6 keys to realising why participative financing is a good alternative to volatile markets

Participative financing

In this section, we will introduce you how the different investment alternatives operate, including participative financing, for all those private savers who are suffering a decline in their investments, whether in shares or funds, resulting from the widespread fall in the markets caused by the Covid-19 crisis.

In this scenario, these different alternatives offered by participative financing enable a limitation of the negative effects on current yields that are exposed to the savers’ investment portfolios, considering the volatility of the markets in the forthcoming months and the fact that investors will be subjected to severe index changes arising from the instability climate generated by a global health crisis of unknown magnitude.

What are the advantages of participative financing?

  • Unrelated investments from market performance.

The profitability of participative financing projects is not based on market fluctuations, which protects investors especially at times like these. The stock markets are experiencing sharp falls – for example, the Ibex 35 has been dropped in the last week, almost 25% of its capitalization – and analysts assure that volatility will become the main focus of the markets in the forthcoming months. Such falls may lead to substantial losses for investors with high equity exposure, which used to be a refuge for those seeking acceptable yields, within a low rate environment and with fixed rate vehicles offering low returns. This investment is closer to real economy due to its typology.

  • Enables the diversification of investments.

The participative financing is positioned as one of the optimal investment alternatives. Thanks to its nature, it allows to diversify the investments in diverse projects, including reduced amounts and revenues not related to these market fluctuations. We are talking about an interesting alternative for maximum investment diversification. In this way, the potential losses due to non-payment of a project may be covered with the profits generated from others. The investor involved in this modality can simulate a strategy similar to a fund portfolio, while choosing participative financing projects with different levels of risk.

  • Scoring to guide the investor.

The risk of a project is analyzed using a scoring for each project. At Housers, all projects are carefully evaluated and selected according to strict criteria by an external specialized company that performs a feasibility and risk study for each operation, based on an accurate and demanding scoring system.

  • Immediacy of investments.

Given its typology, these investments can be performed instantly, with quick access to the platform and an easy and flexible procedure, so the investor decides when to invest and which projects to invest in.

  • Supervised by the regulator.

All investments in crowdfunding platforms shall be limited to those registered and subject to the supervision of the CNMV (National Securities Market Commission), which oversees all their procedures, ensuring all the requirements of Law 05/2015 on the promotion of business financing are fulfilled.

  • An attractive option in terms of profitability and risk.

The decorrelation with traditional markets means a choice between profitability and risk. An alternative to overcome the high volatility of the Stock Market, the low profitability of bank deposits and a fixed income at historical minimums, where the return on investment is about 0%. The benefits are practically non-existent for the investor, who may even lose money by paying commissions.

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