YES to alternative investments, BUT with diversified portfolios
Last February 14, we discussed some of the impacts of the latest ECB measures (TLTRO-III) on traditional capital markets and the volatility of assets such as equities, fixed income and Forex in the current phase of the cycle.
In the same article, we mentioned investment in private markets (alternative investment), poorly correlated with traditional markets, and, therefore, considered an optimal way to diversify financial portfolios.
The CIO (Chief Information Officer) of Calpers, the giant American pension fund, reiterated the commitment of this fund to Private Equity as an investment asset. He emphasized that assets are the ones that have historically generated the highest returns for the firm ($15 for every $1 invested since 1992).
Private Equity aims at professional investors
As far as the individual investors are concerned, they cannot (in general) access private equity funds such as Private Equity.
Despite this, they can look for other ways to venture into an alternative investment, such as investing in startups through crowdfunding platforms.
Through these investments, the investor benefits from a favorable tax treatment by deducting 30% of their investments in the Personal Income Tax with a limit of 60,000 euros of investment.
Yes to alternative investment, but diversifying risks by building your portfolio.
Despite these advantages, investing in startups is not risk-free. One of these risks corresponds to the low degree of maturity of the companies in which investments are made. Another risk is associated with the low liquidity of investments.
For this reason, diversification through an orderly portfolio construction over time is a crucial element when investing.
When talking about alternative investment through startups, we must consider two levels of diversification:
- First: take the investor’s financial assets as the perimeter of the portfolio.
- Second: diversification in the profile of the companies that make up the portfolio.
Investment with guaranteed transparency and trust
Fellow Funders is well aware of these premises, those that are recalled and reiterated in our Investor Session valuation courses. Fellow Funders always recommends investing through trustworthy platforms, where transparency and project monitoring is easy to implement.