Is the risk-return trade-off still valid?

News Highlights  

We would like to highlight two aspects that have generated a lot of interest this week: the acquisition of Banco Popular by Banco Santander and the future evolution of interest rates in Europe.  

Firstly, the acquisition of Banco Popular. Despite  the fact that it means a greater concentration of the financial sector, the most noteworthy aspect is the total loss of their investment for the Bank’s shareholders. Was not Financial Institutions’ investments fairly safe? Are Spanish investors really managing their portfolios’ return “versus” risk ratio adequately?  

Investing through Fellow Funders  

At Fellow Funders we believe that many investors are not properly valuing the risk of their investments and that the returns they are getting are not sufficient to remunerate the risks taken. Is professionally managed alternative investment in equity crowdfunding still a bad investment option?  

At Fellow Funders we believe that Spanish investors need to start asking themselves this important question.  

Secondly, the evolution of interest rates in Europe. More and more voices are being heard about the foreseeable need for the ECB to follow a similar policy to its American counterpart in the medium term and begin a gradual increase in rates. How will this increase affect financing to individuals and SMEs? How will this process affect crowdlending financing? Will it continue to be sufficient financial margin to remunerate the risk of investors in crowdlending operations?  

At Fellow Funders we believe that this process of rising rates, although still incipient, will require an adequate analysis both for investors and for the crowdlending platforms themselves. 

Equity Crowdfunding investment 

At Fellow Funders we continue to believe that equity crowdfunding remains an interesting product 

  • It allows for startups and even small companies to finance themselves with equity which improves their solvency ratios, while keeping their debt capacity intact.  
  • For investors, the return on their investment (if professionally managed) can produce higher returns, although it also involves higher risks.  In this case, however, if the binomial “the higher the risk, the higher the return will be” works quite efficiently. 

At Fellow funders we recommend entrepreneurs and business owners to analyze the Equity Crowdfunding as a financing way, and the investors to take a part of their investments (no more than 10%) to the alternative investment in this type of products. 

Fellow Funders offers investors the same professional tools (scoring, diversification in terms and business models, appropriate valuation of the invested company, long-term investment monitoring, among others) that have traditionally been used by professional investors. 

Remember that the key to success in any investment portfolio is diversification. 

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top