Why shouldn't a Crowdfunding project be missing in your portfolio?

Anyone can start building a passive income today. Even €10 a month means you'll add €120 to your budget in a year, which is already quite nice. How to do it? What is Crowdfunding? What is the current situation with Crowdfunding in Slovakia? Read on...

Thankfully, we are already beginning to live in the 21st century in some areas of life in Slovakia. Today's times offer every person a huge number of opportunities to educate, develop your skills and knowledge, move forward and live a better life. The term 'better life' is often associated with having more money. It may be said that money can't buy happiness, but it's also true that if you can't even afford bread, life is probably a bit more complicated.

The 21st century has brought and is bringing us many new technologies, systems, processes and innovations that aim to simplify our lives. One of these systems is Crowdfunding, which more or less in a sense combines all the elements mentioned above. I will explain:

• Crowdfunding as such is a system that operates today in the developed world, and its aim is to apply the so-called win-win concept, which guarantees certain advantages to both the investor and the borrower, i.e. it is mutually beneficial. In the context of the platform Investment Slovakia it is actually a collective financing of development projects with the possibility of investing from a very small amount - one that almost everyone can afford today. Since a large number of investors are involved in a given development loan, the risk for each of them is reduced at the same time. Moreover, this risk is always eliminated by some form of collateral, whether in the form of a guarantee fund, the property itself or some other form.

• You don't need any extra knowledge or skills to get involved in Crowdfunding. It is enough to be somehow financially Educated. Personally, I think that anyone who is even slightly interested in their money (and I believe that money is almost always the main topic of the day for most people) is interested in acquiring new information that will help them evaluate that money safely. There should be at least a little bit of financial responsibility in all of us that compels us to educate ourselves further.

• If "living a better life" means having more money, I need to be interested in the ways in which I can legally achieve this goal. Crowdfunding is a great option that the 21st century has just brought us. There is no need to get stuck in the mindset of 'this kind of investing is only for the rich', 'the rich are getting richer - the poor are getting poorer', 'I don't have it', 'I can't do it', 'I don't want it', and so on. There are a number of ways a person can legally get more money: either by getting a second job, or by working harder, longer, more intensively at their job. However, by doing so, he loses more time and energy during the day at the expense of the money he earns; or he can look for ways that would be less time and energy consuming - one of them is building a passive income, which can be created from various sources, and one of them is, for example, crowdfunding, or investing in general.

Situation in Slovakia

When it comes to finances, investing, risk-taking, Slovaks are generally a very conservative nation. This can be seen in the statistics, which show that we collectively hold an enormously high amount of money in current bank accounts - one of the highest in Europe. This money may be kept 'safe' (in fact, it is far from safe), but you lose your money over time and it does not appreciate in value - quite the opposite: bank charges, account maintenance, inflation, etc. A bank? Did you know that the bank invests your deposited money? Without your permission... And you're still paying them for it. In fact, your money is floating around the world, making the bank quite a bit of money. You're not getting anything out of it.

The reasons why invest, are dozens. I know of no reason not to invest. Investing (not through a bank) is therefore very important and has been common practice in the developed world for about 150 years. Unfortunately, in Slovakia we are very slow and very clumsy to commit to such "risky" things. Why? Our past history of being duped many times and having rather bad experiences with all sorts of "bargains" from shady businessmen. 

But there is no need to feel sorry for ourselves - because the main reason I see is the low level of education, and I mean financial education, the level of financial literacy in Slovakia, which even today, in 2019, is at such a low level that it is embarrassing. Therefore, in situations like this, we cannot be surprised that we fall for by a fraudster...

The starting point is clear: if you are interested in your own money and legal ways to get more of it and how to start building a passive income, you need to educate yourself; start with the simple things and work your way up to the more complex ones. It's all about interest, and those who are interested don't get lost in financial concepts, activate their critical and analytical thinking, creativity and don't just get caught out.

Opportunities through the Invest Slovakia platform

It's great that real estate crowdfunding has come to Slovakia in the form of a platform Investment Slovakia. As far as Europe is concerned, the pioneers of this way of financing and investing in projects are the Baltic countries. There, crowdfunding has been experiencing a real boom perhaps since 2015. I can say from personal experience that it's great when you say, 'I invested in the renovation of a building in Riga, I invested in the expansion of the capital of an Estonian shipping company, I invested in the construction of a restaurant, I invested in the construction of a restaurant'. v Lithuania," etc. It certainly sounds interesting, but it is still some way off and the opportunity to actually see these projects is quite limited. 

Platform Investment Slovakia brings projects that you can come and see in person (Slovakia is thankfully not so big that you can't do that) and say to yourself: "I invested in THIS project in the High Tatras, I invested in THIS project in Poprad," etc. You can see with your own eyes that the project in question is real.

Anyone over the age of 18 with at least EUR 100 available can invest. This way of investing is absolutely amazing, because in the past, when the word 'investor' was said, one would certainly think of some millionaire who spends 25 hours a day in the financial markets. Today it is different. Indeed, almost anyone can invest, and the time that needs to be devoted to something like this is minimal. 

So why shouldn't you have a Crowdfunding project in your portfolio? The answer is quite simple:

• For example, if you are already investing in stocks, gold or anything else, the best protection for an investor is to spread the risk - Diversification - among various investment instruments. Crowdfunding projects can enrich your portfolio beautifully in this case.

• If you're thinking about buying a property in the future that you would like to rent out, for example, property crowdfunding could be a good starting point. Start small and give it a try. If you like it, you might forget about actually buying a property and just focus on this P2B (peer-to-business) system. The undeniable advantage of this system is liquidity (monetization, speed of sale). If you have an investment apartment (subletting) and you want to sell it, it can take months or years. You have to sell the whole apartment - you can't sell just one room, for example. However, if you are investing through Crowdfunding platforms, it is better to spread the investment and therefore the risk between different projects, so that your investment and interest are returned to you at regular intervals, whether monthly, after half a year, a year or a year and a half, depending on the duration of the project.

• Crowdfunding projects offer a return you won't find anywhere else in this risk class. We typically see 12-17% per year, which is absolutely amazing! Equity portfolios of the world's best investors will make approximately 10-11% per year. When it's a good year, mutual funds will make you maybe 8%. Cryptocurrencies today are more of a future issue, and while you can make 200%, you can still find yourself losing 90% after a year. Investing in gold will at best protect your money from inflation (2-3%), and we don't even need to talk about banking products (time deposits, savings, interest on checking accounts)...

Conclusion

Today, passive income is not a concept that applies only to the rich. If you want to change something in your life, you have to change something in your life (it sounds strange in Slovak, but I'm basing it on the English saying "If you change nothing, nothing will change"). Thanks to investing through crowdfunding platforms such as Investícia Slovensko, you can start building your first passive income, even at the level of 5 or 10 EUR per month - no fees, no effort. All you need to do is give your money time to appreciate in value. €10 a month is €120 for a whole year, and that's pretty nice, wouldn't you say?

*The links in this article refer to the author's website schwa.sk - BUSINESS, where you can find more detailed information about Crowdfunding, investing, reviews of various P2P and P2B platforms, you can see Schwa's real portfolio, the recommended portfolio of a small investor and educate yourself in the concepts related to Crowdfunding.

"Every man is an investor" - Schwa