How Crowdfunding Can Boost Your Investment Diversity

Remember the adage, “Don’t put all your eggs in one basket”? This old saying certainly holds when making investing decisions; in fact, diversification—both between asset classes and within individual asset classes—ranks among the most powerful tools in your arsenal when it comes to reducing avoidable risk. As I’ve talked about before in this column, diversification is critical for any type of investing, in particular alternative investing.  Equity crowdfunding is simply a mechanism to facilitate investments into private companies.

In a nutshell, investment diversification simply means allocating your financial resources across multiple instruments and areas in order to reduce risk. Because these different instruments and areas react differently to events that affect the economy and the market, diversified asset allocation may help protect your portfolio against suffering loss across the board.