Alternative Investments Aren't Just For The Rich Learn More 

TIM THOMAS

We hear a lot these days about alternative investments. Wall Street firms regularly tout their expertise in these investments and try to convince us we need them in our portfolio. In the beginning, alternative investments were only available to what most would consider the wealthy.

The SEC set the definition of the wealthy with their accredited investor definition. To be eligible to invest in these alternative investments, one has to have an income of at least $200,000 (individual) or $300,000 (joint) for the last two years.

If they don’t meet the income requirement, accredited investors must have a net worth of at least $1,000,000 (exclusive of personal residence). Though that group is growing, it leaves out millions of people who could benefit from the diversification offered by this asset class.

One thing common in the early days of these investments was high fees. In the beginning, managers charged investors 2% of the amount invested plus 20% of profits. Here’s what that means.

If someone invested $100,000 in a fund, and the fund earned 10% (few do), the total dollars paid by the investor would be $4,000 ($100k x 2% = $2,000 + $10,000 x 20% = $2,000). That means instead of making $10,000 on your $100,000 investment; you walked away with $6,000! Instead of a 10% return, you earned 6%! That’s a 40% drop in your profit!

The High Cost of Fees

Let’s start with what most consider the traditional investment products – those would be stocks (both listed and unlisted), bonds, and cash. Investors can put money in the U.S. and international markets in both stocks, bonds, and cash. Most investors access these products via mutual funds and exchange-traded funds (ETFs). 

What Are Alternative Investments?

For the reasons mentioned above, innovation entered the alternative investment arena. As a result, companies began developing investments with lower fees and smaller minimum investments. They made these accessible to non-accredited investors. These innovative investments are a game-changer for the everyday investor.

Crowdfunding – The Game Changer

We want to highlight three investments available to non-accredited investors. One, Vinovest, is a unique offering. The other two, DiversyFund and Fundrise, are crowdfunded real estate funds as described in the last section.

Alternative Investments for Everyone

Swipe Up To Read The Rest Of The Article And Get The Low Down On The Alternative Investments Available To Non-Accredited Investors

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