Asset classes like stocks, ETFs, and fixed-income securities fill most portfolios. But hedge funds and high net worth investors have focused much of their efforts on alternative investments to diversify away from the stock market.
YieldStreet makes similar styles of alternative investing possible for the average investor, at least on a limited level. At its core, YieldStreet offers a crowdfunding platform that uses pooled funds to make investments in assets like art, supply chains, real estate, litigation financing, and commercial financing.
All investments on the platform are considered high-yield, offering dependable passive income. Although the company is gaining traction with attractive offerings, there are some significant drawbacks. Should you sign up for the platform? Read our YieldStreet review to learn more.
Key Features of YieldStreet
Headquartered in New York City, YieldStreet has built a significant following since its inception in 2014. The platform has earned its popularity by providing easy access to assets that were previously difficult to gain exposure to. Some of the key features of the platform include:
Alternative Investment Opportunities
You’ll find a wide range of alternative assets on the YieldStreet platform and multiple investment options for each asset class. The assets are grouped into funds, each with its own minimum investment, yield, and time to maturity. The options on the platform include:
- Litigation Finance. YieldStreet’s first deal was in litigation finance, also known as legal finance. In these deals, the company crowdsources funds from investors to cover the cost of legal fees associated with ongoing litigation. In the end, the settlement from the lawsuit is used to pay the cost of the loan. Investors are paid interest on the money they invest in these deals, which are generally structured as short-term notes or structured notes.
- Marine Finance. Shipping companies borrow millions of dollars to cover the cost of new ships, fleet maintenance, and more. You can invest in these loans on the YieldStreet platform.
- Commercial Finance. Many corporations rely on debt to stay in business, borrowing money to cover the cost of manufacturing large orders, to purchase base materials in bulk, and to pay other overhead costs. YieldStreet gives you the ability to invest in these types of loans as well.
- Real Estate. The company securitizes residential and commercial real estate investments in a similar manner to real estate investment trusts (REITs).
- Fine Art. A single piece of fine art can sell for millions of dollars, but you don’t have to have millions to have exposure to the category. You can invest in shares of artworks on the platform, as well as funds that hold multiple works.
- Supply Chain. Building and maintaining supply chains is expensive business, and companies often need to finance the process until their products are sold. You can tap into these financing deals on YieldStreet.
All the investments on the platform are high-yielding investment vehicles. If you live on the income your investment portfolio generates, they’ll make a great choice for some of your portfolio’s allocation.
YieldStreet makes adding alternative investments to your retirement portfolio a breeze with Traditional IRA, Roth IRA, and 401(k) accounts. The accounts come with reasonable fees and have the potential to generate significantly higher yields than traditional fixed-income securities like bonds and Treasury inflation-protected securities (TIPS).
However, there are some potential drawbacks to investing in alternative investments with your retirement account.
First and foremost, alternative assets are relatively illiquid. When buying funds through YieldStreet, although you will receive regular interest payments, you’ll likely have to wait years to cash out your principal investment. Also, alternative investments are often associated with high levels of volatility, which increases their risk.
Given these drawbacks, it’s not a good idea to invest a large percentage of your retirement savings in alternative assets on YieldStreet or elsewhere. But diversifying with a small percentage of your portfolio could lead to a higher level of regular income.
The majority of YieldStreet funds pay regular passive income in the form of monthly or quarterly distributions, depending on the funds you invest in. All income funds we’ve reviewed come with significantly higher yields than most fixed-income investments and dividend stocks.
For example, you’ll receive an 8% annual yield when investing in the company’s multi-asset fund, the YieldStreet Prism Fund.
YieldStreet Prism Fund (For All Investors Big & Small)
The Prism Fund is one of the most important funds for YieldStreet, at least in terms of its relationship with the average investor. Unfortunately, most individual offerings on the platform are only available to accredited investors and come with high minimum investments, but the Prism fund brings the company’s alternative style of investing to the masses.
You don’t have to be an accredited investor to get involved in the Prism Fund, and the minimum investment is just $500. It’s one of the most accessible funds on the platform. At the same time, it’s a multi-class fund, making it one of the most diverse options.
When you invest in the Prism Fund, you’ll gain exposure to a mix of all asset classes YieldStreet is involved in, from real estate to art, commercial, legal, and marine investments. Like other income funds on the site, Prism also has a high 8% annualized distribution rate.
The total annual return on the investment won’t be seen until it matures because the fund is illiquid. However, upon maturity, YieldStreet will begin selling assets within the fund, at which point you’ll tap into price appreciation of the assets if you’re invested.
User-Friendly Investment Platform
Investment platforms are often convoluted with a wide range of tools most investors won’t use . The YieldStreet platform is an exception to the rule.
All funds on the platform are categorized by asset class. When you click on the fund, you’ll be brought to a prospectus that tells you everything you need to know relating to its assets held, expected returns, and fees.
If you’re happy with what the prospectus says, you simply place an order to invest in the fund and become an owner.
YieldStreet isn’t just an alternative investments platform; it also provides savings accounts under the YieldStreet Wallet brand. The savings accounts are backed by a trusted financial institution, Evolve Bank & Trust, and all accounts are FDIC insured.
You’ll earn a 0.20% APY on all balances in the YieldStreet Wallet, which is more than 15 times the national average money market account return. Although this is an attractive rate for a money market account, you may want to shop around for high-yield savings accounts if you’re looking for yield on your cash savings. Some providers, such as GO2Bank, offer APYs as high as 1%.
Advantages of YieldStreet
YieldStreet has become a premier platform for alternative investments. Some of the biggest advantages of the platform include:
- Passive Income. Many of the funds on the platform offer monthly or quarterly interest payments, giving you the ability to earn meaningful passive income.
- Potentially Higher Returns. The vast majority of funds on the platform are expected to produce far higher annualized returns than traditional stock market investments. Although there’s additional risk to consider, the high returns are attractive if you have a decent risk tolerance.
- Diversification. The platform gives you a nontraditional option when it’s time to diversify your portfolio. This could help to offset losses should your traditional investment holdings take on water.
- User Friendly. The YieldStreet platform is easy to navigate, and data is laid out in a way that makes it easy to digest. You shouldn’t have any issues navigating the platform, even if you have little to no computer experience.
- Prism Fund. The Prism Fund is the star of the YieldStreet platform. You’ll earn a high return, pay minimal fees, and have access to some asset classes that only high net worth investors, institutional investors, and hedge funds generally have access to.
Disadvantages of YieldStreet
There are plenty of reasons to consider signing up for YieldStreet, but there are also some disadvantages to think about. Some of the biggest include:
- Most Funds Are Only Available to Accredited Investors. In order to qualify as an accredited investor, you must have a sustained annual income of $200,000 or more, or a $1 million or higher net worth. Unfortunately, the average individual investor will not qualify to make most investments on the platform.
- High Management Fees. You’ll pay between 1% and 4% annually to invest in YieldStreet funds. That’s significantly higher than the average expense ratio of mutual funds and exchange-traded funds (ETFs).
- High Minimum Investments on Most Funds. With the exception of the Prism Fund, every fund we reviewed had a minimum investment of $5,000 or more, and most minimums were $10,000 or higher. High minimum investments are a major barrier to access for the average investor.
- Alternative Investments Lack Liquidity. Alternative investments are known to be relatively illiquid. The vast majority of YieldStreet investments must be held to maturity, although YieldStreet rarely buys back a limited number of shares. You have to be willing to keep your money in the pot for several years before maturity. So, don’t invest any money you’re going to need access to any time soon.
How YieldStreet Stacks Up
One of YieldStreet’s biggest competitors is MasterWorks. Here’s how the two alternative investment platforms stack up against each other:
|Types of Investments||Fine art, real estate, legal, marine, commercial.||Fine art only.|
|Banking & Savings Services||Yes||No|
|Minimum Investment||Most funds require over $10,000; a few as low as $500.||$500 total in $20 increments.|
|Management Fees||1% to 4% annualized.||1.5% annualized.|
|Accessibility||Most investments are only accessible to accredited investors.||All investments are available to everyone.|
YieldStreet Frequently Asked Questions (FAQs)
Chances are that you’ve got a few questions about investing on YieldStreet. Here the are answers to the most common questions:
Is YieldStreet a REIT?
YieldStreet is not a REIT, it’s a crowdfunding and investment platform. However, the platform does offer investments in funds that act as REITs.
How Long Has YieldStreet Been Around?
YieldStreet was founded in 2014 and investments became available to the public in 2015.
Is YieldStreet Prism Fund Safe?
The YieldStreet Prism fund is a highly diversified investment portfolio made up of a wide range of alternative assets. On one hand, the heavy level of diversification adds to the safety of the fund, and investors have been paid as agreed to date.
However, alternative investments are known for high levels of volatility, which ultimately equates to high levels of risk. Although it’s safe to bet a small portion of your investment portfolio on the fund, you shouldn’t go betting the house.
YieldStreet is a great platform for the right investor — in particular, an accredited investor with a history of investing in alternative assets. Unfortunately, the platform doesn’t provide many options for non-accredited investors, and investing in alternative assets comes with increased levels of risk.
Nonetheless, the Prism Fund is a great option if you’re an average investor, giving you access to investments in asset classes you wouldn’t have otherwise. However, you should do your research to get a full understanding of these assets and their risks before diving in.