You may have seen or heard the ads.

A present-day Kal Penn telling his older self that he wasn’t concerned about future stock market volatility because he diversified into other assets. A lady stopping her workout to check out a building she’s presumably interested in investing in. A narrator explaining the big returns ultra-wealthy investors have reaped by investing in the art market.

I saw and heard enough of these ads that I thought to myself: If I have questions about these companies, then there are likely AAII members who have questions too. So, rather than update our traditional broker guide, I asked our research staff to assist me in writing about these alternative investment platforms for this issue.

When I started gathering initial data for the article, I found platforms I never even knew existed. Some are available to all individual investors; others limit themselves to accredited investors (who must meet monetary or financial knowledge requirements).

We settled on what we believe are the five leading platforms with offerings available to non-accredited investors: Fundrise, Masterworks, Prosper, Public and Yieldstreet. Collectively, they offer investors exposure to private real estate, artwork, peer-to-peer lending, collectibles and memorabilia.

Notice the word “exposure.” In most cases, you are buying into a legal entity that owns the underlying asset. In the case of Prosper, you join a pool of other lenders in funding a short-term personal loan. There is no public market for these investments; they are easy to enter but not so easy to exit. Depending on the investment, you could end up feeling like you walked into the Hotel California.

While the restrictions aren’t so strict that “you can never leave” as Don Henley sang in the famous Eagles song, you won’t be able to exit your investments quickly if you change your mind. Some platforms have preset “liquidity events” that occur over a period of time, and some have internal platforms where you can trade your “shares” with others on the same platform. In many cases, you may have to wait until the underlying asset is sold. Even when there is a mechanism for selling shares to others on the same platform, there are no guarantees that you’ll find a buyer.

The biggest question you should ask yourself about these platforms is: Do I need alternative investments? Many investors struggle just to maintain the right mix of stocks, bonds and cash over the long term. Just as you shouldn’t run before you walk, make sure you get the basics of investing down before adding complexity to your portfolio.

Speaking of being pitched services, I seem to have reached the age when I’m getting invitations to attend “free” steak dinners … oops, I mean retirement planning seminars. These are put on by advisers or other financial professionals who are seeking to pitch their services and products. Often, these dinners are a pitch for annuities.

Rising interest rates have increased the payouts for immediate annuities. At the same time, last year’s downward volatility in the financial markets has given salespeople a chance to pitch the “safety” of annuities.

Annuities can work well when bought and used correctly—the key words being “bought and used correctly.” Interested investors should always be in the position of buying an annuity instead of being sold one. Since these contracts can be complex—and some who pitch them don’t understand the complexities themselves—I asked Stan Haithcock, otherwise known as Stan The Annuity Man, to explain which annuities make sense in a higher-interest-rate environment. 

One sales pitch you might hear regarding annuities if you attend these free steak dinners is about taming the stock market’s volatility. Sequence risk is a real risk to those who are reliant on their portfolios for withdrawals. I saw this play out as I was updating my annual rebalancing analysis for this month’s issue.

Consider the case of someone who began taking withdrawals in 1988. They encountered a bear market that ran from 2000 until early 2003. Then there was the 2007–2009 financial crisis followed by the Greek financial crisis a few years later and then the current, ongoing (at least of as press time) bear market. The combination of down markets and withdrawals is troublesome if there isn’t a strategy in place for adjusting your portfolio in response. Actions you can take include direct rebalancing, adjusting your withdrawals and/or tapping defensive assets. 

Wishing you prosperity and good health,