How to earn a more stable return with diversification
We want to help you get the most from your account and earn attractive returns. One of the best ways to earn a more stable return is diversification. Check out our infographic to find out what diversification means and how it works, or read our summary below.
What is diversification?
Diversification is a way of spreading your risk. It’s basically a fancy word for saying “don’t put all your eggs in one basket”.
At Funding Circle, this means splitting your investment into lots of small pieces, then lending them out to different businesses.
Why is it important?
As an example, say you lent £2,000 all to just one business. If they were unable to repay their loan, you could lose all of your money in one go.
Instead, if you were to split your £2,000 across 100 businesses, you could then lend just £20 to each. Then if one or two of them couldn’t repay, you would only lose a small amount.
You would still have a great chance of earning a good return overall.
What do I need to do?
To help, we’ve made diversification easy. Our automatic tool will help you lend your money in small amounts to lots of different businesses.
We suggest lending £2,000 or more, as our lending tool will then spread your funds across at least 100 businesses, with no more than 1% going to each one. Everyone who has diversified like this for a year or more has earned a positive return. 98% have earned 4% or more.
To lend £2,000 or more and diversify your account today, simply login to your account.
Past performance is not a guarantee of future performance, and by lending to businesses your capital is at risk.