2020’s economic uncertainty has led many investors to seek alternative investments with low correlation to the stock market. The following curated list features platforms that allow non-accredited investors to participate in these offerings.
Disclosure: This article is not investment, tax, or legal advice, nor is it a solicitation for investment. I may have an affiliate relationship with some of the companies listed below. Furthermore, I am not a financial expert and offer this only as a way to share my experiences.
For organizational purposes, the alternative investments are grouped in 10 categories shown in no particular order:
- Real estate ownership
- Real estate lending
- Startup investing
- Precious metals
- Hedge funds
- Peer to peer lending
- Business lending
- Aged drinks
When applicable, each company will be associated to tags outlining the investment parameters. Expected return is based on either the company’s advertised returns or average historical data and may not be sufficient for comparing between alternatives. Note: Although some companies have no minimum investment, a nonzero starting capital may be required such that minimum fees do not cause the investment to become unprofitable.
1. Real Estate Property
Fundrise was one of the first companies to allow general investors to participate in non-public real estate investing. Upon funding an account, the investor’s capital is distributed across a selection of Fundrise eREITs which are LLCs that partake in the purchase, renovation and rental of real estate properties.
DiversyFund allows investors to participate in the purchase and rental of multi-family properties via their REIT structured funds. Dividends are automatically reinvested. Fund returns were 18% and 17.3% for 2017 and 2018, respectively.
Nico allows investors to participate in the ownership of real estate properties in the Echo Park neighborhood of Los Angeles. The company is structured as a Delaware public benefit corporation which allows it to prioritize both shareholder profit as well as actions that benefit society.
ConcreIt offers a fully automated platform for the investment in real estate properties. They have an early redemption program that allows investors to withdraw their investment in the short term minus 20% of aggregate distributions (if requested in less than a year). To enable this plan, the company sets aside reserve capital that is replenished using the company’s cash flow. However, the platform is very recent and has no history of returns.
2. Real Estate Lending
Groundfloor allows investors to participate in the lending of real estate loans. Groundfloor originates loans to third parties (usually investors looking to flip a home) using funds sourced from investors that can diversify by buying a small amount across multiple loans. The website could benefit from an overhaul but it does allow an investor to either manually select loans or automatically diversify via their “investment wizard”.
3. Startup Investing
Republic allows individuals to invest in startups. Usually investments are made via Crowd SAFEs which are converted into company equity in case of a liquidity event such as an acquisition or IPO. They do not charge fees to the investor and offer an autopilot option where an investor can setup a desired amount per investment and frequency which reduces the need to actively search for opportunities. They also allow the use of credit cards to fund investments.
My first investment in the platform was in 2018. I have made a few other investments since but have not realized any gains or losses yet. The expected hold time for these investments is 4 to 6 years. However, having been a startup founder myself, I know that a startup’s trajectory can be unpredictable.
StartEngine allows individuals to purchase shares of private companies. Some campaigns charge investors a 2.5% fee upon purchase but most of StartEngine’s revenue comes from a 6% to 8% fee charged to companies raising capital on the platform. My first investment on the platform was in 2018. I have made other investments since but am yet to realize any gains or losses. The expected hold time for these investments is 4 to 6 years.
- Debt in the form of a loan or revenue share.
- Convertible notes or Simple Agreement for Future Equity which convert to company shares upon certain triggers.
WeFunder was the first company I used to invest in startups (2018) but am yet to realize any gains or losses from my investments. The expected hold time for these investments is 4 to 6 years. They charge a 2% fee (minimum of $8) for investing via a linked bank account and 3.5% via credit card.
4. Precious Metals
Due to the variation and cyclicality in returns over time with commodities, I will not be posting an expected return in this section. A comparison of the return of these commodities against major ETFs over different time frames can be found here. It is worth noting that when investing in commodities one should consider the premium of the dealer (the difference between sell price and official price also called spot).
Gold, Silver, Platinum — Stored (OneGold)
OneGold is a new offering by APMEX that allows the purchase of gold and other precious metals via a mobile application or website to be stored by them. There is a 0.12% fee for the storage of gold with an annual minimum fee of $20. At the time of this writing there is a 1% spot premium when purchasing gold and 3% for silver. The investor can request shipment of physical gold to their residence.
Gold — Stored (Vaulted)
Vaulted allows investors to purchase gold that is then stored at the Royal Canadian Mint. All purchase and sell orders incur a 1.8% fee and gold stored is charged at 0.4% per annum. Opening an account is straightforward and funds can be deposited to your vaulted account via a linked bank account.
Gold, Silver, Palladium and others (APMEX)
APMEX was founded in the year 2000 and has a catalog of over 10 thousand precious metal items and numismatics. The items purchased are shipped directly to your selected address for self storage. This does have the advantage of not incurring annual storage fees but implies you are responsible for the safety of your assets. The bullion coin I ordered from them arrived within 3 business days of purchase and was packaged professionally.
Gold, Silver, Palladium and others (JM Bullion)
Founded in 2011, JM Bullion advertises having sold over $3 billion in precious metals. Their website is fairly straightforward to use and orders ship free if above the minimum of $99. The item I ordered arrived within a week of placing the order. The packaging was not as professional as that of APMEX but was sufficient.
FarmAField allows investors to hold equity in cattle. Lots of cattle made available in the platform are ready for resale approximately 1 year after purchase.
6. Hedge funds
Hedge funds usually require investor accreditation and have considerable minimums. TitanVest is a robot advisor that mimics strategies used by hedge funds. It is actively managed and invests capital directly in individual stocks with an automatically adjusted hedge (short) position to limit risks and maximize profit.
7. Peer to Peer Lending
Constant allows investors to crowdfund loans. The account yields 4% for any uninvested capital. The investor can opt to invest in crypto-backed loans for returns of 7–7.5% or with loan originator loans (buy-back guarantee from lender) at up to 11% annual interest. They allow the use of Zelle to fund an account and receipt of funds usually happens within 24 hours.
LendingClub allows investors to purchase notes corresponding to fractions of loans. With a $1000 minimum, the platform diversifies the investment with notes of several different loans. The investors can tune the risk grade and the amount per loan in order to adjust expected returns.
8. Business Lending
Crowdsourced Lending (Mainvest)
Mainvest allows investors to purchase revenue sharing notes for loans to local brick and mortar businesses. The investor then receives a share of the business revenue until the principal plus interest is paid in full or until an agreed upon date (5 or more years from round closure date in some cases). The website is well designed and easy to invest. Investments are made via a linked bank account. I would like to see a more clear expected APY per investment on their website. Currently the investor needs to calculate based on the total yield and time of loan which makes it harder to compare investment opportunities.
KickFurther allows investors to participate in the purchase of inventory for online businesses. Profit is then shared between the company and the investor as the inventory sells.
Worthy bonds are used to provide asset backed loans to American businesses. Bonds are issued at a 3 year term with 5% APY and a minimum investment amount of $10. It is possible to withdraw the investment prior to the end of the 3 year period.
StreetShares bonds are used to provide loans to veteran owned businesses. Minimum investment is $25 for an expected 5% APY. StreetShares co-invests which may imply a higher level of due diligence when originating the loans. 3 year hold period with a 1% fee for early withdrawal. Website looks older than some of the newer alternatives such as Worthy.
9. Aged Drinks
Vinovest allows you to invest in fine wine without the work required to manage your own inventory. Upon creating and funding an account in their platform, they invest your money on a selection of wine (that can be customized by the investor), stores the bottles with insurance and liquidates them when they find an appropriate offer.
Some of the wines would ideally age for 30–50 years to reach peak value. However, expect to hold investment for 3 to 7 years. Can liquidate at any time but process usually takes about 1 month. Can also request bottles delivered.
WhiskyInvestDirect allows private investors to partake in day trading and long term appreciation of Whisky. The company is a new venture by BullionVault which has a strong track record in the market of precious metal trading and storage.
Otis allows investors to purchase shares in collectible assets such as paintings, comics and others. Investor receives a return when and if Otis sells the item for a higher price than it was purchased for. Mobile app is well designed and easy to use. However, offerings are limited and the company has no history of returns. The company keeps a 10% share of profits to finance operations.
Masterworks allows investors to purchase shares in works of art (paintings). Assets are kept in a climate controlled facility at Delaware Freeport and may be available for viewing at their members-only gallery in New York.
The growth of FinTechs has opened up new opportunities for investment in assets previously available to few. The list above outlines some of these new companies offering a range of returns with different levels of risk and hold period for an investor to choose from.