, you will need to have a minimum investment of at least $1,000 to get the ball rolling with Yieldstreet’s Prism Fund.
Variety of investment options
Compared to some other investment platforms that offer access to asset classes usually kept behind closed doors for accredited investors, Yieldstreet offers a robust variety of investment options. From real estate and art to marine, aviation, and legal investment opportunities, there’s plenty to choose from when using Yieldstreet.
Easy to use
If you’re trying to invest in many alternative assets as an accredited investor, there are a lot of hoops to jump through. With Yieldstreet, you don’t have to deal with a pile of paperwork and can get straight to investing in the assets that most interest you. From account creation to tasks like adding funds to your Yieldstreet wallet or choosing an investment, Yieldstreet makes the entire investment process straightforward and user-friendly.
When you consider the typical consumer interest rates lenders offer borrowers, the management fees Yieldstreet charges are much more attractive than the kinds of interest payments most consumers come into contact with. All of this means that you get to keep more of the return you get on your investment, which is a big deal for many investors looking to maximize their earnings each year.
Who is Yieldstreet best for?
Individual investors without accreditation
Since Yieldstreet’s stated goals are to provide access to investment opportunities usually reserved for the 1%, it’s not surprising that Yieldstreet is best for individual investors without accreditation status. If you’re interested in getting into real estate or art investing, but don’t have a high enough net-worth or income to be designated as an accredited investor, platforms like Yieldstreet are one of your only options to diversify your portfolio with alternative investments.
Even though Yieldstreet is designed for everyday investors, a lot more variety is offered to accredited investors using the platform. If you’re interested in choosing your asset classes rather than using the Yieldstreet Prism Fund (or want to dabble in Yieldstreet’s short-term offerings), you’ll need to be an accredited investor.
Who shouldn’t use Yieldstreet?
Investors who are just starting out
While a lot of the functionality and promises offered by Yieldstreet are quite compelling, it’s worth remembering that not every investment opportunity is right for every investor. Generally speaking, it’s wise to only invest about 10% of your portfolio in alternative investments. As such, if you’re new to investing, it may make more sense to stick to stocks, bonds, and mutual funds or index funds. While these aren’t as sexy as investing in pieces of art or condo complexes, they’re much more stable for someone just getting started building their nest egg.
Pros & cons
Yieldstreet vs. Crowdstreet vs Fundrise
Yieldstreet isn’t the only game in town when it comes to alternative investment crowdfunding platforms. Here’s how Yieldstreet stacks up against two major competitors: Crowdstreet and Fundrise.
Between 1% and 2%
Real Estate, Marine, Art, Legal, Commercial, Aviation, Consumer
Between 1% and 1.75%
Real Estate, Commercial
Like Yieldstreet, Crowdstreet offers individual investors the opportunity to invest in real estate. That being said, Crowdstreet is limited solely to real estate and commercial real estate deals. Additionally, while Crowdstreet’s minimum management fees are a bit lower on the high end, with a minimum investment amount of $25,000, Crowdstreet is not very friendly to beginners or those with a lower net worth.
Fundrise has much more affordable management fees than both Yieldstreet and Crowdstreet. It also has a smaller minimum investment of only $500 to get started. That being said, Fundrise is limited to only real estate investments. If you want a much broader array of alternative investment asset classes to choose from, Yieldstreet is the clear winner, with seven times as many options.
Alternative investment asset classes are different investment opportunities that generally offer returns with a low correlation to the stock market. Whether this is real estate, art, or marine vessel deconstruction (when a vessel is sold for parts), investing in assets that aren’t a part of the stock market can help you protect your portfolio through diversification. As such, many people like to invest in alternative investments as a way of generating more of a guaranteed passive income for later in life.
When do I make money from your investments on Yieldstreet?
The answer to this question depends on what exactly you’ve invested in. In some cases, your investment will be on a predefined schedule that offers monthly, quarterly, or annual payouts. In other cases, such as with pre-settlement litigation advances, your payout will occur when a specific event occurs. Still, other returns may happen years from now, based on the schedule described to you when you select a certain option or fund.
Should I pre-fund my Yieldstreet Wallet?
Yieldstreet accepts funds via ACH bank transfers. If you’d like, you can pre-fund your Yieldstreet Wallet to cut down on the time it takes to fund certain investments; however, that isn’t necessary if you’re willing to wait for your bank to process the transfer.
The bottom line
For individual investors who are eager to diversify their portfolios with options beyond the traditional stock market, Yieldstreet offers a lot. From investing in art and real estate to more unique options like pre-settlement litigation advances and maritime deconstruction, the variety offered by Yieldstreet is second-to-none. That being said, most individual investors will have to start off using a Yieldstreet Prism Fund (which is a multi-asset fund), rather than get to pick exactly what they’re interested in investing in. That sort of functionality is reserved for accredited investors who choose the platform for its simplicity and due diligence.
While it’s generally recommended to focus on index and mutual funds if you’re new to investing, the diversification opportunities offered by Yieldstreet will be attractive to investors who are willing to put up a portion of their portfolio in alternative investment classes. Especially if you don’t currently have accredited investor status, Yieldstreet provides a pathway to wealth creation that otherwise wouldn’t be available to you. Yieldstreet is thus as much philosophy about gatekeeping in the financial industry as it is a platform for exploring and leveraging investment vehicles outside of the stock market.
Ultimately, it’s important to only invest money you can afford to lose, but with industries like aviation and real estate continually boasting impressive returns, there’s a lot of potential in alternative investment classes. If you’re interested in learning more about alternative investing or want to get involved, Yieldstreet is a good platform for that kind of work.
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