Crowdfunding investment: 3 tips for a successful investment
Do you want to get more out of your savings? Then you can choose from various forms of savings or perhaps invest, but have you ever thought about crowdfunding? In this way you give an ambitious entrepreneur a helping hand and you have a chance to achieve a good return. But how do you ensure the highest possible return? Crowdfunding expert Ronald Kleverlaan gives you three tips.
Investing via crowdfunding
Crowdfunding is a relatively new form of investment. So it’s only logical that you look for some extra information before you start. As director of the Alternative Financing Knowledge Centre (ECAF) at Utrecht University, Ronald Kleverlaan knows better than anyone how to get the most out of your crowdfunding investment. He gives weekly advice on crowdfunding through his online newsletter and now shares his knowledge with us. His three tips:
1. Know what you do and what you invest in
Actually, these are two tips in one, but they are quite important. As an investor you can choose what you invest in, that makes it so accessible. “But that’s also a pitfall,” says Ronald. “Crowdfunding remains an investment, so you have to know what you’re doing and what the risks are.
It is therefore important that you know what kind of company you are investing in and how experienced the founder is, but that you are also aware of industry developments. “Really immerse yourself in the company. Don’t just invest based on a picture and a good quality pitch, take your time. The AFM has recently introduced the rule that all project information must be available for 48 hours before an investment can be made, so you now also have the time”.
2. Spread your odds
It is mainly growing start-ups and small and medium-sized businesses that focus on crowdfunding in the Netherlands. That’s why it’s important to spread your opportunities, Ronald believes. “Those companies don’t exist forever, so there’s always a chance that your loan won’t be repaid.
“ A new legislative framework is expected to be introduced by the government sometime in 2018. This will ensure that there is a stricter selection for companies that can crowdfunding. But the risk that a company won’t survive will always remain, no matter how much you analyse and no matter how many rules there are, “ says Ronald.
Read more about the risks of crowdfunding on www.knab.nl/crowdfunding/investeren under the tab “Risk”.
Recognize that too:
- the repayment of the loan depends on the creditworthiness of the entrepreneur to whom you lend money;
- the loan is not repayable early;
- the investments in crowdfunding projects do not fall under the deposit guarantee scheme; investor compensation schemes or any other (statutory) guarantee scheme.
Spreading opportunities over many loans is very important. Don’t invest more than 10% of your freely investable assets in crowdfunding. And spread your capital by saving and/or investing in other products (savings, shares, real estate, bonds, etc.) in addition to crowdfunding in order to further spread the risks.
3. Don’t focus on gross return
Investing through crowdfunding often gives you more return than putting your money in a savings account. But Ronald warns: “Don’t focus on average gross returns. Those returns are often very high, around 8%. But realise that this is a gross percentage”.
It may well be that during the term of your investments there are a number of companies that do not repay your loan. Your average net return will then be a lot lower. “As I said, it is and remains an investment, so there are risks involved. So make sure you minimize those risks and calculate your net return”.
Crowdfunding investment: how does it work?
Well, now you know how to get the most out of your crowdfunding investment. But how do you start? Take a look at Knab Crowdfunding. Here you can subscribe to the crowdfunding projects you find interesting and easily keep track of your investment.
If you decide to invest, you have a chance of a good return. And, investing is possible from as little as € 100, so you can easily spread your investments and reduce your risks. That’s worth a try, right?