Balance Risks and Rewards when Crowdfund Investing - dummies

Balance Risks and Rewards when Crowdfund Investing

By Sherwood Neiss, Jason W. Best, Zak Cassady-Dorion

The younger you are, the more risky you may be with your crowdfund investments. You may truly believe that nothing will go wrong. (And if anything does go awry, you’ll likely recover much faster and less painfully than an older person would.)

Young or old, you need to be aware of this fact: Crowdfund investing is high-risk investing. You can’t approach it with the assumption that because federal regulations allow it, this type of investing must somehow be immune from failure. It’s not.

Fifty percent of investments in early-stage companies fail. You’re going to do your homework, so you may be in better shape than some other investors, but you are not immune to failure. If you choose to put some money into crowdfund investing, you must be prepared for the worst.

Why invest in this type of venture at all, then? Ah, there’s the rub. Because if — if — you put your dollars behind a concept and a management team that achieve their goals for growth, you stand to earn more than you would from a bond, a mutual fund, or most other traditional investments.

The greater the risk you take, the greater the potential reward may be — if you choose wisely and get lucky.