5 Ways to Invest You Haven't Heard of! (probably)

In this video, I show you 5 different avenues you can use to invest outside of the stock market, crypto, and other traditional forms.

Okay, so please forgive the somewhat clickbaity title, but none of these investment ideas were on my radar until recentl,y and I thought it was worth sharing with you. I’ve covered the stock market in a lot of videos on this channel, but what if you just simply aren’t interested in the stock market, yet still would like to invest some money – but you just don’t know how or where?

Historically, a lot of investments have only been available to the super wealthy, or, at the very least, accredited investors. Accredited investors are individuals who have over 1 million dollars in net worth or earn $200,000 per year for the past two years.

This was one of those rules like the pattern day trading rule, put in place under the guise of protecting less-sophisticated investors from losing money on speculative investments, but just because you are a high earner, doesn’t mean you are more sophisticated when it comes to investing.

Thankfully though, there are now many investment platforms for the average person without needing high minimums or a high net worth to participate and in this video, I’ll cover some of my favorites.

Oh, and thanks to Masterworks.io for sponsoring this video.

What’s the Point?

Since investing in the stock market has become pretty simplified and readily accessible, you may wonder what the point is of looking for less traditional forms of investing. Well, the first reason is probably the most obvious, and that’s diversification. The stock market has been on an incredible bull run and well, that just won’t last forever, so investing some money elsewhere with uncorrelated assets protects you during market downturns.

Second, it can be fun to invest in things you’re passionate about – whether it’s music or art or wine or collectibles – if you are passionate about something that also appreciates over time or generates revenue, why not invest in it?

When the stock market ends its bull run, investors will likely be looking for other areas to invest in and well, you can too. So let’s get into it.

Song Royalties

You’re probably familiar with the concept of royalties – it’s essentially a payment made to the owner of the asset for the right to use that asset. It could be from a book, a patent, a franchise, or a song. With songs you have two copyrights: the composition and the sound recording. The composition copyright covers the actual songwriting, like melody and lyrics. The sound recording copyright covers the actual recorded version that you hear.

Oftentimes, the record label owns the sound recording copyright, and the composition copyright gets split between everyone involved with the songwriting and also a publishing company who handles licensing and collecting royalties.

Now both types of copyrights will generate royalties, depending on how the song is used. Licensing the song for film and TV, when a song is sold or streamed, and when a song is played in public or on the radio.

So let’s take a look at the site Royalty Exchange. Here, you have auctions for different types of songs and catalogs earning different types of royalties. So here is an auction Drake’s track “In My Feelings.” It’s for the Musical Composition Public Performance. So it earns money from streaming, radio, etc.

We can see that it earned about $45,000 for the last 12 months, which is quite the dip from previous years. Now just because a song was popular when it was released and generated a lot of money doesn’t mean it will continue in the future. Ideally, you want songs that will stand the test of time and continue to get streams years and years after its release.

Most investors look at the last 12 months earnings and determine a multiple that they’re willing to pay based on how risky they view the investment. So someone that wins lots of Grammy awards and is constantly on the Billboard charts is considered less risky.

One metric that this platform created is Dollar Age which helps you determine the quality of the earnings. Would you rather have a catalog that earned $45,000 last year that has been generating similar amounts for the past 10 years or a catalog that earned the same amount, but has only been generating revenue for the past 3 years? The catalog that has been around for 10 years earning royalties is considered less risky than the newer catalog, so the Dollar Age metric helps investors get an idea of their risk. Generally, the higher the dollar age amount, the less risky the investment.

Most listings sell for an average multiple of 6 times the last 12 months’ earnings, which can make it limiting for people who don’t have tens of thousands of dollars to invest in something like this, but it is possible to find some more affordable listings.

The other downside is the whole copyright / royalty structure with music can be confusing, so you’ll likely want to do your own research to make sure you know exactly what you’re getting before you invest.

But as a big fan of music and passive income, I think this is an interesting avenue to explore and having the option to own some royalties to your favorite song is just pretty freakin’ cool.

Art

If you’re anything like me, you probably thought that investing in art was for the super rich. Well, this brings me to the sponsor of today’s video, Masterworks.io. Founded in 2017, Masterworks.io is the first company that opens the door to top-tier, blue-chip art investments for everyone. They have a combined 75-plus years of art collecting experience, which is like 75-plus more years than I have.

So not only is art the least correlated to the stock market out of any asset class, it also beat the S&P by 180% from 2000-2018.

The way it works is you purchase affordable shares of masterpieces – like this Banksy piece which gave a 32% annualized net return to investors.

Or maybe you’re more of a Andy Warhol fan… that’s a pretty good return on investment.

The other nice thing about Masterworks is you have the option to sell your shares on their secondary market if you want to exit your investment before they sell.

So here we can see we could buy shares of a Jean Michael Basquiat for a couple hundred dollars.

Masterworks limits its focus to only the top-performing artists and chosen based on Masterworks’ data-driven investment criteria, using a database of over 1 million records, historical appreciate data, and in-depth risk-reward profiles. Not to mention all of the paintings have been qualified by the SEC.

I will say that I get emails from brands and companies every week and I’ve turned down every single sponsorship opportunity up to this point because I actually think Masterworks is super cool and definitely worth checking out for yourself. Use this link to skip the 25,000+ person waitlist and join Masterworks.io to start investing in multi-million dollar artworks today.

Peer-to-Peer Lending

Despite what you may think, peer-to-peer lending is not uploading the latest Nelly album to Limewire for strangers to download for free. Instead of traditional financing where you borrow from an institution like a bank, with peer-to-peer, you are borrowing from an individual or a group of individuals. Different platforms will have different rates and terms, and from the investing side, most platforms work with accredited investors. One platform I found that allows just about anyone to invest is Prosper. On average, the historical returns are 5.4%, so not the most enticing numbers, but you can opt for higher risk and higher return loans as well. You can browse through their listings and see the Loan Rating, Category, Amount, Yield, % Funded, and Time left.

For most loans, you can choose to invest with as low as $25 all the way up to the amount left to be funded. They recommend diversifying your investment between many different notes.

Once a loan gets funded, the borrower makes monthly payments on the loan and your portion of the payment gets added to your account where you can then invest in more loans or transfer it to your bank account.

This definitely has a pretty high risk element. The borrower could file for bankruptcy, pass away, or just stop paying on the loan. In most of these cases, you are probably S-O-L. But the higher rating loans may be a solid low risk way to get 5% on your money.

Startups

If you’re a fan of Shark Tank like I am, you may have wished you could invest in innovative startups alongside Mark Cuban and Barbara Corcoran, but the average person can’t be an angel investor or venture capitalist.

Angel List is a site where accredited investors can partake in VC investments, so that’s not super helpful unless you’re pretty well off financially. Luckily, there is a spin-off of AngelList called Republic, which really opened the door for unaccredited, everyday investors. The minimum to invest here is $10… although companies can set the minimum and is usually between $50 and $250.

Now this form of investing is definitely one of the riskiest. Startups go bust all of the time and even ones that appear successful can end up shuttering, leaving investors in the red. With republic, less than 3% of the startups that apply pass through their due diligence and investment committee, so in general, you are seeing higher caliber companies on the platform. They also invest in all of the startups listed on the platform as well, so your incentives are aligned.

The way you’ll make money is if the company gets acquired or goes public at a higher price than you paid for it.

Let’s take a look at some of the startups we could invest in. Here’s Predictiv, which takes your DNA and assesses your risk for over 16,000 diseases and simulates your reaction to over 300 drugs.

And just like Shark Tank, they have their valuation, and what they’re looking to raise. Just like other crowdfunding sites, companies will post updates and investors can talk about what they like about the company and why they invested.

Here’s Kibbo, which tackled the van life demographic by creating communities of like-minded nomads, giving them access to a network of locations where you can live and work. I thought that was a cool idea and so did almost 1500 other people, as they went on to raise $745,000.

I don’t know a whole lot about being a VC, but I know that they’ll make a lot of investments, expecting most to go bust, but hoping for that one company that will give them a 100x return on their investment.

So like most private securities, this isn’t very liquid, meaning once you invest, you won’t really be able to get your money out unless the company gets acquired or goes public. But I love innovative businesses, so I will likely invest in a handful of these startups and see what happens. But like I mentioned, this is probably one of the riskiest ways to invest your money, so you have to be okay with losing your entire investment.

Collectibles

If none of the other investment platforms were up your alley, perhaps this last one is. If you’re a fan of collectibles, like trading cards and comic books, there’s a site called Mythic Markets that allows you to buy shares of some of these collectibles to benefit from their increase in value over time. So here is a sealed 1987 NES game Metroid, that I guess is worth around $50,000 and you can buy shares for $25 apiece.

Or here’s All Star Comics #8 featuring the first appearance of Wonder Woman with shares available at $37 apiece.

Mythic Markets does seem to be rather new – I’ve never heard of it before, so I don’t really know what kind of returns you can expect, so this is probably best if you’re super familiar in what you’re choosing to invest in. They have recently launched their secondary market, so you can buy and sell your shares.

On the purely sports memorabilia side, there is collectable.com which again, allows you to buy shares in valuable collectables. You have items like a Babe Ruth baseball card or a game worn and signed Michael Jordan rookie jersey.

This again is a newer site, but you can see some of their recently sold pieces and the return on investment it generated – which seem pretty impressive to me. Here’s a Wilt Chamberlain rookie card that was offered at $200,000 and Collectable exited at $350,000 for a 75% return.

After you buy shares of an offering, there’s a 90-day lockup period once its fully funded. Then, you can buy and sell shares via their secondary market.

There are other sites available too, like Rally, so if this is something you’re interested in, I definitely recommend checking out all of the available platforms to see which you like best.

Final Thoughts

I personally love that more and more platforms are opening up different forms of investing for unaccredited investors. This allows everyday people to have access to diversification and the ability to invest with smaller amounts of money.

If you have any creative forms of investing that I didn’t include in this video, let me know in the comments below the video! Also, be sure to check out Masterworks.io.

Thanks so much for watching, if you would do me a favor and hit the thumbs up button on this video, consider subscribing if you haven’t already, and I will see you in the next one.