Where to invest in 2018?

Thursday, July 12, 2018

 

Yes, we know. The internet is full of ideas, suggestions, and hints about where one should invest. In most cases that advice is super-general (i.e. invest in the stock market) or is often not an option available for mainland Europe investors. So, this is not intended as an exhaustive list of the myriad of ways you can invest your hard-earned cash. Instead, we will look at some of the investment categories and, specifically, some platforms that have caught our attention during the last 12 months.

 

Bank deposits

 

Wait, what? Don’t worry, you read it right. Bank deposits are still one of the most available and widely used savings options. However, this does not mean we suggest you call up your local bank and arrange for a ten-year fixed term deposit for a lowly rate. As with all things finance, there is nowadays a better way to do that.

 

Raisin has created a pan-European marketplace for bank deposits where you as an investor can shop around to find the best deals. Why invest in your local bank when there is a better rate offered in another country? Currently, the platform connects you with 48 banks from over 30 countries. With the cost of transferring funds among EU banks being close to zero (in euro currency) and plenty of foreign exchange platforms available, this is something you should really look into if long-term deposits are something you are considering. Yes, the rates might still be low compared to marketplace lending platforms, but so are the risks and at least you know you are getting a good deal on your deposits.

 

Robo-advisors

 

The words ‘AI’ and ‘Robo’ are so overused that people tend to ignore most news about the apocalyptic warnings of how AI will end humanity or promises of how we will all live on universal income while we watch robots do all the work (before they rise up against us!).

 

Robo-advisors are, luckily, not a sci-fi fantasy, but a great alternative to traditional wealth management instruments that forego the human side of picking investments and rely on hard algorithms instead. As there are less people involved in managing your investments, you are charged much smaller fees compared to a traditional investment brokerage. This might not mean that you earn more, but at least you know it costs you less to run the whole thing.

 

ETFmatic is currently the only robo-advisor platform available within all EU countries and offers you to invest in Exchange Traded Funds (ETFs) - investment funds, that normally closely track the performance of a financial index. Even if you are unfamiliar with the world of ETFs, know that the platform is easily accessible, offers an extensive FAQ to guide you through the process of investing and charges very low rates compared to a traditional brokerage.

 

Investment crowdfunding

 

If you are feeling a bit entrepreneurial, but are not ready to grow a beard, tattoo your arms and work on your start-up from a café, then either equity or debt crowdfunding might be something for you. Generally, investment crowdfunding platforms allow you to invest in either equity or debt (i.e. bonds) of companies in an early stage of their development with the promise of a possible pay-out when that company either repays the bond, pays dividends, is acquired by another company or goes for an IPO. Be aware though that it might take a while for your money to turn around and you might even not see it ever again as, contrary to popular depictions of start-ups in the media, most start-ups do actually fail.

 

Invesdor is one of quite a few investment crowdfunding platforms that are available to European investors, but stand out with great advocacy and marketing efforts for the projects and companies that seek financing through the platform.

 

Loan marketplaces

 

If deposits seem to offer too low a yield, ETFs seem too complex and investing in start-ups too risky, then investments in marketplace lending might be something to consider adding to your portfolio.

 

Generally, marketplace lending platforms allow investors to invest in loans originated by either related or unrelated loan origination companies. The rates offered to investors are usually starting around the 6% per annum mark and can reach 14-16% on some platforms or go even higher for those willing to take on currency risks. Most platforms offer a secondary market where you can sell off your investments to other investors, some offer a BuyBack Guarantee (meaning the platform will buy back the loan from the investor if the loan defaults) and options to invest in different European currencies.

 

Swaper is one of several Baltics based platforms that was launched in 2016 and currently offers around 2.7 million euros worth of loans on the platform per month. Rates start at 12%, all loans come with a BuyBack guarantee and there is a +2% loyalty bonus for investors investing more than 5000 EUR.

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