Yieldstreet Review: Invest in Alternative Assets With Only $500
Yieldstreet lets you invest in alternative assets with as little as $500. The crowdfunding platform offers a curated selection of alternative investments, periodically including environmental, social, and governance (ESG) options. Learn if you should invest.
Anna Ng Updated February 10th, 2022
Rating: Good (4.0 / 5)
- Investment Type: alternatives
- Minimum Investment: $500
- Fees: 0%-2.5%
- Historical Return: 10.6%
- Term: from 3 months to 5+ years
- Open to accredited and non-accredited investors
- Access to alternative investments in multiple asset classes
- Low minimum investment
- Some alternatives have a low correlation with the stock market
- Invest with a self-directed IRA
- The Prism Fund is open to non-accredited investors
- Clear and transparent investment terms
- Most investments are only for accredited investors
- Most investments are highly illiquid
- Yieldstreet is a relatively new platform
- 1-2% fees on most investments
- Opaque and esoteric investments that are hard to understand
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What is Yieldstreet?
Yieldstreet is a crowdfunding platform for alternative assets. Investments like real estate, legal finance, or supply chain finance have historically been reserved for hedge funds, family offices, and pension funds. With Yieldstreet, you can diversify your portfolio with assets that have historically had a low correlation with the stock market.
Yieldstreet differentiates itself from other platforms by offering many asset classes and ways you can invest. They also help you match investments with your goals, be it income or growth.
So far, they’ve funded $2.7 billion, returned $1.3 billion to investors, and repaid 188 individual offerings. Yieldstreet has returned 10.6% net of fees annually since early 2017. It is one of the few crowdfunding platforms to disclose past performance. (Of course, past performance doesn’t guarantee future performance.) The platform has attracted over 350,000 members, and an average investor invests in 6.5 opportunities.
Yieldstreet was cofounded by Milind Mehere, a serial entrepreneur, and Michael Weisz, a former credit investor. They’ve raised over $300 million in funding.
What can you invest in?
Yieldstreet lets you invest in multiple asset classes:
- Real estate
- Private equity
- Venture capital
- Legal finance
- Commercial finance (e.g., supply chain financing, medical receivables)
The investment team selects less than 10% of the opportunities they review. Yieldstreet prefers asset-backed investments from experienced asset managers like Raistone Capital, LawCash, and Athena Art Finance Corp. Ideally, investments should have a low correlation with the stock market, too.
Except for the Prism Fund, most offerings on the platform are reserved for accredited investors. To be accredited, you need to earn at least $200,000 a year for two years ($300,000 for couples), or your net worth, excluding your primary residence, must be greater than $1 million.
There are several ways you can invest:
- The Yieldstreet Prism Fund. Most first-time Yieldstreet investors start by investing in the Prism Fund. You don’t need to be accredited and can start with a $500 investment. The fund invests in multiple asset classes and pays a quarterly distribution
- Thematic funds. If you are an accredited investor, you can pick from a list of thematic funds that invest in alternatives like art or structured credit. Each fund holds multiple investments, helping you diversify. The minimum investment is $10,000, though some funds have $25,000 minimums
- Individual investments (build your own portfolio). You can invest in a curated list of offerings across multiple asset classes with varying yields and terms. You need to be an accredited investor and must invest at least $10,000 per offering
- Short-term notes. You can also invest in short-term notes, which are a higher-yielding alternative to money markets and CDs. The notes have 3 or 6-month maturities. As of February 2022, Yieldstreet launched 45 series of notes; 34 of them were repaid in full, and the remaining notes are performing as expected
Yieldstreet Prism Fund
- Accreditation: none
- Minimum: $500
- Distribution: 8%
- Liquidity: quarterly
- Fee: 1.5% of invested assets
The Prism Fund is a collection of alternative investments across asset classes like real estate, art, consumer, legal finance, corporates, and commercial. In the past, private credit investments were available only to institutions and family offices.
The fund has raised over $87 million in assets and pays an 8% distribution. Distributions are automatically reinvested unless you choose to opt out and get cash instead.
The Prism Fund’s main goal is to help you generate income, so it tries to invest in cash flow generating asset-backed opportunities. As of 9/30/2021, around 30% of the fund was invested in real estate.
The Prism Fund costs 1.5% of invested assets; no fee is charged on the small percentage of the fund that’s in cash. And Yieldstreet may let you redeem shares once a quarter.
The Prism Fund is not available to investors in Nebraska or North Dakota.
- Accreditation: must be accredited
- Minimum: from $10,000
- Returns: vary by offering
- Target term: varies, current funds have 5 – 7-year terms
- Fee: 1%-2% management fee, 0.25% fund expense fee, 5-15% incentive fees (a percentage of returns over target return)
- Some funds are IRA-eligible
Thematic funds are less diversified than the Prism Fund, which owns different types of assets. However, thematic funds give you access to multiple investments within an asset class. You can access venture capital, art, and private equity and get diversification benefits.
Here are the thematic funds Yieldstreet is marketing today:
- Venture Capital Fund managed by the StepStone Group
- Structured Credit Fund managed by Onex
- Art Equity Fund from Athena Finance Corp
- Private Equity Fund from Bonaccord
Single offerings on Yieldstreet
- Accreditation: must be accredited
- Minimum: from $5,000
- Target term: varies, generally 4-5 years
- Fee: 2% management fee, 0.25% fund expense fee
If you want to pick individual investments, you can invest in a curated selection of private debt and equity offerings. Needless to say, picking individual investments is riskier than investing in a diversified fund or even a thematic fund.
Sample investments include:
- A multi-family property in Dallas, Texas
- A multi-family apartment complex in Boston, MA
- A portfolio of 19 multi-family buildings in Ohio
Short term notes
- Accreditation: must be accredited
- Minimum: $500
- Annualized return: 3-4%
- Maturity: 3 or 6 months
- Fee: none
Short term notes are a higher-paying alternative to money market funds and CDs. It’s a way to park cash for a few months and generate income. The notes on the platform are currently returning an annualized 3-4%, which is better than the 0% yield offered by money market funds. Interest is paid monthly.
Yieldstreet issues the notes and uses the money to fund other investment opportunities on the platform.
ESG Investing with Yieldstreet
Yieldstreet does not have a sustainable investing focus – in fact, they periodically showcase energy portfolios. However, they’ve also offered ESG opportunities like ESG-themed portfolio of structured notes. (Structured notes are hybrid securities that are issued as debt but with outcomes tied to the performance of the underlying stock.)
You can invest in alternatives with a self-directed IRA. Yieldstreet lets you open a traditional or Roth IRA, though you need to pay account maintenance fees. These fees range from $299 to $399 depending on your account size. Also, you can’t use the Yieldstreet IRA to invest in opportunities from other platforms.
🔔 Looking for more options? Rocket Dollar is a self-directed IRA provider that lets you invest in alternatives from many platforms.
Yieldstreet Wallet is an FDIC-insured bank account held at Evolve Bank & Trust. Yieldstreet pays 0.20% annual interest on the cash you keep in the account. It is much better than 0.01% offered by some big banks or 0% offered by many brokerage accounts, but not as good as 1%+ you can earn from banks like Quontic or Aspiration. The main point of having the Yieldstreet Wallet is that you can quickly deploy cash on investment opportunities.
How do I invest?
You must be a U.S. citizen or resident to invest. International investors can’t use the platform at this time.
To start investing, you need to:
- Verify your identity
- Verify your investor accreditation by submitting documentation, such as tax documents (you don’t need to verify your accreditation if you are only investing in the Prism Fund)
- Link a U.S. bank account
Is Yieldstreet safe?
Yieldstreet is a well-established crowdfunding platform that has generated a strong track record throughout its history. It is a registered investment advisor regulated by the SEC, and its financials are audited by Deloitte & Touche LLP. Cipperman Compliance Services LLC serves as the Chief Compliance Officer.
However, all investments involve risk. Higher-yielding investments, such as the ones Yieldstreet offers, typically come with more risk. Yieldstreet had a borrower default in the past, though investments on the platform are typically asset-backed, which can improve recoveries in case of default.
Besides, crowdfunding is a new concept that has not been through a recession. Yieldstreet’s track record is relatively short, and their 10%+ returns are not guaranteed going forward.
Unlike bank accounts, alternative investments are not FDIC-insured. Because they are illiquid, you can’t get your money back whenever you want, either. Investments can even stretch further than their target term or due date. And quarterly liquidity offered by the Prism Fund is not guaranteed.
💰 Should you invest with Yieldstreet?
- Yieldstreet offers investors with above-average incomes (who aren’t super-rich) a way to invest in previously inaccessible assets
- It’s a way to diversify your portfolio and improve its performance by getting into assets that have a low correlation with the broader market
- However, Yieldstreet is best if you already have a solid portfolio of stocks and bonds and want to diversify further. You should be fine with locking up your cash for years
- We would avoid investing more than 5-10% of your assets in alternative assets from all platforms
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NOT INVESTMENT ADVICE. The content is for informational purposes only; you should not construe any such information as investment advice.