Besides traditional stocks, bonds, and cash, unique investments are hard to find these days. Don't get me wrong. There are lots of choices out there. But doesn't it seem like everyone is peddling the same alternative investments as everyone else?
You know the ones I'm talking about – publicly-traded REITs, crowdfunded real estate, hedge funds, commodities, or cryptocurrencies. Some of these are available to all investors. Others are only available to high net worth individual or institutional investors.
Accredited investors have options that other investors don't. These investors have a net worth of $1 million or more (not including personal residence) or incomes in the last two years of $200,000 for individuals or $300,000 for joint filers with the expectation that income will continue. The rule comes from the SEC in Rule 501 of Regulation D. The idea behind the rule is that these high net worth individuals are a more sophisticated investor and can withstand losses better than their nonaccredited counterparts.
Those statements are both debatable. Let's face it. No one likes loss. And just because someone has a large amount of income or net worth doesn't indicate sophisticated investors. It just means they make a lot of money.
What follows is an introduction to nine unique investment options. Some are only available to accredited investors. Others are available to anyone looking for unique investments for 2020 and beyond.
Table of Contents
- 1 Farmland
- 2 2. AcreTrader
- 3 3. Fine Wine
- 4 4. Luxury Watches
- 5 5. Art
- 6 6. Startups
- 7 7. Invest with the Top Fund Managers
- 8 8. Collectibles
- 9 9. Peer to Peer Lending
- 10 10. Forex
- 11 Bonus: Fixer-Uppers
- 12 Final Thoughts
Though farmland is not unique in and of itself, investing in farmland can be difficult. Buying land outright is expensive. Depending on the area, it can be costly. Also, it's a hands-on activity to run a farm. Most people don't have the knowledge or expertise to do it. If you can't run the farm yourself, you'll need to hire someone to run it for you. Most people don't want to take on any of those responsibilities, so they look for something else.
Now there are options available where you don't have to run the farm yourself or have any farming expertise.
FarmTogether offers a low-cost investment opportunity that allows investors to own real land. Real land is less subject to inflation and more stable than many other investments. Why? For one thing, we're not making any more of it. The law of supply and demand means it's likely to increase in value.
Farmland offers an investment with little to no volatility compared to the stock markets. It does not move with the markets either. As a result, it provides an investment that is truly diversified from traditional stocks and bonds. For the last twenty years, farmland has not had a negative return. That's something not many investments can say.
For those looking for cash flow, they offer that as well. The typical investments range from $10,000 – $50,000 per transaction. That $10,000 number is much more accessible than many of these types of offerings. And there are precious few funds that offer investment in farmland with cash flow.
- The investment is in farmland, not the farm itself.
- Farmland is a more stable investment.
- Investors can get income from the rent and profits on the crops
- Investors can get capital gains when they sell the farmland
- Accredited investors only
- Investment is illiquid
- Higher minimums ($10,000 – $50,000)
- Farmland may not sell or sell at a price lower than expected
You can read a full review here.
Another opportunity to invest in farmland comes from AcreTrader. There are a couple of things that make AcreTrader unique.
- The selection process – The investment team, has a rigorous selection process. Less than 1% of the farms they visit get included.
- Separate legal entities – Each farm gets placed in a separate entity. More often than not, that entity is an LLC. Investors own shares in the LLC rather than directly in the farmland. That provides a layer of liability protection for the investors.
Investors make money in two ways – cash flow and capital gains from the sale of a property. The cash flow comes from the rent paid by those operating the farm. Capital gains occur when the farmland sells. Like other alternative investments, you should view these as long term investments. AcreTrader gets involved in all aspects of the farming operation, including insurance, accounting, working with the local farmer, to improve the land's farming and sustainability.
Here's how farmland returns compare to stocks.
The pros and cons of AcreTrader are similar to FarmTogether.
- Rigorous farmland selection process reduces the risk of investing (<1% accepted)
- Experienced team of professionals with farmland and financial expertise
- Investors can specify which investment they want. Each one is a separate entity
- Investors receive both cash flow and capital gains when they sell the property
- Limited liquidity. A secondary market may exist via their marketplace. No guarantee a buyer will step forward
- Higher minimums ($10,000 – $25,000)
- Farmland may not sell or sell at a price lower than expected
- Cash flow is not guaranteed and can fluctuate based on market conditions
3. Fine Wine
Vinovest offers a unique alternative investment – fine wine.
The first thing to know about investing in fine wine is that it takes knowledge to understand how to choose the right wines. Vinovest has a team of experts, called sommeliers, who have undergone rigorous training over several years. Three of their four sommeliers have achieved the Master Sommelier title. That's the highest degree of recognition in the wine industry. These folks know their wine.
Wine selections come from their knowledge and a sophisticated algorithm their technical team developed — the result – the best wines with the best chance or price appreciation. You own the individual bottles. Vinovest will store and age the wine at their state of the art facilities around the world. They guarantee the safety of your wine.
The minimum investment is just $1,000. It's a unique offering and worthy of consideration. Here is how fine wine stacks up against other investments:
- Lower investment minimum ($1,000)
- Investment is liquid. You can sell all or a portion of your bottles at any time.
- Wines are chosen based on technology and with Master Sommeliers.
- Investment security – insurance, stored in secured vaults, guaranteed authenticity (eliminates fraud)
- No guarantee wines will appreciate.
- Higher fees (2.85%) relative to mutual funds, ETFs, and other traditional investments (lower than many alternative investments)
- Tax reporting – Vinovest only sends 1099s for sales greater than $20,000. For transactions less than that, it's up to the investor to self-report
Read this review of Vinovest for a more detailed description.
4. Luxury Watches
Luxury watches are another investment where if you don't know what you're doing, you can lose a lot of your hard-earned dollars. Fraud is rampant in the high-end jewelry business in general. Luxury watches are no different.
We recently discovered a company that takes much of the risk out of investing in luxury watches – LuxeStreet, Inc. We're not talking about a $5,000 watch. We're talking about watches with a price range from a minimum of $50,000 up to $1 million. They specialize in the following four brands:
- Audemars Piguet
- Patek Philippe
- Richard Mille
What kind of return can you expect? How does a 12% annual cash flow sound? That cash flow gets paid to investors every month (1% per month). Here's a look at the offering:
Before deciding to purchase a watch against which to lend money, the team at LuxeStreet goes through an extensive process to value the watch. As you may know, fraud is prevalent in the jewelry industry. Part of the due diligence process is to determine if the watch is legitimate.
LuxeStreet has made this investment available with a minimum investment of $10,000. If you're an accredited investor looking for a unique alternative, you should take a closer look at LuxeStreet.
- Loans collateralized by luxury watches owned by LuxeStreet.
- Loans are short term, which is less risky than their longer-term counterparts.
- Little to no default risk. Of the $5.02 million loans to date, there have been zero defaults. In this high-end market, it's rare.
- A great source of passive income in a low-interest-rate environment (12% annual)
- Investment is illiquid. It's a three-year commitment with no liquidity for the investment during the three-year term.
- No guarantee that the dealer will repurchase the watch or that LuxeStreet can sell it at a price needed
- Default risk – though there have been no defaults on the loans to date, there is no guarantee there won't be in the future.
- LuxeStreet is a newer company (August 2018) and carries a higher risk than a more mature company.
Here is a full review of LuxeStreet.
Many of the uber-wealthy make a lot of money investing in art. The problem, like with many investments, is the price point to invest. With works selling for hundreds of thousands, even millions of dollars, that market is out of reach for most.
That's where Masterworks comes into play. The team at Masterworks has a four-step investment process.
- Masterworks find the paintings they want and use their own money to buy them.
- Once the paintings are purchased, they file an offering circular with the SEC to offer them publicly.
- They offer shares for investors to purchase, representing ownership in the painting.
- When Masterworks sells the painting, investors get their proportional share of the profits.
The only purchase paintings from the top-performing artists. Here is a list of some artists and the historical returns on investments in these artists' work.
Like the other investments we've featured, the art is a noncorrelated asset with the stock market. Plus, they offer competitive returns.
- An experienced team that select paintings by top performing artists
- The selections come from a database of over 1 million paintings
- Masterworks only chooses paintings that meet specific appreciation potential
- $1000 minimum initial investment.
- Hedge fund like high fees – 1.5% plus 20% of profits
- Illiquid – no current market to sell shares
- Must be approved to invest
- No guarantee art will sell at a profit.
When investing, risk, and return are always related.
In other words, the higher the expected return of an investment, the greater the risk of that investment. That's an essential investment principle that many forget. If you want a 10% return, you're going to have to take on a significant amount of risk to get that expected return.
Startups, companies that are newer companies looking to raise money, are the epitome of that investment principle. They are high-risk companies that, if they make it, offer extremely high returns. Typically, these companies attract money from angel investors, venture capital, and hedge funds until now.
Enter Republic.co – Republic is a unique company that offers investors the chance to invest in these tech startups for as little as $10.00.
As an investor, you will be an investor with the V.C. firms and angel investors that also invest in the startups. Republic invests its own money into the investments as well.
Since investors only make money if the startup succeeds, investors should only invest as much money as they are willing to lose.
- Potential for a very high return on investment
- Republic invests alongside you. They invest their own money into startups.
- Rigorous selection process. Only 3% of the companies they review make the cut.
- The service is free to investors. The startup pays Republic's fees.
- Among the riskiest investments. Investors could lose their entire investment if the startup doesn't make it.
- No income is paid along the way.
- Limited ability to sell shares. There is a one-year lockup, meaning transfers or sales must meet specific criteria.
- Investors must apply and get approved to participate.
7. Invest with the Top Fund Managers
You hear a lot of debate about whether active or passive management of investments is better. I'll leave it to others to settle that debate. If you're one who believes that active management should be part of your investment strategy, take a look at Round.
The team at Round offers access to some of the top fund managers. They build a portfolio with those fund managers on your behalf. To get started, you go to their website and answer a few questions about yourself, your goals, and risk. From there, the team seeks the best fund managers to fit your needs. They monitor the portfolio daily, making adjustments as market conditions warrant. That's not to say they are a day trading platform – far from it.
Most investments with these top fund managers have high minimum investments. That's not the case with Round. You can start with an investment as low as $500.00! They charge an annual management fee of 0.50% of the amount you invest. And here's one of the best things. There is no fee charged in any month your portfolio doesn't make money. That's extremely rare with the top fund managers.
- Low minimum account size – $500
- Full liquidity – you can withdraw money at any time
- Easy online account opening
- Access to some of the top active management funds
- Not for those seeking passive management
- Though the fee is less than many managers, it's higher than passive funds (0.50%)
- Risk – investments are in the traditional stock and bond markets. Expect short term fluctuations and market drops
- If withdrawals requested at a time of a market drop, you could lose money
Get the details about Round to learn more and invest.
For those who are pop and geek culture fans out there, investing in collectibles may be a game-changer for how you look at your diversification options. When considering the reasoning for investing in collectibles, some of these stats may speak for themselves.
Remember Cabbage Patch Kids? Many of the dolls list for $3,500 to $5,500 on eBay. Vintage Barbie is being sold for thousands on the platform as well. G.I. Joe, from 1963, sold in 2003 for $200,000 in a private sale.
Mythic Markets is a company we recently discovered that offers the opportunity to invest in these unique collectibles. There are many pros and cons to this type of investment.
Their latest investment is in a vintage Marvel Comics Spider-Man comic book.
- Available to both accredited and nonaccredited investors
- Assets are fully insured and held in climate-controlled vaults with 24-hour security
- Authentication of assets by three leading independent grading experts
- Low minimum investment – Investment sold in shares. Can buy as little as one share. Price varies based on the offering
- Illiquid – there is currently no secondary market to sell shares
- Profits dependent on selling the collectible. If it doesn't sell, investors make no money
- No dividends or income
- Company risk – Mythic Markets is a venture-backed startup. These companies carry a higher risk than established businesses
Here is a full review of Mythic Markets.
9. Peer to Peer Lending
If you're looking for another way to earn passive income, you may want to consider peer-to-peer lending platforms. Peer to peer lending allows investors to diversify their assets by investing in different types of loans. The type of loans you choose will determine your investment return and risk exposure (remember, risk and return are related).
Some lenders allow you to start with as little as $25 in a single loan. Your investment is combined with other investors to make up the entire loan amount. While others may want to invest more many sticks with $25 to reduce their risk exposure. By only investing a small amount in different loans, you can reduce your risk of default.
After you make your initial investment, you will begin to receive passive income as the borrower makes payments. As the borrower continues to pay down the loan, you will receive interest payments every month. Even if you don't plan on reinvesting your passive income back into the platform, you will still earn a return on your investment. Keep in mind that interest rates vary and depend on several factors, including the borrower's creditworthiness and loan amount.
- It's a relatively low-risk investment that pays a competitive rate of passive income.
- Minimum investment as low as $25
- As the borrower pays off the loan, you get paid.
- Higher interest rates than traditional fixed-income investments
- Investment is in personal loans. If a borrower defaults, you can lose your investment, have your income lowered, or both.
- The higher the interest rate, the higher your risk. Higher interest rates mean a riskier borrower, increasing the risk of loss.
- No FDIC insurance like you'd get on bank C.D.s or high yield savings accounts.
- Each lender has different loan standards. If you don't understand those standards, you could take on more risk than you thought.
Peer to Peer Lenders
The world of stocks and shares can alienate many investors because it is seen as volatile and seemingly bankers' realm. However, many novice investors are beginning to look towards the world of Forex.
Forex investing means selling and buying currencies against one another to make a profit. Set up a dummy account on an online Forex platform and practice selling yen against the pound and buying dollars against the krona.
When you have honed your skills, you can take the investment plunge for real. It can be challenging to find the time to research the markets, but this higher risk investment can be hugely lucrative.
Buying a fixer-upper to renovate, you can outperform the market and sell a second property at a profit. When looking at homes for sale, consider the demographic that you are targeting.
Those wealthier families need larger homes in highly desirable areas. Young professionals will want apartments and penthouses in the city center. Consider how far your budget will stretch and purchase the worst house on the best street.
As you can see, there are several unique investments available. They may be hard to find, but they are out there.
If you're looking for an investment that is noncorrelated to the stock and bond markets, is more stable, and has a competitive expected return, one of these may fit your need. As with any investment, be sure it meets your overall investment strategy and goals. If it doesn't, it may hurt more than help.
Additionally, most of the theses unique investments are not liquid. That means you cannot quickly get your money out of them. You should always consider these types of investments to be long term in nature.
We hope you found the information on the five unique investments we introduced here to be helpful. If they fit into your overall investment strategy, we think they are worthy of your consideration.