What kind of investor are you? Do you fancy investing in the next Google and Facebook? Maybe the next Virtual Reality glasses or self-piloting helicopter? Or do you like to invest in the boring, old-world businesses such as F&B or car dealership? Whichever option you choose, you need to know the risk-reward payoffs. Myself? Although I like the cutting edge technologies, I’m a chicken when I invest my money. I always look for low risk, good return opportunities within the old economy.
Investing in THE next big thing
Are listed Internet companies like Alibaba, Amazon and Facebook too boring for you? Then you may want to invest in early startups where you will get astronomical returns if they succeed! Or you may lose your entire investments when the startups fail.
Investing in startup is very risky and almost like pure speculation. Always remember that the odds are stacked against the normal investor. Most startups fail and history is littered with the next might-have-been. Being first to market doesn’t guarantee success. Just look at Friendster.
Even if you bet on the right horse, it doesn’t mean you will make money. You may be stuck in an unlisted company forever. Or you may get diluted if you don’t have pre-emptive rights to protect your interest. And you are competing against VCs.
If you are still undaunted, you can try out equity crowdfunding. In Singapore, equity crowdfunding platforms (Crowdo, CapBridge, FundedHere, Fundnel) can only accept accredited investors. How to invest? Pick the right team, the right idea, the right partners and the right investment structure.
Investing in Same old, same old
I have a confession. I’m a chicken when I’m investing my money. I do take risk of course, but I’m always looking for low risk and good return investment ideas. I prefer lending money to a boring seafood supplier giving me a steady 10-15% return, rather than a tech startup that could give me 10x return (a slim possibility) or a complete write-off (most likely). I’m not looking for a company to cure cancer or fly to Pluto. I just want to lend to any simple business that does whatever it has always been doing well; and repay my money without any drama, rain or shine.
Is crowdfunding risky as implied by the ST reporter in the recent post? Yes, there is a certain level of risk. But if you strip away to crowdfunding part – which essentially means pooling of resources, debt-based crowdfunding is nothing but plain old lending.
Is lending risky? In my view, not really. The basics are quite common sense – you would want to lend to companies that has a good track record, operates in a stable industry and profitable. Large corporates are usually well-banked, but lending to SMEs through p2p plaforms (MoolahSense, FundingSocieties, New Union, CoAssets, Capital Match) gives higher return.
There is one disadvantage though – lending to SMEs won’t give you any bragging rights and unlikely to impress your hot date.
But fret not. You can always play the nice guy – you’re helping the downtrodden SMEs to get even with the large, greedy corporates.