Art Investing vs. Peer-to-Peer Lending (P2P): How do They Compare?

As platforms like Yieldstreet continue to expand access to alternative investment opportunities, it's important to evaluate different strategies and asset classes to decide on an investing plan that works for you. Fortunately, there are more options to choose from today than ever before, and advancements in technology have led to increasingly innovative and exciting ways to invest. 

When evaluating options, it can help to narrow down your choices and compare different strategies side-by-side. To see how this works, let's take a brief look at two particularly interesting trends in the alternative investing space: Art and peer-to-peer lending (P2P). 

P2P Lending - The Pros and Cons 

P2P lending is often touted as a worthy alternative to credit, allowing lenders to provide personal loans to borrowers without the need to involve traditional financial institutions. The potential pros of this setup are difficult to ignore, as platforms like Upstart and LendingPoint can offer lenders interest rates as high as 30%. Naturally, this is more than attractive for investors seeking robust returns in the form of passive income, or regular monthly payments on a loan. 

As for the cons, P2P lending can come with significant risks. For one thing, many individuals seeking loans on P2P platforms are those that traditional credit agencies would describe as "sub-prime," or individuals with low credit scores or minimal credit history. Moreover, P2P loans are generally unsecured, meaning if a borrower suddenly defaults, the lender is left out of the money, and with little to no recourse for recouping their initial investment. 

Art Investing - The Pros and Cons

Believe it or not, fine art has been outperforming popular index funds like the S&P 500 for more than 20 years, but investing in fine art hasn't always been easy for the average investor. Today, however, platforms like Yieldstreet allow investors to take a more accessible approach by adding shares of fine art to their broader portfolio, earning annual returns that can exceed 12%. Beyond impressively high returns, another pro is that the value of art isn't typically correlated to traditional markets, making it a potential hedge against periods of inflation.

And the cons? Well, art is considered a relatively illiquid asset, meaning physical works of art will be harder to sell for a profit than other assets like stocks or cryptocurrencies. Additionally, there is never a guarantee that a piece of art will appreciate, and shifting trends in the art world can sometimes tweak the value of an investment to the downside.

Overall, while both can be great alternative investing options, art and P2P lending are considerably different asset classes, and deciding between the two will depend on your ideal time horizon and appetite for risk. P2P is higher risk but can generate healthy returns in the short to medium term. Art may be less risky but could be better suited to those looking to maximize profit over the longer term. 

Source: Yieldstreet


Categories: Investments

Tags: Art investments, Investments, P2P lending, Yieldstreet