Ok, you know about diversification and how it helps reduce risk. You know you shouldn’t tie up all your money in one stock but you should spread out your investment across different companies and industries. Well the same goes for crowdfunding investments as well. But let’s take a step back and look at your overall investment portfolio. At crowdtrader.net we assume and encourage all investors to have a healthy balance of investments in stocks and bonds in addition to their crowdfunded investing. Do you already hold stocks in real estate or other related companies? How will investing in a crowdfunded real estate project affect this overall balance.
If you are here reading crowdtrader.net I assume you have already decided it is financially sound to add some crowdfunded investments to your portfolio so we will focus on diversification within this asset class. There are two aspects of diversification first of all make sure you don’t invest only in one project, spread your investments across a number of projects this is a must in my opinion (assuming you have enough capital to meet the requirements for more than one project). If you are investing in real estate make sure you are not investing in the same real estate market (i.e. all in NYC). You may also consider investing across a mix of commercial and residential rental properties as well as across a mix of properties focused on capital appreciation and development. If you are looking to invest in business ventures and start-ups I would say the most important part is to make sure you are spread across a mix of a few different projects all you need is for one project to really succeed and you will be able to cover losses from any failures.
There is another form of diversification which must be considered that crowdtrader.net highly recommends. Diversify across a number of crowdfunding platforms! It may be a bit troublesome but we feel it is very prudent in a fresh and unproven industry to make sure you don’t have all your money invested through the same platform. Although you have done due diligence link it is always smart to consider the risks associated with the platform itself and work to mitigate it through diversification. You can read about our favorite crowdfunding platforms to choose a few to work with and see platform reviews of fundrise.com, realtymogul.com, realtyshares.com, realcrowd.com and more.