6 Investing Tools That Help You Diversify

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If you’re in the stock market in any way — through your 401(k), direct investments or a mutual fund of some kind — you probably couldn’t ignore the stomach-churning volatility (mostly downwards) in the markets since the coronavirus outbreak hit our shores.

Let’s not relive that nauseating experience, but instead think about ways to deal with the changing investment landscape.

One thing you can do more easily than in the past — thanks to various new investment platforms — is to diversify. Some of these new tools let you make money by lending to individuals with startup businesses or by funding social causes, while others allow you to access investment assets that were once only available to the very rich, such as fine art and real estate.

These investment options can reap substantial rewards, but they aren’t risk-free. Fortunately, we have all the details listed below so you can make an informed decision about using these services.

To do something different with your money, consider using one of the following novel investment tools:

Be a real estate investor with as little as $500

Real estate is often touted as a good way to diversify investments, but it has traditionally been out of reach for many smaller investors. Two of our partners, Fundrise and Diversyfund have worked ways to make real estate investing accessible to everyone.

They operate a little differently, but for both of them, you only need $500 to get started.

Fundrise charges a 1% annual fee and an upfront asset acquisition fee of 0%-2%.

From 2014 to 2019, Fundrise investors had average annualized returns of in the range of 8.76%-12.42%.

DiversyFund is structured a little differently. It also allows you to start investing with just $500, but charges no fees up front. Investors get a 7% preferred return. In other words, 100% of returns up to the first 7% goes to investors before DiversyFund receives a share of the profit.

To learn about each of these tools in greater detail, check out this post and this post.

Invest in fine art through Masterworks

You don’t have to be a high-roller to invest in fine art anymore.

A new company called Masterworks allows you to buy into the global art market with fractional investing — similar to the way you buy fractional shares in companies through stocks.

No, you don’t get to hang the “Mona Lisa” in your living room. But you can get partial ownership in blue-chip artwork that has a history of appreciating steadily over time — and which provides you an alternative to the volatility of the stock market.

Remember, past performance of investments doesn’t predict future performance. And you should understand fees that apply (Part-Time Money has a good review of Masterworks here) to make sure you’re comfortable with this new and unusual wealth-generating opportunity.

Click here to learn more about Masterworks or to get started investing.

Buy Worthy Bonds

One low-risk way to make more on your savings than you can through a traditional savings account — and help build your community at the same time — is through Worthy Bonds, a program that allows you to get started investing with as little as $10. A separate post explains all the details, but here’s the gist of it:

“You buy 36-month Worthy Bonds for just $10 each. Your money is loaned to small businesses through a peer-to-peer system, also known as P2P lending. Small-business owners using this system gain access to capital, and you earn 5% on your investment.”

Visit Worthy’s website to learn more or get started.

Invest through LendingClub

As another peer-to-peer lending platform, LendingClub is a way to make money while helping out families who need cash to consolidate their debt or make a major purchase.

Loans on LendingClub are rated from “A” for lower-risk investments with lower interest rates to “E” for higher risk and higher interest rates. Average historic returns, as of our publication date, range from about 4% to 7% after service fees. You need to deposit $1,000 to open an account.

Visit LendingClub’s website to learn more about it or to get started.

Invest through Prosper

Prosper is another peer-to-peer lending platform. If you invest here, your money isn’t going to buy shares in a corporation. Instead, your money is combined with that of other investors to provide personal loans to individuals who need to consolidate debt, buy a car or otherwise gain access to cash.

Investors on the platform get to choose which loans they fund. Prosper rates loans from “AA” for lower-risk, low-reward loans to “HR” for higher-risk, higher-reward lending opportunities. Historic returns on investments average 5.1% after fees, as of our publication date.

You need to commit at least $25 to each loan you want to fund on Prosper.

Visit Prosper’s website to learn more or get started lending.

Connect through Wealthramp

If you’re not ready to take the plunge using one of the investment platforms above, Wealthramp may be the right tool for you. It essentially serves as a matchmaker between investors and financial advisers.

You answer a few questions, and Wealthramp matches you to vetted independent advisers who fit your preferences. Users have the opportunity to review professional backgrounds and request an introduction to anyone who looks like a good fit.

Wealthramp only matches people to fiduciaries — professionals who are required to work in your best interests — so you can be sure you won’t be sent to a salesperson angling for a commission. There is no cost to investors to use Wealthramp.

Click here to learn more or to get started.

Have you ever tried any of these platforms? Share your experience by commenting below or on our Facebook page.

Kari Huus contributed to this post.

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