Diversification: what it means with equity crowdfunding

— Investment tips — 2 minutes read

Louise, our specialist in customer service, has a few words of advice for our investors on diversifying investments. 

Equity crowdfunding (also called investment crowdfunding) means you are investing your money into unlisted companies who are seeking capital in exchange for a stake in their company, which is “equity”. Investment crowdfunding is a high-risk, long-term investment. Investment crowdfunding can be unreliable, but, high-risk investments can sometimes mean a large reward.

Everyone wants to find that one great investment opportunity, the next tech superstar, with low risk and high yields. But it’s virtually impossible to find. 

So, we recommend that our investors diversify their investments, and diversify their crowdfunding portfolio to make the most out of it. 

What does diversification of your equity crowdfunding portfolio mean?

Diversification means simply putting your money into many pockets. Every time you back an entrepreneur or small business, you are taking a risk, because each business has a number of factors that impacts whether the company will succeed or fail. It depends on the industry, idea, market and even the co-founders and team. 

It’s impossible to accurately predict which investments will have a good return, but you can help to de-risk your investments by diversifying smartly. If your investment portfolio is diverse, the gains you derive from some investments may outweigh the losses incurred from others. 

Diversifying your equity crowdfunding portfolio means you should invest your money in varying companies, at different levels of operation and maturity, and in diverse industries.

We recommend you spread your investment into new ventures, established SMEs, and early-stage startups across a range of industries like technology, food & beverage, clothing & fashion, renewable energy, and more. 

Why diversify your portfolio?

Risk and reward are correlated: when the rate of risk increases, so does the size of reward and vice versa. A responsible investor should pick options to earn the maximum return on investment (ROI). Diversification helps you better position yourself for a positive return on investment overall. 
As the old proverb says, “Don't put all your eggs in one basket”, meaning “Don't risk everything on the success of one venture”.
The MyMicroInvest platform makes it easy to diversify your investments by:

  1. We give you access to comprehensive information about carefully selected, high-potential young businesses. 
  2. Read clear and transparent information including descriptions of the market, business plans and all of the appropriate disclosures. 
  3. Get started today with small, affordable investments so that you can invest in various companies across a range of industries.