"Don't put all your eggs in one basket" is one of the most frequently heard pieces of advice for investors, which in other words means diversifying your investments. This is important so that when some of the invested capital loses value at some point, another investment may be profitable. Diversification allows you to maintain the profitability of the target and reduces the risk of suffering losses in the event of failure of an individual company. In addition, investment diversification is important not only when investing in stocks, but also in bonds, venture capital and personal loans .
A well-diversified stock or loan portfolio should have at least 20 investments with companies representing different industries. This conclusion is also confirmed by Capitalia's research on investment returns for investors who invest in Baltic companies using Capitalia's financing platform.
Accordingly, since 2017, when Capitalia was the first to offer investors to invest in loans to various companies in the Baltic States on a specially created financing platform, the average return on loans during these years on the Capitalia platform has been 12.3%. Loan losses in annual terms have been below 0.05%. Taking into account provisions for bad loans, only three of the 293 investors surveyed had a negative return. All investors who had invested in 10 or more loans showed a positive return. Only one-third of investors with fewer than 25 loans in their portfolio have been able to show better than average returns. Two-thirds had a worse return.
This confirms - the greater the number of loans of the investor, the smaller is the fluctuation of its monthly return (the risk of investment return decreases accordingly), while the return approaches the average. Investors, where they have built a portfolio of loans with more than 25 companies, but whose returns are noticeably below average, have financed a deal with a significantly higher than average amount.
Therefore, for successful investments in both financial markets and loans, we recommend dividing the investment amount into equal-sized investments in at least 20 companies, preferably more.
Useful suggestions on how to invest and earn
One can invest and save not only in bank deposits. The goal of this handbook is to inform about the wide range of alternative investment opportunities available to any investor. The target audience of this handbook is anyone who has established or plans to establish savings in the thousands (but not in the many millions) and who basically understands or is ready to learn what shares, bonds, investment funds and similar terms mean. The handbook content is regularly updated.
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