What risk means in crowdinvesting
In crowdinvesting, investors invest directly in individual companies or projects. Investments are not pooled and each is subject to its own business, market, and external factors.
Unlike funds or ETFs (An Exchange Traded Funds is a low-cost fund that tracks an index and trades on the stock exchange like a share), there is no automatic diversification. To reduce dependencies on the development of individual investments, a conscious allocation of investments at the portfolio level is essential.
Diversification is a proven principle in managing entrepreneurial risk.
Single-asset risk in investing
Investing a larger amount in a single opportunity makes returns entirely dependent on its development. Companies and investment opportunities rarely follow a straight path, as delays, market shifts, operational challenges are common in any entrepreneurial environment.
By spreading capital across multiple investments, the impact of any single opportunity on the overall portofolio is reduced. Each investment develops independently. Diversification does not reduce the risk of the individual investments, but it does reduce their impact on the portfolio as a whole.
Important to know:
Risk is a part of investing. Risk can be reduced by diversifying, or spreading capital, into multiple investments. It is important to understand ones own risk tolerance, make an investment plan for a diversified portfolio and follow the plan.
Diversification does not happen only within an asset class, such as spreading between multiple startups, but also across asset classes and across time. A general rule of thumb is that no-more than 10% of the total portfolio should be invested into one single asset.
How Invesdor selects investment opportunities
Before a project is published on Invesdor, it undergoes a structured
Objective: To provide investors with a solid informational basis. Among other things, the following are considered:
Business model
Key company figures
Legal and ownership structure
Market environment and competition
Team and Advisors
This review allows Invesdor to select the most promising investment opportunities to offer to the investor base. It also allows the investors to access key information needed for an educated investment decision. It is however important to remember that the investment decision and decision for diversification lies with the investor. Invesdor strongly encourages investors to diversify.
Clear division of responsibilities:
-> Invesdor ensures structure and information
-> Portfolio structure lies with the investor.
Diversification is important not only within an asset class but also across asset classes.
Diversification as a fundamental principle for conscious investors in crowdinvesting
Diversification means actively spreading investments to reduce dependencies. As a result, single investment developments have less impact on the overall picture. Diversification can take place across:
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Different companies or projects
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Various industries or themes
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Different maturities
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Different types of investments
Which combination makes sense depends on your own goals, available capital, and personal risk assessment.
Diversification across asset classes
On Invesdor, the following asset classes are available, each with its own structure, maturity, and risk profile:
- Bonds: Debt investments with a fixed term and defined repayment structures
- Shares: Equity participations with a long-term perspective and entrepreneurial risk
- Corporates: Direct invstments into mature SMEs or high-growth scale-ups
- Renewable energy: Project-based investments with specific regulatory frameworks
- Real Estate: Property-based investments with market- and location-dependent factors
Combining different asset classes is important in building a diversified portfolio. More important than one single asset is achieving a balanced portfolio in which assets complement one another.
Important to know:
Diversifying a portfolio does not guarantee a risk-free return, but rather reduces the impact of a single asset on the overall performance of a portfolio. It is a structural approach to building a balanced portfolio.
Invesdor's view on diversification
We review investment opportunities in a structured way and based on clear criteria. This creates transparency, but it cannot predict how individual companies or projects will develop over time. For that reason, diversification is a key principle for each investor on our platform.
„Our role is to present investment opportunities transparently and provide well-founded information. How these are combined within a portfolio is part of each investor’s own strategy. Diversification helps structure the overall investment in a balanced way.“
– Christopher Grätz, CEO Invesdor
Diversification: the "10 investments rule"
The "10 investments rule" illustrates how diversification can work within a portfolio. The starting point is a total investment of €10,000.
Option 1:
The entire amount is invested in a single project. Its development fully determines how the investment performs.
Option 2 with "10 investments rule":
The same amount is spread across ten projects at €1,000 each. Each investment develops independently, and individual deviations have less impact on the overall portfolio.
The difference lies not in the capital invested, but in the structure. By spreading investments, the portfolio becomes less dependent on individual project developments.
The principle can be flexibly applied to different budgets.
Where to find risk information
For every investment opportunity on Invesdor, a Key Investment Information Sheet (KIIS) is available. It summarizes essential information relevant to making an investment decision.
In the document, pay attention to:
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Risk factors: Investment-specific aspects that could influence the development
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Company information: How is the business model structured and in what environment the company operates
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Financial figures: What the economic situation looks like
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Investment structure: How the investment and repayment is structured
We recommend reading the KIIS carefully before every investment, especially the section on risks.
This way, you maintain an overview and make decisions based on relevant information.
Further reading on diversification
Diversification is more than an investment principle. Those who engage more deeply with the topic encounter different terms, approaches, and definitions. Especially in a financial context, it is worthwhile to understand these distinctions.
In the Invesdor blog, you will find content that examines diversification from a broader perspective, covering structures, interdependencies, and foundations for investment decision making.
Read the article:
FAQs
Diversification is not a question of the amount invested. Even smaller sums can be spread across multiple projects. What matters is not how much is invested, but that investments are not concentrated in a single project.
There is no fixed number. For many beginners, it makes sense to start with several projects and gradually build the portfolio. The important thing is not to rely entirely on a single outcome. It is better to combine different projects
Yes. Diversification develops over time. Build your portfolio step by step by spreading your capital across individual investments rather than investing everything at once. Investments made at different times also contribute to diversification.
No. Diversification reduces dependency on individual projects but does not replace careful selection. The key is the combination of informed project decisions and balanced allocation within the portfolio.
Yes. A portfolio is not a static structure. With each new investment, the allocation can be adjusted — for example through different industries, maturities, or project types. Diversification is an ongoing process, not a one-time step.
In crowdinvesting, investors select each project themselves. There is no automatic diversification as with funds or ETFs. Diversification here is created consciously at the portfolio level — through individual decisions and active structuring of investments.
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