Investments

What Is Yieldstreet?

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 7 minute read

Most investment portfolios consist of several equities, ETFs, and fixed-income instruments. However, in order to diversify away from the stock market, hedge funds and high net worth investors have put most of their attention on alternative assets.

The common investor may now participate, at least to some extent, in alternative investment strategies like those offered by YieldStreet. YieldStreet’s main feature is a crowdfunding platform where investors may pool their money to purchase artwork, real estate, finance legal cases, or finance businesses.

All of the investments available on the site have a high yield and consistently pay out. The firm is making headway thanks to several appealing offers, but it also has some major flaws. Will you benefit from becoming a member? Get the details in our YieldStreet review.

YieldStreet’s Key Features

With its headquarters in New York City, YieldStreet has attracted a sizable user base since its launch in 2014. The platform’s success is due in large part to the fact that it makes investing in previously inaccessible assets simple. Features that set this platform apart from others include:

Alternative Investment Possibilities

The YieldStreet platform features a diverse selection of alternative assets and numerous investing opportunities across all available asset classes. The assets are organized into funds, each of which has its own entry requirement, return rate, and duration. Options available on the site include:

  • Legal Funding. Initial business for YieldStreet was in the form of lawsuit financing, often known as legal finance. To defray the expense of court-ordered legal representation, some companies are turning to investors via crowdfunding. The litigation payout is applied to the balance due on the loan. These transactions often take the form of short-term notes or structured notes and provide investors a rate of return on their capital.
  • Financial Services for the Marine Industry. To finance the purchase of new vessels, upkeep of the existing fleet, and other operational expenses, shipping corporations borrow millions of dollars. On YieldStreet, you have the option of purchasing these loans as an investment.
  • Banking on Business. Borrowing money to meet the expense of producing big orders, buying raw materials in bulk, and paying other overhead charges is a need for the survival of many companies. You may also invest in these kinds of loans on YieldStreet.
  • The Property Market. Similar to REITs, the corporation securitizes its holdings in residential and commercial real estate (REITs).
  • Excellence in the Arts. While it takes more than a million dollars to gain any real attention to the world of fine art, even just one piece may fetch tens of thousands. On this site, you may purchase fractional ownership in individual works of art or invest in funds that pool together a collection of different pieces.
  • In the Supply. Supply chain management is a costly endeavor, and businesses must typically front the money themselves until the items are sold. The YieldStreet platform provides access to various funding opportunities.

Investments for Retirement

The platform only features high-yield investment options. A portion of your investment portfolio allocation should be made up of them if you plan to rely on the income generated by your investments as a primary source of income.

With YieldStreet, you can easily diversify your retirement portfolio with alternative investments, whether you have a Traditional IRA, Roth IRA, or 401(k). Compared to more conventional fixed-income assets like bonds and Treasury inflation-protected securities, the accounts feature lower costs and the potential to provide far larger yields (TIPS).

Putting your retirement savings into non-traditional assets is not without risk. To begin, alternative assets tend to be less liquid than traditional ones. Although investors in funds purchased via YieldStreet will receive periodic interest payments, access to their initial capital may take several years. Furthermore, the volatility that is commonly linked with alternative investments also raises their inherent risk.

Due to these risks, it is not recommended to put a sizable portion of your retirement fund into alternative assets on YieldStreet or anywhere else. But even if you only diversify a little portion of your portfolio, you may find that your monthly income increases.

Continual Distributions

Most of the funds on YieldStreet distribute earnings on a regular schedule, usually once per month or once every three months. All of the income funds we looked at had yields that are far greater than those of bonds and dividend equities.

One of the company’s multi-asset funds, the YieldStreet Prism Fund, offers an annual yield of 8%.

YieldStreet Prism Fund (For All Investors Big & Small)

With regards to the ordinary investor, the Prism Fund is one of the most crucial funds for YieldStreet. The Prism Fund makes the company’s alternative investment strategy accessible to a wider audience than the platform’s individual products, which often require either large minimum contributions or only accredited investors.

You can invest in the Prism Fund with as little as $500 and there is no need that you be an accredited investor. It’s one of the easiest ways to invest on the exchange. It’s also one of the most flexible choices because it offers investments across many classes.

By purchasing shares of the Prism Fund, investors will be able to diversify their exposure to the many asset classes in which YieldStreet invests, including but not limited to real estate, art, commercial, legal, and maritime assets. Prism offers a high 8% yearly payout rate, similar to other income funds on the site.

Because the fund is illiquid, investors won’t be able to see their yearly return on investment until the investment matures. However, after the fund has matured, YieldStreet will start selling assets inside the fund, giving you access to any price appreciation of the assets.

Easy-to-Use Investment Platform

Most investors won’t bother using the platform’s many features because of the complexity of the interface. The YieldStreet ecosystem deviates from the norm.

The platform’s total money pool is divided up into various asset classes. If you select the fund, you will be sent to a prospectus detailing its holdings, returns, and expenses. If you’re sold on the fund after reading the prospectus, all you have to do is put in an order to buy shares.

Wallet YieldStreet

In addition to being a platform for alternative investments, YieldStreet also offers savings accounts called YieldStreet Wallet. Evolve Bank & Trust, a reputable financial organization, is behind the savings accounts, and your money is safe in their hands.

The YieldStreet Wallet offers an annual percentage yield (APY) of 0.20% on all balances, which is more than 15 times the rate of return offered by the typical money market account. 

This is a great rate for a money market account, but if you’re seeking a return on your savings, you could do better by opening a high-yield savings account instead. Providers like GO2Bank provide annual percentage yields (APYs) of 1%.

YieldStreet’s Benefits

In the realm of alternative investing, YieldStreet has quickly risen to prominence. In addition to its many other benefits, the platform also has:

  • Accumulating wealth without actively working for it. Monthly or quarterly interest payments are available on many of the funds listed on the marketplace, allowing you to generate substantial passive income.
  • The possibility of greater reward. Most of the funds you’ll see on the site aim to provide annualized returns that are far higher than those you’d get by investing in the stock market directly. If you have a high risk tolerance, the potential rewards are worth taking on the extra risk.
  • Diversification. When it comes to portfolio diversification, the platform provides a unique choice. If your conventional investing portfolio takes a hit, this might serve as a buffer.
  • Acceptable for the average user. It’s simple to go about the YieldStreet platform, and the information is well presented. No prior knowledge of computers or the internet is required to use this platform.
  • Insight Fund, or Prism Fund. On YieldStreet, it’s all about the Prism Fund. Gain access to asset classes often reserved for wealthy individuals, institutions, and hedge funds while still paying low costs.

YieldStreet’s Drawbacks

While YieldStreet has a lot going for it, there are a few drawbacks to consider before signing up. Here are a few of the most notable:

  • Accredited Investors Only Can Invest In Most Funds. You are considered an accredited investor if you have a net worth of at least $1 million or a yearly income of $200,000 or more. Most investments on the site are unfortunately out of reach of the ordinary individual investor.
  • High Costs Due to Management. You should expect to pay between 1 and 4 percent yearly to put money into YieldStreet funds. As compared to the typical expense ratio of mutual funds and ETFs, it is extremely high (ETFs).
  • Most funds have high initial investment requirements. Every fund we looked at required an investment of at least $5,000, and the vast majority required at least $10,000, with the exception of the Prism Fund. Limiting factors for the common investor include high minimum investments.
  • Non Conventional Investments Be short on cash. It’s common knowledge that alternative investments are difficult to sell quickly. Although YieldStreet occasionally repurchases a small number of shares, the vast majority of investments made through the platform must be kept until maturity. You need a long time horizon and the patience to wait for your money to grow in the pot. Don’t risk any funds that you might need to use shortly.

Bottom Line

For the proper type of investor, specifically one with experience investing in alternative assets and who is accredited, YieldStreet is a fantastic resource. Non-accredited investors are limited in their choices on the platform, and the higher risks associated with alternative asset investments just add insult to injury.

However, the Prism Fund is an excellent choice for the everyday investor since it provides exposure to asset classes that the ordinary investor would not have access to otherwise. However, before investing, you should study the market and the dangers associated with these assets.

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