How to Invest?
First things first, investments used to be when you put your cash in a bank account where it sat to earn interest. It has changed quite dramatically, as these days, with negative interest rates, it’s the usage to pay the bank to hold our money for us. Nevertheless, an investment can be a gamble: instead of the security of keeping your money in a bank account, you’re taking a risk with your money. The goal is to make more than you invested by making a good profit, but, depending on many factors including timing and the type of investment, there is also the possibility you end up with a loss.
When it comes to how to invest, there are different ways and channels you can invest in. Below, some of the possibilities available to you:
On your own: Why not? If you have the financial IQ, the financial and business knowledge, you can go for it as long as you have a team of experienced lawyers, accountants, auditors and experts. However, it is not cheap. People that decide to do it on their own are usually quite wealthy. If you don’t have a lot of money investing on your own is probably not the best option.
Investment Bank: Investment banks are available; however, you need to be a sophisticated investor or a high-net worth individual as you will need to have a considerable amount of money in order to invest through investment banks. The minimum amount to invest would be over half a million euros, and that’s just to get you started. Considering you would be one of the smallest clients with half a million invested, the service you’d receive would not be what you would expect. In addition, not only is it expensive to get into an investment bank, but they also take an annual percentage on the assets under management, usually 2%, as well as 20% of the profits. In case there are no profits you will still be charged the management fees.
Private Equity Funds: Opportunity for great investments, yet again it requires a substantial amount of funds. In this case, we are not looking at half a million any more. In private equity, there are funds starting at 250 million dollars. Usually private equity funds are for very big investors.
Platforms: Such as crowdfunding or crowd lending are also available and these are affordable. These are for the everyday investors. However, the level of information available to the investors is not enough to make good decisions. Chances are it will be like a lottery ticket in the sense that based on the information provided you pick and choose what you want. You also don’t have any margins for negotiating any protection mechanisms, like options, warrants, ratchets, board seats and so on. It still remains a good option, however with some important limitations.
Bank & Insurance Companies: They both provide different investment products but you shouldn’t expect big returns. Usually these days, banks and insurance companies tend to look after clients that have over a half a million euros, although, sometimes, they can start at €300,000. If you have less than that, they probably won’t do business with you but if you still want to work with them you can approach. Don’t expect great returns from them and the risky is fairly high.
Our suggestion to you is to learn and develop your financial IQ. At The Access Club, we can help, as Members learn and understand how to do deals and make investments. The Club will also source affordable deals, with big upside potential and with the necessary protection mechanisms in place, as well as a thorough due diligence.
There are many investment vehicles and opportunities available. Many investors make money in all categories, however they are all financially literate and that’s your starting point, to develop your financial IQ.