With all the attention given to grand investment plays and headline-grabbing startups, small investments often go overlooked. However, it’s the smaller, carefully considered investments that can provide robust risk-adjusted returns and play a vital role in portfolio diversification. Whether you’re a casual investor or a professional asset manager, focusing on smaller but meaningful investment avenues is crucial.
In this article, we explore five tips that will guide you in making small but worthwhile investments in the European markets.
1. Explore Crowdfunding Platforms
Crowdfunding has gained traction as a legitimate means of investing in startups or smaller enterprises. With lower entry barriers, these platforms enable individuals to participate in early-stage investments.
Platforms like Seedrs, Crowdcube, and Kickstarter offer a range of European ventures you can invest in. While the risk is higher given these are early-stage companies, due diligence can unearth potential gems. Always read the terms carefully and consider the tax implications, which can vary from country to country in Europe.
2. Dabble in Fractional Shares
Fractional shares allow you to purchase a piece of a stock or ETF, instead of buying a whole unit. This feature enables investors with limited capital to participate in the market.
Online brokers like eToro or Trading 212 often offer fractional investing. This can be a cost-effective way to gain exposure to higher-priced European assets like luxury brands or renewable energy stocks. Be aware of fees and ensure that the platform you use is regulated by European financial authorities.
3. Invest in High-Yield Savings Accounts
While the interest rates on standard savings accounts are currently low across Europe, some specialized online banks offer high-yield savings accounts that can provide better returns.
Look for online banks based in Europe with a proven track record and regulatory approval. Make sure to understand any withdrawal restrictions and confirm that the bank participates in a national deposit insurance scheme to protect your investment.
4. Peer-to-Peer Lending
Peer-to-peer (P2P) lending platforms connect individual borrowers with individual lenders, cutting out traditional financial institutions from the equation.
European platforms like Mintos, Twino, or Bondora offer P2P lending with potentially higher yields than traditional savings accounts. Always evaluate the risk factors and perhaps diversify your P2P investments across multiple borrowers to mitigate risks.
5. Explore Government Bonds
While not as glamorous as tech stocks or venture capital, government bonds offer a relatively secure investment avenue.
Many European governments offer bonds with varying maturities and interest rates. While the returns may not be exorbitant, they are typically more secure, making them a valuable component of a diversified investment strategy. Consider bonds from stable economies like Germany or Switzerland for lower risk, or look to emerging European markets for potentially higher returns, albeit with greater risk.