{"id":3628,"date":"2021-10-04T13:05:08","date_gmt":"2021-10-04T13:05:08","guid":{"rendered":"https:\/\/blog.ethis.co\/?p=3628"},"modified":"2022-11-15T04:15:38","modified_gmt":"2022-11-15T04:15:38","slug":"equity-crowdfunding-diversification-strategy","status":"publish","type":"post","link":"https:\/\/ethis.co\/blog\/equity-crowdfunding-diversification-strategy\/","title":{"rendered":"Diversify Your Investment Portfolio with Equity Crowdfunding"},"content":{"rendered":"\n<p>When it comes to investing, there is one most important rule that every investor should live by, i.e. \u201cdon\u2019t put all your eggs in one basket.\u201d To put all your eggs in one basket means to risk losing all the money you invest by depending entirely on only one investment portfolio for your <a href=\"https:\/\/ethis.co\/blog\/money-management-tips-improve-personal-finance\/\" target=\"_blank\" rel=\"noreferrer noopener\">money to grow<\/a>.&nbsp;Smart investors diversify their investments by spreading their capital across multiple investment portfolios. One of the investment options you can consider in your diversification strategy is equity crowdfunding. Before we weigh the pros and cons of equity crowdfunding diversification, let&#8217;s understand the basics of equity crowdfunding. <\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_51_1 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\" role=\"button\"><label for=\"item-69e8b9d92b3dc\" ><span class=\"\"><span style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input aria-label=\"Toggle\" aria-label=\"item-69e8b9d92b3dc\"  type=\"checkbox\" id=\"item-69e8b9d92b3dc\"><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/ethis.co\/blog\/equity-crowdfunding-diversification-strategy\/#What_is_Equity_Crowdfunding_ECF\" title=\"What is Equity Crowdfunding (ECF)?\">What is Equity Crowdfunding (ECF)?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/ethis.co\/blog\/equity-crowdfunding-diversification-strategy\/#Why_You_Should_Consider_Equity_Crowdfunding_Diversification_In_Your_Investment_Portfolio\" title=\"Why You Should Consider Equity Crowdfunding Diversification In Your Investment Portfolio \">Why You Should Consider Equity Crowdfunding Diversification In Your Investment Portfolio <\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/ethis.co\/blog\/equity-crowdfunding-diversification-strategy\/#_1_Equity_crowdfunding_is_open_to_anyone\" title=\"&nbsp;1) Equity crowdfunding is open to anyone\">&nbsp;1) Equity crowdfunding is open to anyone<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/ethis.co\/blog\/equity-crowdfunding-diversification-strategy\/#2_Relatively_low_minimum_investment\" title=\"2) Relatively low minimum investment\">2) Relatively low minimum investment<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/ethis.co\/blog\/equity-crowdfunding-diversification-strategy\/#3_Long-term_game\" title=\"3) Long-term game\">3) Long-term game<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/ethis.co\/blog\/equity-crowdfunding-diversification-strategy\/#4_It%E2%80%99s_a_high-risk_investment\" title=\"4) It\u2019s a high-risk investment\">4) It\u2019s a high-risk investment<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/ethis.co\/blog\/equity-crowdfunding-diversification-strategy\/#5_The_high_risk_comes_with_high_potential_returns\" title=\"5) The high risk comes with high potential returns\">5) The high risk comes with high potential returns<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/ethis.co\/blog\/equity-crowdfunding-diversification-strategy\/#Strategise_Your_Equity_Crowdfunding_Diversification_via_Ethis\" title=\"Strategise Your Equity Crowdfunding Diversification via Ethis\">Strategise Your Equity Crowdfunding Diversification via Ethis<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"What_is_Equity_Crowdfunding_ECF\"><\/span>What is Equity Crowdfunding (ECF)?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In essence, equity crowdfunding is an online offering of a private company\u2019s equity in exchange for funding from the \u2018crowd\u2019, or the public. Investors gain a stake in the company in return for the capital invested. It\u2019s an alternative to conventional bank lending that offers a mechanism for early-stage companies to raise funds for their ventures.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"536\" src=\"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/10\/blog-page-images-2-71-1024x536.png\" alt=\"Equity Crowdfunding Diversification What is Equity Crowdfunding (ECF)?\" class=\"wp-image-3629\" srcset=\"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/10\/blog-page-images-2-71-1024x536.png 1024w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/10\/blog-page-images-2-71-300x157.png 300w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/10\/blog-page-images-2-71-768x402.png 768w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/10\/blog-page-images-2-71.png 1200w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption><em><strong>Equity crowdfunding: How does it work?<\/strong><br><\/em><\/figcaption><\/figure>\n\n\n\n<p>Equity crowdfunding is rapidly gaining traction globally, including in Asian countries as bank lending in several Asian economies begins to slip amid a pronounced <a href=\"https:\/\/www.cnbc.com\/2015\/11\/09\/equity-crowdfunding-gains-traction-in-asia.html\" target=\"_blank\" rel=\"noreferrer noopener\">start-up boom<\/a>.<\/p>\n\n\n\n<p>This alternative funding mechanism allows average investors, like most of us, the opportunity to invest in a domain that was traditionally dominated by wealthy individuals, venture capitalists, and angel investors.&nbsp;<\/p>\n\n\n\n<p>Related: <a href=\"https:\/\/ethis.co\/blog\/investing-equity-crowdfunding-pros-cons\/\" target=\"_blank\" rel=\"noreferrer noopener\">Investing through Equity Crowdfunding (ECF): The Pros and Cons<\/a><\/p>\n\n\n\n<h2><span class=\"ez-toc-section\" id=\"Why_You_Should_Consider_Equity_Crowdfunding_Diversification_In_Your_Investment_Portfolio\"><\/span><strong>Why You Should Consider <strong>Equity Crowdfunding<\/strong><\/strong> <strong>Diversification In Your Investment Portfolio <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Depending on your risk appetite and financial goals, equity crowdfunding may make a good investment vehicle in your diversification strategy. Let\u2019s drill down into the five reasons.&nbsp;<\/p>\n\n\n\n<h3><span class=\"ez-toc-section\" id=\"_1_Equity_crowdfunding_is_open_to_anyone\"><\/span>&nbsp;1) Equity crowdfunding is open to anyone<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In contrast to conventional equity investing that was only accessible to accredited investors and high-net-worth individuals, equity crowdfunding is open to anyone looking to diversify their investment portfolio.&nbsp;<\/p>\n\n\n\n<p>This emerging investment asset class allows you the option to diversify your investments beyond the traditional asset classes to suit your goals and risk profile.&nbsp;<\/p>\n\n\n\n<p>Related: <a href=\"https:\/\/ethis.co\/blog\/investing-stock-markets-ethical-investment-crowdfunding\/\" target=\"_blank\" rel=\"noreferrer noopener\">Investing in Stock Markets vs Ethical Investment in Ethis Crowdfunding<\/a><\/p>\n\n\n\n<p>There is no investor profiling that will disqualify or restrict you from investing in this emerging asset class. But in Malaysia, investors are categorised by the Securities Commission Malaysia into three types: retail investors (average investors like most of us), angel investors (individuals with a certain income or personal assets), and sophisticated investors (high net worth individuals or entities, and accredited investors).<\/p>\n\n\n\n<p>The two key differences between these types of investors are their income group and the maximum investment limit.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"741\" height=\"309\" src=\"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/11\/Equity-Crowdfunding-in-Malaysia.png\" alt=\"Equity Crowdfunding Diversification\" class=\"wp-image-3792\" srcset=\"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/11\/Equity-Crowdfunding-in-Malaysia.png 741w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/11\/Equity-Crowdfunding-in-Malaysia-300x125.png 300w\" sizes=\"(max-width: 741px) 100vw, 741px\" \/><figcaption><em><strong>Types of equity crowdfunding investors as classified by the Securities Commission Malaysia.<\/strong><\/em><\/figcaption><\/figure>\n\n\n\n<h3><span class=\"ez-toc-section\" id=\"2_Relatively_low_minimum_investment\"><\/span><strong>2) Relatively low minimum investment<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Traditionally speaking, equity investing requires a high minimum investment, which in a way, translates to why it was only accessible to high-net-worth individuals. On the contrary, equity crowdfunding offers a much more affordable entry amount. You don\u2019t need huge capital to get off the ground.&nbsp;<\/p>\n\n\n\n<p>At <a href=\"http:\/\/ethis.co\/my\" target=\"_blank\" rel=\"noreferrer noopener\">Ethis<\/a>, you can start your equity investment journey from as low as RM1,000.<\/p>\n\n\n\n<p>The relatively low minimum investment makes it possible for any Tom, Dick, and Harry (or Ali, Ah Hock, and Muthu, in the Malaysian context) looking to have a dip in equity investing to play the field.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><a href=\"https:\/\/ethis.co\/my\/project\/estet-sepakat-es\/?utm_source=ethis_blog&amp;utm_medium=Diversify_Investment\"><img decoding=\"async\" width=\"1024\" height=\"536\" src=\"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/10\/blog-page-images-2-91-1024x536.png\" alt=\"Equity Crowdfunding Diversification\" class=\"wp-image-3631\" srcset=\"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/10\/blog-page-images-2-91-1024x536.png 1024w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/10\/blog-page-images-2-91-300x157.png 300w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/10\/blog-page-images-2-91-768x402.png 768w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/10\/blog-page-images-2-91.png 1200w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/a><figcaption><em><strong>Invest in Estet Sepakat, an ATaaS company with a data-driven disruptive technology approach to improve farmers\u2019 income and enhance national food security.<\/strong><\/em><\/figcaption><\/figure>\n\n\n\n<h3><span class=\"ez-toc-section\" id=\"3_Long-term_game\"><\/span>3) Long-term game<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Except for your short-term financial goals, your investment plan is essentially your long-term savings plan. So it only makes sense that you have a couple of long-term investment options in your investment mix.<\/p>\n\n\n\n<p>But there is an opportunity cost that you have to consider since long-term investments lock in your capital that could be used or invested elsewhere. This is why it\u2019s important to align your diversification strategy with your financial goals and risk appetite.&nbsp;<\/p>\n\n\n\n<p>Related: <a href=\"https:\/\/ethis.co\/blog\/crowdfunding-grow-wealth\/\" target=\"_blank\" rel=\"noreferrer noopener\">Crowdfunding: A New Way to Grow Your Wealth<\/a><\/p>\n\n\n\n<p>Meanwhile, equity crowdfunding is a long-term investment. It may take years for you to reap your returns, if at all. The illiquid nature of this investment vehicle makes it suitable for those looking for long-term gain, notwithstanding the risks that come with it, which brings us to the next point.<\/p>\n\n\n\n<h3><span class=\"ez-toc-section\" id=\"4_It%E2%80%99s_a_high-risk_investment\"><\/span>4) It\u2019s a high-risk investment<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Investing in early-stage companies carries high risks. The business may not do well, there is a risk of business failure and even bankruptcy. Should the business go south, so will your investment. You may not be able to recover your initial investment and lose all of it.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"536\" src=\"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/10\/blog-page-images-2-61-1024x536.png\" alt=\"Equity Crowdfunding Diversification\" class=\"wp-image-3632\" srcset=\"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/10\/blog-page-images-2-61-1024x536.png 1024w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/10\/blog-page-images-2-61-300x157.png 300w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/10\/blog-page-images-2-61-768x402.png 768w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/10\/blog-page-images-2-61.png 1200w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption><em><strong>Investing via equity crowdfunding is risky.&nbsp;<\/strong><\/em><\/figcaption><\/figure>\n\n\n\n<p>However, diversification means you should also consider varying your risks. Since the nature of this investment is a high risk, you may consider adding equity crowdfunding into your high-risk investment portfolio as part of your diversification strategy. But remember, when it comes to high-risk investments, and any investment for that matter, only invest an amount that you can afford to lose.&nbsp;<\/p>\n\n\n\n<h3><span class=\"ez-toc-section\" id=\"5_The_high_risk_comes_with_high_potential_returns\"><\/span>5) The high risk comes with high potential returns<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>As with other types of investments, the higher the risk, the higher the potential returns. While it\u2019s possible that the early-stage companies you invest in can go bust, and you risk losing all of your capital, so is the chance for the business to flourish and for you to win big.&nbsp;<\/p>\n\n\n\n<p>Related: <a href=\"https:\/\/ethis.co\/blog\/earn-halal-money-mindset\/\" target=\"_blank\" rel=\"noreferrer noopener\">How to Earn Halal Money? The Money Mindset<\/a><\/p>\n\n\n\n<p>The returns you can anticipate will depend on how consistent the business is in making profits &#8211; so you can earn your dividends, and how strong is the company\u2019s exit strategy &#8211; so you can sell off your shares once the company has the financial capability to buy back your shares or go public.&nbsp;<\/p>\n\n\n\n<p>Therefore, it\u2019s crucial to carefully assess the company\u2019s profile before deciding to invest. Research their founders, the problems they are solving or trying to solve, the market demand, the growth potential, proof of concept, if any, and other concerns that you may have.&nbsp;<\/p>\n\n\n\n<h2><span class=\"ez-toc-section\" id=\"Strategise_Your_Equity_Crowdfunding_Diversification_via_Ethis\"><\/span>Strategise Your Equity Crowdfunding Diversification via Ethis<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>At Ethis, we make it easy for investors to access this information related to issuers on our platforms by making it available on our platform. Most importantly, we don\u2019t just accept any investment deals that come our way. We curate and filter them through, conduct thorough due diligence on each issuer, and ensure that their business is Shariah-compliant before having them on board. This is part of our standard operating procedure to manage the risks while maintaining quality issuers on our platform.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"536\" src=\"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/10\/blog-page-images-2-51-1024x536.png\" alt=\"Equity Crowdfunding Diversification\" class=\"wp-image-3633\" srcset=\"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/10\/blog-page-images-2-51-1024x536.png 1024w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/10\/blog-page-images-2-51-300x157.png 300w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/10\/blog-page-images-2-51-768x402.png 768w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/10\/blog-page-images-2-51.png 1200w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption><em><strong>Invest in exciting high-growth companies via Ethis Malaysia at ethis.co\/my.<\/strong><\/em><\/figcaption><\/figure>\n\n\n\n<p>Ethis is a fintech, impact investment, and Islamic crowdfunding platform based in Malaysia with a growing global community of funders from more than 80 countries. We are one of the few firms licensed to operate investment platforms in multiple countries, including equity crowdfunding by Securities Commission Malaysia.&nbsp;<\/p>\n\n\n\n<p>Grow your money ethically via equity crowdfunding at <a href=\"http:\/\/ethis.co\/my\" target=\"_blank\" rel=\"noreferrer noopener\">ethis.co\/my<\/a>.<\/p>\n\n\n\n<p>Read more about <a href=\"https:\/\/ethis.co\/blog\/islamic-investing-al-bay-crowdfunding\/\" target=\"_blank\" rel=\"noreferrer noopener\">Islamic Investing<\/a><\/p>\n<div class=\"rns\" data-title=\"Diversify Your Investment Portfolio with Equity Crowdfunding\" data-tags=\"\" data-categories=\"Equity Crowdfunding\" data-comments=\"0\" data-date=\"1633352708000\" data-author=\"Triningsih Ngadimun\" data-single=\"\" data-url=\"https:\/\/ethis.co\/blog\/equity-crowdfunding-diversification-strategy\/\"><\/div> <!-- Check out https:\/\/reactandshare.com -->","protected":false},"excerpt":{"rendered":"<p>When it comes to investing, there is one most important rule that every investor should live by, i.e. \u201cdon\u2019t put all your eggs in one &hellip; <span class=\"read-more-link\"><a class=\"read-more\" href=\"https:\/\/ethis.co\/blog\/equity-crowdfunding-diversification-strategy\/\">Read More &rsaquo;<\/a><\/span><\/p>\n","protected":false},"author":65,"featured_media":3635,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":""},"categories":[1774],"tags":[],"aioseo_notices":[],"jetpack_featured_media_url":"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/10\/blog-page-images-2-81.png","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/pbDwgm-Ww","_links":{"self":[{"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/posts\/3628"}],"collection":[{"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/users\/65"}],"replies":[{"embeddable":true,"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/comments?post=3628"}],"version-history":[{"count":1,"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/posts\/3628\/revisions"}],"predecessor-version":[{"id":6543,"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/posts\/3628\/revisions\/6543"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/media\/3635"}],"wp:attachment":[{"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/media?parent=3628"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/categories?post=3628"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/tags?post=3628"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}