Written by peer-to-peer lending platform AS Mintos CEO and co-founder Martins Sulte
Modern technologies make new investment possibilities ever more available and ensure reduced costs of investment, opening up investment opportunities to those with fewer funds to invest.
There are several assets that one can choose depending on available funds and the strategy. One can invest starting with a small amount of money to understand whether a specific financial instrument is suitable. It is also important to start investing as early as possible in order to use the power of compound interest, that is, to earn interest on revenues from interest. Based on a long experience of investing, I offer five suggestions where to invest money in the coming year.
Before making serious investments, I suggest investing in education and first of all, educating yourself. Undoubtedly, it is one of the best investments possible. A good investment includes any new body of knowledge that can be a language, new software or the skills needed to build a new device. In addition, this investment can start as a simple desire to learn something without any commercial purpose.
Education offers opportunities in the future and is one of the safest ways to invest when assessing a planned return. Today education requires less additional funds than it may actually seem: one can invest in education not only by learning in the classroom but also by buying a self-learning book, by participation in online courses or by using other easily accessible resources on the internet.
By investing in education, a person gets three essential benefits. First and foremost, it provides moral satisfaction. Second, it is an opportunity to acquire new skills. Acquired skills could help in the future as we presently don’t know what functions or knowledge may be necessary for a person in 10 or 15 years. Third, investing in education is a re-evaluation of existing things from a new viewpoint, which helps to find increasingly better solutions.
Purchasing a land is one of the best ways to invest. However, for investing into land an individual must emphasize that this kind of investment is suitable for a person planning one’s activities in the long term. The growth of the value of land in the future is linked to overpopulation. Land is becoming an increasingly scarce resource in many countries, with the result that buildings are being built at increasingly higher rate. Cities such as London, New York and Mumbai are clear examples of large numbers of people and the value of land. It is not for nothing that China is actively building islands in the sea, while in India, a large part of the city is land reclaimed from the Arabian Sea. Such actions ensure the expansion of the livable land. The magazine Der Spiegel, analyzing the UN forecast for population changes, concludes that in 2100 there will be between 11.2 and 16.6 billion people on the planet. Increasing amount of people and the shortage of land will boost the price of the land.
There a number of companies worth mentioning, however I would like to emphasize companies that work in the areas of food and technology. Food, just like land, will be increasingly in demand due to growing population. For instance, various startups are already radically changing our thinking about food offering new products that offer maximum ease of use and offer balanced and sufficient nutritional value. That means that the rapid development of technological ease will continue to ease people’s lives in the future. In turn, various technology companies, of which many have yet to be founded, will offer services that will be utilized by an increasing number of people. It is a positive factor that one can make both short-term and long-term investments in company shares, giving people a choice of the most suitable alternative. One should count on investing in shares as requiring patience, constant attention to one’s chosen strategy and especially psychological resilience in acting rationally, which as has been proven in most cases, is not an investor’s strong side.
Investing in funds is comparatively easier, however, research and the selection of a suitable fund is necessary. In my opinion, investment funds that follow a particular market (tracker funds) are a good choice since such investment carries lower commission costs and does not require in-depth involvement. It is a perpetual subject of discussion on whether active or passive investments are best.
However, one must be aware that changes are constantly taking place. The development of technology and new entries to the market develop this process, making investment cheaper and more accessible. This means that it is possible to invest with significantly smaller sums. Such new services as Betterment and Wealthfront offer automated investment management services and make investment maximally accessible to all.
HIGH YIELD INVESTMENTS
A higher return naturally means a higher risk. High risk bonds (junk bonds), shares and real estate investment trusts count among high-return investments. In addition to the aforementioned, the significance in the financial services sector is being proved by such new classes of assets as crowdfunding and peer-to-peer lending. The advantage is that individuals can support each other on crowdfunding platforms realizing person’s goals via the internet. The largest platforms in the field are Kickstarter and Indiegogo.
Peer-to-peer lending platforms bring together investors and borrowers. It implies that investors, who want to invest free funds meet borrowers who need funding to realize their goals. These technology-based platforms offer not only a new class of assets to ordinary investors, but also significantly reduce costs and ensure the opportunity to invest much smaller sums which are not measured in thousands of euros. The peer-to-peer lending industry has experienced rapid growth, reaching almost 25 billion USD in loans financed in 2014. According to a forecast by Morgan Stanley, the number will reach 290 billion USD in 2020.
Mintos is a peer-to-peer lending platform that brings together investors and borrowers, offering non-bank lenders the peer-to-peer model for additional financing. The non-bank lender Creamfinance is enlisted on Mintos platform. Almost 4000 investors from 39 countries have registered on the platform and funded more than EUR 11.9 million in loans. Loans available on the platform have been issued in Latvia, Lithuania, Estonia and Georgia.