Where a private investor can invest in

Classical private investors are people with an average income who think that spare money can be invested somewhere more effective than bank deposits. They have an available capital of a few thousands of US dollars, good knowledge of economics and analytical thinking. They think it’s time to shift from passive investing in currencies and gold to active investing. They have already tried to work with the stock market, yet they neither have a sufficient seed capital nor sufficient experience to enter the international markets. Read on about where a classical private investor can invest money, risks and yields.

1. Bond investing in stock exchanges

Bond investing in a stock exchanges are available only after a contract conclusion with a broker. It’s best if an investor finds time and call on a broker’s office to sign a contract, where all the tariffs and conditions will be explained in detail. But It’s possible to apply in electronic form. After that, the contract with the opening of an account will be concluded remotely or delivered in paper form.

Options for investment through stock exchanges:

“Blue chips” are the companies, leading in their sector and based on which the stock indexes are formed. They are suitable for long-term investment, as in a short term relatively deep drawdown are possible. Example: the NASDAQ drawdown in on October 16, 2017.
Company equities of separate sectors (sector index futures). In 2017, oil and gas sector, going through a tough time, is an option for a long-term investment. The most attractive are telecommunications companies and retailing ones ( for example contracts for difference of assets, trading in such exchanges as CFD NYSE or CFD XETRA or CFD NASDAQ.
Futures and options on separately taken assets. The instruments for those who understand the peculiarities of investment, the demand is insignificant.

You can invest in stock exchange securities also through a Forex broker. For example, in LiteForex arsenal there are CFD companies listed in NYSE and NASDAQ, and also stock indexes of the USA, Great Britain, Australia, etc.

2. Investments in ETF

An Exchange traded fund (ETF) is a regulated fund, the money of which is invested in different assets. Funds can be diversified and niche. A company can manage dozens of funds, one can invest in them buying ETF securities, issued by the managing company.

Advantages of the investing in ETF:

ETF is a basket of assets comprising the index, due to this they can be diversified but only within the index sector.
There is a ETF almost in every market sector, in other words, it enables you to correct the distribution of any portfolio’s assets.
You can easily buy or sell ETF, as they are freely accessible in the exchange.
ETF doesn’t require active management, so portfolio acquisition and management costs are reduced for an investor.

Exchange traded funds embrace stock markets of Australia, Great Britain, the USA, China, Russia, etc.

buy fund securities through banks;
buy securities in the exchange through a broker.

As an example, here is the list of the U.S. ETF.

Investing in ETF is an alternative to mutual funds, showing unstable yield, and securities, which depend on domestic economic factors (the policy of the country’s government and shareholders).

3. Crowd investing platforms (investments in start-ups) and hypes

This investment option will suit those, who like risk and aren’t afraid to lose their money, getting in return the thrill and satisfaction from the very process of investment. The amount of investments varies from a hundred of dollars to dozens of thousands, the project yield can be more than 100% a year, but the risk level is not comparable with that of classical investment in stock assets.

3.1. Crowd investing platforms and P2P lending platforms

A crowd investing platform is a service which links people who need money for a project and those who want to earn on investing. The potential borrowers are unable (or don’t think it is necessary) to enter a stock exchange with IPO, and investors are willing to get more yield than that of deposits or Micro finance despite the corresponding risk.

There are several hundreds of crowd investing platforms, their turnover in 2016 exceeded $2 billion. In Russia, this investment option is in its infancy, mainly because of the lack of the legislation and the system to control the reliability of both the project owners and the platforms themselves.

P2P lending platforms

An alternative to crowd investing platforms can be P2P or P2B lending platforms. They are the platforms where individuals directly lend to other individuals or legal entities. The platform doesn’t serve as an actual risk manager (that is its difference from a bank), but provides initial information about a borrower and ranks the risks according to common parameters.

Risks of investing in crowd investing platforms and P2P lending platforms

there is no way to examine the information about start-ups and borrowers; there is no business plan, no financial accounting;
the platform isn’t responsible for the project’s viability, there is no compensation fund;
in case of any problems with money repay by a platform or a start-up, it is hardly possible to solve them in court;
crowd investing platforms and P2P lending platforms will interest those who want to get fast and high profit, but are ready to risk and put up with money loss in case of failure.

3.2. HYIPs

HYIPs (high-yield investment programs) are usual Ponzi Schemes (pyramid schemes). They have their own site, legend and money from new investors is used to provide a return to the previous investors. Investment in HYIPs resembles gambling, where the one, who manages to withdraw the money the earliest, makes profits. The risk of losing money is enormous but the yield can count from 10-15 % per month. The examples of HYIPs read here.

Now HYIPs have a somehow different form. With the growth of cryptocurrencies’ popularity, more and more projects started to use ICO, attracting the investors’ capitals by selling tokens. According to Coin Market Cap site data, there are more than 1000 cryptocurrencies in the world. The list is being renewed constantly, and it means most them are nonviable.

Investor’s risks:

there no guarantee that a HYIP isn’t a fraudulent scheme and the money will be repaid;
many HYIPs have such conditions of return pay that a scam can occur earlier than the investments will start to pay off;
it is impossible to predict precisely when exactly a scam will occur;
HYIPs will interest investors who like risk.

This investment list can be enriched by real-estate purchase, but it is hardly profitable. Except that real estate requires transaction costs, it doesn’t generate income as stock assets do. Conservative investors invest in domestic real estate, those who want to obtain foreign citizenship invest in foreign real estate. Add your ideas, where would you invest if you were a private investor with a small fund, in the comments!

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