With stocks jumping 90% or more in a single day, it’s hard to imagine why you wouldn’t want to get on that rocket ship with everyone else. When the gravy train with biscuit wheels is rolling through town, you get on board.
But what about when times aren’t so good?
When future outlooks are grim at best, potentially higher yielding, outside-of-the-box investments start to look a little more appealing. It’s also a way to wildly diversify your holdings.
Some of these options may be a little familiar, while some could be considered downright weird. Please bear in mind, I’m not endorsing any of these companies and don’t have any relationship with them, just pointing out they’re available and facilitate some interesting ways to diversify your investments.
Peer to peer lending is something you may have encountered once or twice. Some example of peer to peer lending companies are Lending Club and Prosper that offer loans for things like debt consolidation, home improvement loans. Peer to Peer lending options can also be available to borrowers with lower credit scores they may not be able to qualify for loans at other institutions.
On the other side, people that have invested money on the platform fund the loan and receive a share of interest payments. For as little as $25 you can start investing in various types of loans with different risk ratings. They stick pretty close to the same way bonds are rated.
For example on Prosper, their highest grade is AA and is followed by A and down in alphabetical order to E. The lower the rating, the higher the risk. Something on the low end of this would be akin to a ̶j̶u̶n̶k̶ ̶b̶o̶n̶d̶ high-yield bond. Prosper boasts a historical return averaging 5.3%.
If peer to peer lending sounds like something you might be interested you can find out more here
Or if you’re not interested in investing, but still curious about their options, you can filter by the available loans here
Think angel investing, but with much more people instead of a single person.
Slow and smaller returns post great recession caused investors to start looking elsewhere for higher yields and ramped up the startup funding boom.
Investing in these types of early stage companies was previously something only reserved for the well connected, usually deep pocketed, angel investors of Silicon Valley and across the country.
Companies like SeedInvest and Angel List are making it possible to invest in these very early stage start ups. The platform will do the due diligence and review all the fundamentals of the underlying business and state that only 1% of the companies that apply are accepted.
You can get started with a $500 minimum investment for SeedInvest and $1000 for Angel List. SeedInvest didn’t state any capital requirements but Angel List requires you to be an Accredited Investor.
You can absolutely go out and buy the next painting you see at a garage sale, take it to Antiques Roadshow, and see if you’ve hit the jackpot, but that’s more of a gamble than an investment.
For getting your feet with with investing in fine art, you can take a look at a fractional ownership platform like Masterworks. Materworks invests in high quality blue chip art, then hold for 3–10 yrs before selling or allow you to sell your shares on the secondary market. On the Masterwork site, they cite a statistic of:
Artprice, blue-chip art has outperformed the S&P 500 by 180% from 2000–2018. Deloitte estimates the total value of art to be $1.7 trillion.
Just don’t get too excited, their platform appears to be invite only for now.
When a popular vineyard has a good year resulting in above average crop, that will translate into what’s called a ‘good vintage’ and is one of the main factors behind a wine’s price, especially one worth investing into. It used to be you would need to have a fancy wine cellar stocked with fine vintages that you never plan on touching more than showing off to some friends to be a wine investor. That’s no longer the case.
Many of the platforms in this article use some flavor of the fractional ownership model where instead of having to purchase the entire asset outright, you get a percentage of ownership based on the amount of money you put in.
VinoVest the ‘investment sommelier’ takes a different and intriguing approach. Rather than selling shares of an asset or creating something akin to an index like Masterworks, Vinovest will
“Select, buy and store your wine for you. Access your wine online or in real life anytime”.
Talk about a liquid asset. If you’re still with me, thank you and I apologize.
Vinovest boats features like full insurance, verification and authentication and storing securely and properly. They even have wine futures (En Primeur) where you can invest in wine still in the barrel 2–3 years before release and even have an index that tracks the fine wine market
This could be a good option is you’re a wine lover and could see yourself enjoying some of your investments from time to time since they have the unique feature of handing over wine from your portfolio instead cashing out.
Buy land they aren’t making any more of it — Mark Twain
I’m sure you’ve seen that quote before. I wanted to include at least one type of investment in Real Estate, but stick to items a little more exotic and unique than something like a REIT.
Here I’m talking specifically about farmland. This is an interesting one because without actually tending to the land and farming crops, investing in farmland is just buying acreage and waiting.
Enter AcreTrader. AcreTrader allows you to invest in farmland by purchasing shares of different income producing farm properties. Income generally comes from renting out the land for farming use, or selling the property for a profit. AcreTrader reports a 12.2% average annual return and that $10,000 invested in farmland in 1990 would be worth over $199,700 today. That outperforms most assets classes except for REITs over the same time frame.
AcreTrader requires a minimum of $1000 to get started investing. I did come across one similar platform called FarmTogether, but as of now, they’re only open to accredited investors (see above for more info on what an accredited investor is)
This is by far one of my favorite alternative investment options. Maybe not so much for the monetary returns, but more so for the emotional returns.
My first job was sweeping out my grandfathers antique shop when I was around 9 or 10. Antiques and Collectibles will always hold a special place for me. Collectibles can be anything from toys, coins, comic books, sneakers, trading cards, the list goes on.
The traditional way of investing in collectibles used to be buy and hold, a long time. That’s still an option, but like many of the other alternative investments, there’s a platform that buys high quality assets, securities them with the SEC and sales shares of ownership.
Meet Otis, ‘The Stock Market for Culture’. Word of caution, be prepared for a wave of nostalgia to come washing over you after viewing some of their ‘drops’.
A quick skim brandishes images of Super Mario Brothers 3 NES game sealed and graded, first issues of X-Men, Teenage Mutant Ninja Turtles, Avengers, and Vintage Jordan’s. Including a pair of game-worn shoes from a legendary moment where MJ shattered the backboard that even boasts of still having a piece of glass embedded in it’s sole. It’s physically painful how cool some of the items are, so be careful not to get sucked in.
It’s unclear what types of returns you might be able to expect, but it has some positively obscenely cool items for you to invest in.
A private mortgage is exactly what it sounds like. You’re buying the loan attached to a borrowers primary residence.
We’ll be looking more at the purchasing of existing mortgages rather than funding new ones our self. Paperstac is a platform that facilitates mortgage note investing.
They handle online closings and offer a wide array of listings to invest from. They offerings include notes that are in first or second position, meaning either the first, or second loan against the title of the home. In the event of a foreclosure, the first lien holder has the priority and would be paid out first, the remaining amount would go to pay off the loan in the second lien position. This means second position loans typically have higher yields to go along with their higher risk.
They also have options that are performing and non-performing meaning payments are current or behind. Most of the notes they’re offering are probably lower than what you may have expected for a mortgage note, many being in the 15K — 60K range with various risk profiles and returns in the 3.75% — 12% range. If you’d like to skim some of the notes available you can view them here.
Diversification reduces risk by spreading your risk across different asset classes and categories. We really focused on the different part here. These alternative investments are definitely outside the box and could lend your portfolio a new level of diversification outside of traditionally liquid assets.
Some of these investments have a highly emotional component (looking at you collectibles) so don’t get too wrapped up in investing on a platform because you could own a small slice of something ultra cool.
However, that’s the exact same mechanism that gets people to pay those high prices to own a forgotten piece of their childhood delivering returns to people.
With the sun shining, everyone seems to be out making hay and piling into the market. It hasn’t and will not always be that way, there are always ups and downs in a cyclical market. The next time we see ourselves in a market downturn and returns begin to stagnate, or if you’d like to greatly diversify, these are some interesting and unique options to consider.