Alternative assets have long been a critical part of the investment strategy for the wealthy and for institutions like university endowments. They’re used both to diversify risk away from stocks and bonds and into things like real estate, as well as to add the potential of big gains from exposure to things like venture capital.
But those kind of investments also play a vital role in fueling the entrepreneurism that has always been the beating heart of innovation and job creation in our economy. Maybe it’s the fabled garage startup looking to fund a disruptive new technology. Or perhaps a real estate developer willing to transform a dilapidated property into sorely needed new housing and office space. So many of the projects that help keep our economy and our communities growing and vibrant depend on financing in one form or another.
And when the supply of that financing is restricted to a few wealthy institutions and VC firms, then whole categories of projects and companies that don’t fit their mold simply can’t find the financing they need, choking the growth and renewal our economy depends on.
Leveling the Playing Field
In 2012, the JOBS Act was signed into law, ushering in a new era for for matching investors with people and companies looking for funding. Now the same disruptive forces that have lowered costs and opened up information throughout other parts of our economy are transforming alternative investing and business financing, helping to shape a healthier and more diverse economy for everyone.
Real estate, venture capital, private equity, commercial debt, personal loans, and litigation financing are just a few of the options in this rapidly growing ecosystem of alternative investments now available to regular investors, in some cases starting with just $50. But that also means a lot of new terms to learn, risks to understand, and choices to make.
Who We Are
In 2016 when my wife and I started researching options for investing in some of these with our own money, it was very hard to find a comprehensive list of platforms across all of those investment types. While we found some great sites out there about equity crowdfunding and other online alternative investments, they tended to stick within specific categories (like real estate or startups). And if the alphabet soup of regulations and rules confused two MBAs with more than a decade each of experience as senior executives, we knew there was an opportunity to help others make some sense of this exciting but confusing landscape.
So what began as a few Google docs to track what we were learning about the full range of choices eventually became a database of more than 100 different platforms (alongside a blog) to share that knowledge with others on the same journey.
Humans are wired to learn by tinkering, and I strongly believe that tinkering while minimizing risk is still the best way to grow your knowledge and confidence in finance and investing (and plenty of other things!). I’m an MBA by training and a CEO by trade, but am a tinkerer at heart. As Donella Meadows puts it in her classic book, Thinking in Systems:
What’s appropriate when you’re learning is small steps, constant monitoring, and a willingness to change course as you find out more about where it’s leading.
My wife and I are both experienced executives (me on the corporate side, my wife in the non-profit sector) who love to learn and grow, and help others do the same and this site is one way of doing that. We also both believe it’s important for everyone to develop financial literacy so they can better understand and take control of their financial future.
The Fine Print
This is a fantastic time to be an amateur investor, but of course YMMV (your mileage may vary). I’m a big fan of placing lots of small bets as a way to both diversify risk and to maximize learning, and before you put your hard-earned money into any alternative investments, keep the following in mind:
- Don’t risk what you can’t afford to lose, especially when you’re just starting out.
- If you have any consumer credit debt (credit card, auto loan) you should pay that off before putting any money into alternative investments.
- Most alternatives are relatively illiquid investments, which means that if you’re going to need the money anytime soon, put it in the bank instead.
- Risk and reward fall on a spectrum: you won’t hit a home run with P2P loans, but you’ll earn cash interest payments every month, which is fun. On the other hand, with a venture investment you’re unlikely to see any of your money for years (if ever), but there’s at least a small chance that one of those investments will be the next Facebook.
- Most people, most of the time, should have most of their money (especially their retirement savings) in a diversified mix of stocks and bonds using low-cost index funds.
- Nothing on this website constitutes specific legal, financial, or tax advice. Consult a professional if you need help with your particular situation.
Want to learn more but aren’t sure where to start? You can explore 120 crowdfunding investment platforms in our database and learn more about the nuts and bolts of crowdfunding and alternative investing on our blog. Did you know you can use a self-directed retirement account to invest in many alternative investments? Rocket Dollar makes it easy, and when you sign up using that link you'll be helping to support YieldTalk.