What is diversification and how does it work?
Diversification is a bedrock principle of investing. It is a strategy of mixing various types of investments within your portfolio. Diversifying your investments means spreading your money across different categories such as asset classes, industries, sectors, and companies. This can help mitigate the risks and ultimately lower your overall risk. It is another way of saying, ‘don’t put all your eggs in one basket’.
Here are 5 interesting ways you can diversify your portfolio with Acredius!
1. Invest in businesses with varying categories of risk
At Acredius, all businesses are required to go through a risk assessment before being published on our platform. With the information provided by the business owner (leveraged by external alternative data), we assess the business’s creditworthiness using artificial intelligence and machine learning algorithms.
This classifies businesses into specific risk categories, from A+ to E. On our platform, A+ projects have the lowest risk, with interest rates of around 2.5%. D projects have the highest risk, with interest rates of about 15% and E projects are rejected.
On this point, you can diversify your portfolio by mixing some investments from various risk classes. For example, you can invest in a D risk-class project with an interest rate of around 15% and some investments in B risk-class projects with approximately 5% interest rate, to spread out your risks.
2. Invest in projects from different industries
On our platform, we have projects from across industries, such as information technology, education, accommodation, energy and the medical sector, to name a few. You can choose to mix up your investments with projects from different sectors to diversify your portfolio.
3. Invest with different amounts
With Acredius, you can easily invest starting from CHF 200, up to any multiple of CHF 200 you like. This means you can vary the amount you want to invest across the different projects on our platform.
4. Invest in projects with different durations
Our platform’s average loan duration is around 36 to 48 months (3 to 4 years). You can decide to mix up your investments in projects with loan durations you are most comfortable with.
5. Invest in businesses originating from different regions in Switzerland
We have projects from all 4 language regions in Switzerland. For instance, you can diversify your portfolio by investing in some projects from Ticino, some from Vaud and some in projects from Zurich.
As with any investment, there is always an element of risk. This is why diversification is the best way to protect your hard-earned money! Not only will diversification help you better understand your investments, but it can also help lessen the risks involved, should one of your investments go wrong.
To learn more, please visit: www.acredius.ch
