If you’re on the path to wealth building, FIRE or personal financial independence, you’ve probably worked hard to check off the boxes on the list of “must do” personal finance steps.
Reduce expenses. Save up an emergency fund. Pay off debt. Max out 401k. Invest in index funds. Purchase real estate. You know, the list of classic steps, as outlined in every personal finance book and blog ever written.
Once you completed the “must haves,” you probably explored stocks, bonds, mutual funds and ETFs.
Once that is covered (more boxes checked!), what’s next?
Alternative investments, made online via crowdfunding platforms, is a strategic option worth considering.
Why Invest in Alternative Investments?
For institutions and the wealthy, alternative assets have long been key to big picture investment strategy. And for good reason. They diversify your portfolio and add the potential for high returns. They are usually uncorrelated to the macro economy so they’re less influenced by market ups and downs. Sounds good right about now in this COVID downturn right?
Crowdfunding platforms opened up this valuable asset class to “every day” individual investors when they arrived on the scene a few years ago (thanks to the JOBS Act). Now virtually anyone can invest in commercial real estate, business loans, startups and collectibles (all alternative investments) without having to be an accredited investor.
Not only do these new platforms bring accessibility, they make it super easy too. For example, you can get started with real estate investing with Fundrise in a matter of minutes and for as little as $500.
Another “pro” that I personally think is underestimated and not talked about is that these platforms also make investing really interesting, in a whole new way.
For example, while some invest in alternatives to diversify their portfolio (my husband), others simply find this asset class more interesting to study (me). Study fine art, wine and music royalties? Yes, please. And for the sake of investing in our financial future. Sounds even better. I’m even thinking about teaching my kids about finance by having them choose some investments in video games through Fig/Republic. These kinds of things make learning fun and engaging for
me the kids, even at a young age. And what a great way to teach them about finance and investing in a way that is relevant to them.
What are some risks with alternative investments?
Of course with the diversity and potential for high returns there are risks to consider as well.
Alternative investments carry more risk. Often the risk is losing all the money you invested. With many, you are not able to sell the asset in a public market so you have to wait for a liquidity event to get your money back.
All that to say, you must do due diligence when you invest in alternatives. Also, to get back to the classic personal finance check-off boxes I mentioned earlier, alternatives are the area to explore after you’ve done the “must have” work (emergency funds, savings, stocks, bonds, etc.). You probably shouldn’t be looking into alternative investing platforms if you have credit card debt and need to get your emergency fund in check, especially with the impacts of COVID-19.
3 Easy Ways to Get Started With Alternative Investments
If you are looking to diversify your portfolio, here are three easy ways to take the next step to invest. The platforms below are open to non-accredited investors and require a (relatively) small investment to start.
Equity: Invest in an Early Stage Startups (Real Estate and Video Games) with Republic
- Website: Republic
- Investment Types: Private startups, video games, real estate
- Minimum Investment: $10
Republic is an online investment platform where anyone can invest in private startups with as little as $10. The company launched with a goal to provide capital to underserved markets and provide investment opportunities to all investors (the kind of opportunities that used to be available to only the ultra wealthy).
Republic’s founders are Angelist alumni so you can count on credibility and experience. Their site stands out for their commitment to diversity and including minority-founded startups in their offerings, “because talent is evenly distributed, but opportunity is not.”
Republic recently sold out of an offering with $11 million in accredited investors subscriptions and $5 million by non-accredited investors. The future is looking bright for crowdfunded private investing!
Check out Republic to invest in startups.
**New** Republic recently acquired Fig and Compound. That means you can also invest in video games and real estate on their platform. (You can read more about Fig in our post here.)
Real Estate: Invest in REITS with DiversyFund
- Website: DiversyFund
- Investment type: Commercial Real Estate
- Minimum Investment: $500
DiversyFund is a crowdfunded commercial real estate investment platform. The San Diego-based company (hey – we’re neighbors!) differentiates itself in the space because the company owns and manages properties directly (vs. acting as a broker that matches investor with projects). Cutting out the middle man means no management fees.
The minimum investment is $500 and it’s open to non-accredited investors making DiversyFund an easy, affordable way to get into commercial real estate. One thing to note – all dividends are reinvested so investors won’t see any income until the properties are sold. This could be a benefit if you don’t want to deal with taxes on income. Invest for the long term (3-5 years).
The DiversyFund founders are experienced commercial real estate investors and their website is distinguished by a “let’s give everyone access to the same wealth-building opportunties used by the top 1%” vibe. It screams “empower the every day investor and democratize the investing landscape!” I dig it.
Check out DiversyFund to start investing in real estate.
Water: Invest in Startups focused on Water Technologies with WaterWorks
- Website: WaterWorks
- Investment types: Startups focused on sustainable water technology and projects
- Minimum investment: $500
WaterWorks is a “funding portal” that connects investors to technology companies and projects seeking capital to fund innovative water solutions. Expect opportunities in desalination, plastic reduction, smart pumps, filtration technology, algae blooms and red time reduction.
According to their site, the opportunities listed with WaterWords are likely to be with small companies that have a limited track record. So, as usual, it’s important to read the details and do your research on each opportunity before investing. You’ll have to review each one to learn about limitations on the offering but in general, anyone over 18 can participate in WaterWorks opportunities.
The pressures of climate change, population growth and unforeseen global challenges like COVID-19 could cause clean water shortages so this may be a valuable area for investors who are thinking ahead. WaterWorks is one of the first fundraising platforms in the water sector. If you’re interesting in exploring this area, give them a look!
Check out WaterWorks to invest in water innovations.
Money Minx Take on Alternative Investing
We’ve been placing small bets in different alternative investment platforms and so far we like what we’ve seen. Our main goal is diversification and we’ve found lots of interesting new ways to look at investing. You can read about our personal experiences here and here.
Have you tried alternative investing yet? We would love to hear about your favorite platforms and how you got started.