Worth the Risk? – Uncommon Investment Opportunities

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If you have already paid off your credit cards, funded your emergency savings account, and are contributing the maximum to your IRA, and have some discretionary income left over, you may be wondering where to invest it.

The stock market is an obvious choice, but there are some interesting alternative investments out there for the thrill-seeking investor.  As with all investments, these unique opportunities come with risk - does the risk justify the reward?

In this post we take a look at three types of uncommon investment opportunities: investing in microloans, investing in commercial real estate, and investing in collectibles and art.

Investing in Microloans

If you are interested in supporting individual entrepreneurs or small start-ups, microlending (also known as peer-to-peer lending) may be for you. With as little as $25, you can get started with an online platform such as Kiva, Kabbage, Prosper, or Lending Tree.

While investors assume the risk that borrowers will not repay, the repayment rates are historically in the 95% range. Investors can diversify their lending across several different loans to mitigate the risk that one loan defaults.

Investors looking to fund individual business activity in underserved communities will find that microlending platforms give them access to those opportunities.

But be sure to research and understand the liquidity of your investments, how you are paid, and all fees before investing.

Investing in Commercial Real Estate

Until recently, access to commercial real estate investing was only available to accredited (“high-worth”) investors. For a minimum investment of as little as $10, online platforms such as Fundrise offer access to portfolios of owned, financed or managed commercial properties such as:

  • Malls and strip malls
  • Office buildings
  • Warehouses
  • Factories
  • Apartment buildings
  • Cell towers
  • Mobile home parks
  • Restaurants
  • Convenience stores
  • Data centers
  • Senior living facilities
  • “Mixed use” buildings and may combine such as retail, offices, and apartments

Historically, returns on investments in commercial property portfolios range from 6 to 12%. Since the risk of default or decrease in value is spread across the portfolio, these investments are inherently diversified and much less risky than owning commercial property outright.

Investments are fairly illiquid, however, so be prepared to have those funds tied up for years.

Investing in Collectibles and Art

Investing in collectibles or art may be a rewarding way to diversify your overall investment scheme.

Online platforms such as Mythic Markets offers the opportunity to invest in unique collectibles to both accredited and nonaccredited investors. Shares are inexpensive, and the collectibles themselves are fully insured, stored in a secure, climate-controlled space, and authenticated. Profits depend wholly on the ability to sell individual collectibles at a profit.

For even the most distinguished investor high-end art is out of reach, but an online platform such as Masterworks allows the average investor to participate in that market.

Masterworks finds works of art to purchase, purchases them, offers shares to investors, and sells the art. Investors receive a proportional share of the profit. Returns have ranged from 8-16%, but there is no guarantee that an individual work of art will sell at a profit or, really, will sell at all.

The Bottom Line

For most investors, having no revolving credit card debt, maintaining a healthy emergency savings account, and maximizing pension and IRA contributions will satisfy their investment needs.

However, if you have some “extra” money to play with, one of these three uncommon investment options may be right for you.

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