Making the most of your investment: Diversification
In the final post on our ‘making the most of your investment’ series, we’re looking at diversifying your investment.
At Funding Circle, you are in control of your money – you choose which businesses you want to lend to and how this is done. You also choose the level of risk you’re comfortable with for the return you’re looking for.
Part of lending through Funding Circle is choosing how you want to lend your money, and spreading amounts across lots of businesses to manage your risk. In the financial world, this is called diversification.
By diversifying and spreading your money to lots of different businesses, if any business is unable to fully repay its loan the impact on your overall return is reduced.
At Funding Circle, it’s easy to diversify. As an investor, there are two ways you can spread your money, whilst remaining in control and choosing the level of risk and return you’re comfortable with:
- Automatic lending. Our Autobid tool enables you to automatically place bids quickly and requires little management. You can set the maximum amount of money you want to be lent to any one business (from 0.5% of your total funds). So if you had £4,000 in your Funding Circle account, Autobid would lend a maximum of £20 to any one business.
- Hand-pick businesses. If you want to choose the businesses you lend to and focus on companies with characteristics you value, you can hand-pick the auctions you want to bid on. By choosing this option, you can also ask the business questions before deciding whether to bid.
If you are looking to rapidly lend your money out, you can buy loan parts directly from other investors. This takes place on our secondary market. To find out more information about this, click here.
Some people choose to diversify across hundreds of businesses to reduce their risk. By doing so any loss you experience will have a lower impact on your overall return. Every investor at Funding Circle who has lent no more than 1% of their funds to any business, and has been lending for at least 6 months, is currently earning a positive return.
Other investors like to spend more time reviewing and choosing individual businesses to lend to and will therefore lend to less businesses. This means any loss you experience will have a greater impact on your overall return, but the probability of experiencing a loss will generally decrease. Funding Circle allows you the control and transparency to choose the strategy that is most appropriate to you and delivers the maximum returns for the level of risk you are comfortable with.
We hope you have found the blog posts helpful over the last few weeks. If you have any questions please feel free to get in touch with us by leaving a comment below, or email email@example.com.
The Funding Circle team
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