For years, startups like Yieldstreet have promised to lift Wall Street’s barriers. Their pitch: instead of sticking with stocks and bonds, why not get access to the same “alternative” investments as the ultra-wealthy such as real estate projects, private credit, and litigation financing?
But for many retail investors, that pledge has dissipated. CNBC recently reported that Yieldstreet’s real estate deals, particularly, have been hit hard, with millions in customer funds wiped out. Out of 30 deals examined, four were already declared total losses. While twenty-three more are on a “watchlist,” which essentially means that investors are in limbo, waiting to see if any value can be salvaged.
Take this, for example: an investor who put $400,000 into two Yieldstreet real estate projects saw it nearly all evaporate. Both projects were marketed with projected returns around 20% per year. In reality, one was written down to zero, and the other is scrambling for new capital to stay afloat. The map below shows a portion of those distressed projects.
What went wrong?
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Rising interest rates. When the Federal Reserve began raising rates aggressively in 2022, it pushed borrowing costs higher and dragged down real estate valuations across the country.
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Leverage cuts both ways. Many of these deals relied on borrowed money to boost returns. When projects underperformed, the debt magnified losses instead of gains.
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Marketing vs. reality. Investors were told that their money was backed by real buildings and collateral, but in practice that collateral didn’t provide much protection once deals underperformed.
So, while Yieldstreet’s website once hailed double-digit returns, many investors are facing drastic losses they never foresaw. Some have even filed complaints with the SEC, claiming they were misled about the true risks. This story is a cautionary tale of the risks involved with chasing exclusivity. Alternative investments can sound exciting at first. Who wouldn’t want “special” access to deals once reserved for hedge funds and billionaires? But just because you can invest in something doesn’t mean you should.
We believe that real wealth is built on transparency, discipline, and strategies that actually serve your goals. You don’t need to chase 20% returns in cloudy deals to ensure a strong financial future. Sometimes, the best way to “invest like the 1%” is to remember what the smartest of them already know: protect your downside, stay patient, and focus on steady, compounding growth.