Smash Your Risk and Supercharge Your Returns with Crowdsourced Investments
Crowdsourced investments such as collective funding for tech startups or sharing in real estate loans or actual residential or commercial real estate is exploding in popularity. A subtle rule change made a few years ago has finally been approved recently that allows increased access to crowdfunded investments for investor without substantial assets or incomes.
So what are the advantages and benefits of crowdsourced investments and why are they likely to be the new hot trend for many years to come? Keep reading to find out!
Investing normally requires you to put up a substantial amount of cash, especially if you buy individual securities like stocks or bonds, otherwise the trading and other fees companies charge will eat into your capital and hurt your returns. Mutual funds and other products were invented as a way to get around this, but it can be hard for many people to save up enough to invest in these either except through their 401k plans at work.
The beauty of crowdsourced investments is that sometimes the minimum investments can be very low like a couple hundred bucks or a few thousand for assets like real estate. Crowdsourcing allows many investors to invest a small amount in each deal and therefore they can invest in many deals to spread out their risk. This spreading out of capital is called diversification and ensures that if one deal doesn't work out as planned then you will not lose all of your money or affect you returns much at all.
Potential for Amazing Returns
Returns on hot or new investment ideas always get worse the more people find out about them and crowd into the space. Being on the cutting edge of crowdfunded investing allows you to have low competition and get access to some of the best deals before the general population catches on.
Millions of people have now heard of peer to peer lending on sites like Lending Club and the returns and ability to engage in that type of investing have got much harder after institutions and large companies moved in and push the little guy out.
The beauty of crowdsourced investments is that most large hedge fund and other institutions aren't interested because they have enough money to go after bigger deals or buy whole investments outright instead of just pieces of them. As the saying goes, their loss is your gain.
Access to more asset classes
Crowdsourcing allows the average investor to access assets, locations, and asset classes they never thought possible. A commercial office building in New York? A hotel complex in Aruba? These one exclusive and desirable investment and assets were once reserved for the connected, rich, and wealthy investors of the world. That time is over. You, the average hardworking American, can now benefit from the global prosperity and growing middle class our world is experiencing from the comfort of your couch. How? You guessed it—crowdsourced investing.
Easier due diligence
With so many investors in a single deal instead of just a few, you can rely on or communicate with your fellow investors and use their diligent efforts in researching and learning about the investment to learn yourself.
Why research and go through the same bother that they already did? Save yourself time and money and move on to your next deal by relying on the research and due diligence of other investors. This is not advisable except in crowdsourced investing because your risk is lower so much for the reasons we listed above.