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Yieldstreet Review 2020: Earn Passive Income Through Alternative Investment?

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Written by Jason Dolan
Updated on May 13, 2020

Yieldstreet Review 2020

Getting into the world of alternative investments can be tricky. Especially if you have no knowledge of the subject and have concerns about losing your newfound wealth. For the most part, your investment portfolio should consist of time tested assets like stocks, bonds and real estate.

However, if you are looking to speculate with a small portion of your portfolio, alternative investments like art collections could be something that interests you.

Alternative investing has historically been available only to those that are extremely wealthy or very well connected. Now, thanks to crowdfunding, there are sites that bend the branch down a bit for more everyday individuals.

Today we are going to be taking a look at Yieldstreet and finding out what they bring to the table by offering alternative investments to individuals.

Summary

  • Yieldstreet is an alternative investment platform where you can invest in unique assets such as real estate, consumer finance, commercial finance, and litigation finance
  • They thoroughly scrutinize the investment opportunities in their funds and only about 10% of those actually make their way to their investors.
  • Yieldstreet also has an excellent track record so far without any loss of principal so far according to Yieldstreet.
  • However, keep in mind just like any other investment returns are never guaranteed and losses are possible.
  • Yieldstreet reports that investors have earned an annual return of 12.6% over the course of their operation. 
  • Yieldstreet has some useful features for its investors to take advantage of such as Yieldstreet Wallet, their high-interest cash account.
  • Generally, Yieldstreet investments are illiquid in nature, so the ability to sell is not always guaranteed. 
  • The majority of your money should be invested in time tested assets like stocks, bonds and real estate.
  • However, if you are looking to speculate in the realm of alternative investment this is an interesting option.
  • We would not recommend putting the majority of your money into an untested, alternative investment.
FeatureExplanation
Minimum Investment$10,000
LimitationsAccredited Investors Only
AssetsAlternative Investments
Investment CategoriesLitigation Finance, Real Estate, Commercial Finance, Consumer Finance
Fees1 To 2%
LiquidityLow, No Secondary Market To Sell Investments
Time HorizonVaries Based On Investment
Due DiligenceAbout 10% Of Reviewed Investments Are Accepted
High Yield Cash AccountAvailable To Non-Accredited Investors

View current Yieldstreet offerings here! 

What Is Yieldstreet?

Yieldstreet is an alternative investment platform that gives an ordinary investor the opportunity to get in on deals that would otherwise be out of reach.

They offer access to investments in 4 different asset classes: 

  1. Litigation Finance - These investments range from a variety of legal cases such as motor vehicle accidents, police brutality, assault or labor cases. 
  2. Real Estate - Invest in real estate in urban areas in properties with high loan to value ratios.
  3. Commercial Finance - Yieldstreet will offer commercial financing and loans to specific borrowers. Investors will earn returns based on the interest rate paid on these loans. 
  4. Consumer Finance - Yieldstreet offers marine, art and other consumer finance investments. Yieldstreet has a wide variety of deals, one including a loan to an NBA player for $200,000 that was secured by his million-dollar contract. 

The company was founded in 2014 by Millind Mehere. He reportedly created the organization because he had become frustrated with the lack of alternative investment opportunities available to investors who are not ultra-wealthy.

Since then they have grown to a user base of over 100,000 accredited investors with more than $600 million in assets under management.

While there is an added element of risk to alternative investments, many investors have used Yieldstreet to provide a passive revenue stream. These assets are also less correlated with the stock market, an added benefit! 

How Does Yieldstreet Work?

It’s free to open up a Yieldstreet account. However, you must be an accredited investor in order to take advantage of the offers that they have available. 

If you are considered an accredited investor, then you may be able to invest in Yieldstreet’s offerings on its platform. The minimum investment is typically $5,000 depending on the offer.

Yieldstreet is strict about the opportunities it allows on its site. According to Yieldstreet, only 10% of investments that they analyze actually show up on their online marketplace. However, it is important that you perform your own due diligence on each offering. 

What Is An Accredited investor?

If you are new to investing, the term “accredited investor” may be new to you.

The SEC defines such an investor as someone who is “financially sophisticated” and does not require the protection of merely investing in securities that have regulatory filings.

You are considered an accredited investor if you meet one of the following criteria:

  • An annual income of $200,000 or $300,000 jointly OR
  • A net worth of at least $1,000,000

If you are not an accredited investor, here are some other crowdfunding sites for non-accredited investors!

Yieldstreet Features

Yieldstreet High-Yield Cash Account

This is a feature on the Yieldstreet platform that is available to unaccredited investors. It is also something that accredited users can benefit from as well.

The Yieldstreet high yield cash account is FDIC insured, it also comes with an APY higher than most traditional banks. While it isn’t the best high-yield cash account around, you might find it convenient if you are going to be a Yieldstreet member.

Check the current APY rate here!

Pre-Funded Offerings

A pre-funded offering is something you will see on the Yieldstreet Marketplace from time to time.

This means that you will start earning interest immediately upon the acceptance of your investment instead of waiting around for the deal to become fully funded. During that time period, you would not ordinarily be earning returns.

The pre-funded offering is paid in full by Yieldstreet at the onset of the investment. The balance decreases as investors contribute money to the fund. 

Even if you have experience in alternative investing, you may not have run across a pre-funded offering before. These can be difficult to find on your own and something that Yieldstreet strives to give its members access to.

Yieldstreet Marketplace

Because Yieldstreet offers its investments in a crowdfunded environment, they use their marketplace to advertise available investments.

You will be able to observe all the fine print of an investment and make comparisons to other offerings in a much easier fashion than you could on your own. You can research important factors like terms of service and payout frequency. 

How Does Yieldstreet Make Money?

The company makes money in a few different ways, but for the purposes of their investors it really boils down to the fees.

Their management fee is anywhere from 1% to 4% depending on which offers you go with. If you have no point of reference, it might not seem like much but it is very high in comparison to other investment platforms.

Yieldstreet is charging users a premium since they are one of the only platforms offering alternative investment.

Keep in mind, you will be able to see the management fee associated with each offering on the marketplace before you actually invest. They are very transparent about this. 

There are also additional fees depending on the way each offering is set up, again this is available to be viewed in the details section of the marketplace.

These additional fees are dealt with on an annual basis. The first-year fees can be anywhere from $100 to $150. While every year after that is $30 to $70.

This may not have a large impact on your decision if you intend to invest a large amount as it will end up being a low percentage vs your returns.

Yieldstreet Track Record

Yieldstreet claims to this day that they have not lost investment principal on their offerings.

They make no claims that it will stay that way forever. Alternative investments are high risk, so make sure to do your due diligence before investing. 

However, if you are looking for a platform to invest in alternative investments, Yieldstreet does have an excellent track record. 

Is Yieldstreet Safe?

After spending some time going over the Yieldstreet website, it appears that they use most of the latest in encryption algorithms.

As far as the investments go, there are risks just like any other investment out there.

These alternative investments have many risks including the risk of default. This means you could end up losing some or all of the money that you invest.

To date, Yieldstreet claims that they have had $0 in a principal loss for their investors.

This is a great track record, but it does not mitigate the fact that it is possible to happen.

If you are specifically looking for the Yieldstreet Wallet feature then you will be happy to know it is held by an FDIC registered bank and insured for up to $250,000.

Generally speaking, most of your money should be invested in time tested assets like stocks, bonds and real estate. These assets have been earning returns for investors for hundreds of years.

You should consider alternative investments to be a speculation, not somewhere to invest your life savings.

Frequently Asked Questions

Who Is Yieldstreet For?

Yieldstreet is best for the investor that is interested in making alternative investments that would not typically be available for them in their current financial state. This is also for those who are looking to diversify out of the traditional stock, bond and real estate categories. This investment is available to accredited investors only, however.

What Is An Accredited Investor?

An accredited investor must have a net worth or assets under management of at least $1 million. They can also qualify as accredited if they make over $200,000 per year ($300,000 if married) and expect to make the same amount in the current year.

Can You Redeem Shares Early?

Yieldstreet investments are not liquid. When an investment is cleared and “complete," you are not able to cancel or modify this investment until the duration is completed. You cannot sell or redeem shares early. 

What Are Some Of The Past Investments?

Some examples of past investments are a Washington D.C. Hospitality Property, an NYC Times Square Hotel Construction Financing Project, a Tanker Acquisition and a Post-War and Pop Art Portfolio.

What Is Customer Service Like?

Yieldstreet has an extensive FAQ page on its main web page. It also has a customer support number that can be found on their main page that operates between 6:00 AM to 6:30 PM Monday through Friday.

What Is The Due Diligence Process?

Yieldstreet evaluates its opportunities with a broad investment philosophy. They favor loans with certain characteristics such as experienced asset managers that understand what makes a great alternative investment, low minimums, short durations, yields targeting 8% or above and low stock market correlation.

How Often Do You Earn Dividends/Distributions?

Distributions are made quarterly, with Yieldstreet targeting an annualized return of 7%. This can change depending on the short-term liquidity of certain investments in the industry. Remember that returns are never guaranteed.

Do They Reinvest Distributions Automatically?

This is up to the client. Clients can decide to reinvest their distributions into the underlying asset or direct the money to a bank account.

Is This Correlated With The Stock Market?

Yieldstreet aims for its investments to be less correlated to the stock market for them to differentiate themselves in the investment industry.

When the stock market takes a hit, alternative investments like the ones that Yieldstreet offers are often seen as favorable and hold up better. Nothing is guaranteed, however.

Yieldstreet Pros

  • Low minimum investment ($5,000) compared to other accredited platforms
  • Cash account with higher APY than most traditional banks
  • Excellent track record 
  • Thoroughly vetted opportunities
  • Asset-based collateral on loans

Yieldstreet Cons

  • Risk of default
  • High management/additional fees
  • Highly illiquid investments
  • Only available to accredited investors

The Verdict

Yieldstreet has created a platform where alternative investments are easily accessible. They are still growing and finding new investment opportunities to offer on their platform. Most of the investments they look at do not make the cut since they have very high standards. 

With their investment services only being available to accredited investors, it severely limits the number of individuals that are going to be able to participate in their platform. 

Yieldstreet has systems in place to assure that their members only have access to high quality opportunities. It has worked well for them as they have recorded no principal loss during their 6 years as a company. This is something that they will try to maintain, but it is unlikely to continue forever due to the type of securities that they offer. There are significant risks associated with alternative investments.

If you are okay with alternative investments and their added risk, Yieldstreet seems like a solid platform for you to make use of. Lastly, this is provided that you can overlook the high fees associated with them in order to get access to these limited deals.

In the future, we will likely see other alternative investment platforms and hopefully lower fees as a result of the competition!

Click here to view current investment offerings on Yieldstreet!

Yieldstreet review
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