I get this question frequently enough from friends and people who land on this blog. To provide a quick reference, if you want to start investing your money through online platforms, there are a few different ways you can do it:
- Property crowdfunding
- Business and personal finance (loans)
- Stock market
- Online properties (websites, apps etc)
- Cryptocurrencies
- Forex
The level of risk and expertise needed to operate in the above markets differs wildly, so I’ll try to give some further pointers as to what to start off from. I will also include the expected level of return per year one should be aiming for.
Property Crowdfunding
I think this is a pretty safe and low-risk investment given that you are purchasing real estate, which historically has held its value very well. As always, you need to be vigilant in what properties you invest in and diversify as much as possible.
I recommend diversifying geographically, for examples having properties in various locations around the UK, Spain, and Italy. You can also diversify on property types, such as buy-to-let, flipping, and even property-backed loans.
These are my favorite platforms:
- Housers – Italy and Spain
- Property Moose – UK
- Property Partner – UK
- iFunded – Germany
- Bulkestate – Estonia
You can read about my favorite real estate platforms in Europe as of 2020, where I go into more depth about these platforms and online real estate investment in general.
I have already posted about how to invest in the Spanish property market, and I think it is one of the hottest markets at the moment, so definitely give that article a look if you’re interested in this asset class. If you’re interested in other markets, check out my guides on investing in the German market, the Portuguese real estate market, and the Italian property market.
Expected yearly return: 4-12%
Business and Personal Finance (Loans)
This might initially sound like a fishy area, but really it’s not. After the last financial crisis, banks tightened up their lending procedures, and while that was, in general, a good thing, it also left a lot of people out in the cold and unable to get a loan.
In Europe, this is a big problem in many Eastern European countries as well as other Western European countries like Spain too. With interest rates being as low as they are at the moment, the situation created was that of people in Western Europe having money to invest and on the other hand people in Eastern Europe needing cash for business or personal needs. The resulting opportunity created the rise of loan platforms that are doing so well today.
With these loan platforms, you can choose to diversify your investments over hundreds or thousands of loans across many countries. You can also choose to diversify as to what types of loans you want to invest in. For example: business loans, car loans, home refurbishing loans, bridging loans, etc.
My recommended platforms:
You can read more about what I consider to be the best P2P lending platforms in Europe 2020, or my mega review of Mintos.
Expected yearly return: 8-12%
Stock Market
The stock market is one of the most well-known ways of investing, so I won’t spend much time on it. I will only say that you should really think twice about using financial advisors and investment brokers, as they are mostly just salesmen who make money on the amount of products they manage to sell to you. In other words, they aren’t really on your side.
Research has shown that most index funds perform better than actively managed funds, so you don’t need to be paying hefty commissions every year for someone to manage your funds. You can use index investing to your benefit, especially now that roboadvisors are taking the place of fund managers. A great European platform for roboadvisor-based index investing is Finizens.
Another great strategy would be to go for dividend growth investing. There are tons of websites of investors who detail their month to month earnings using this strategy. I like the idea of dividend growth investing when compared to index investing for the following reasons:
- No yearly commissions to pay (indexing can cost 0.5 to 1% of your total sum invested)
- You choose which companies to put in your portfolio. You can thus avoid companies that you don’t want to support. For example, being a health-conscious person, I don’t want to invest in and support Coca-Cola. So that company would be out of my dividend growth portfolio, even though it has a great track record. Same goes for McDonalds.
- It’s more exciting, depending on your personality, to actually choose which companies you want to be a part-owner of, and track them year over year. On the downside, it also takes more time.
If you’re interested in learning more about dividend growth investing, I would recommend the dividend growth investing course of my friend Marco. Another good resource is the Dividend Growth Investor website.
Expected yearly return: 10%+
Gold and Silver Bullion
First of all, what the heck is bullion? Bullion is gold and silver that is officially recognized as being at least 99.5% pure and is in the form of bars or ingots rather than coins. The word bullion comes from the French Minister of Finance under Louis XIII, Claude de Bullion. To create bullion, gold first must be discovered by mining companies and removed from the earth in the form of gold ore, a combination of gold and mineralized rock. The gold is then extracted from the ore with the use of chemicals or extreme heat.
With that out of the way, we can now talk about where to buy, store and sell bullion online. The storage part is key here. Most probably, you won’t want to worry about storing your own gold or silver in a safe place. That’s why platforms like BullionVault take care of storage for you. Of course, you can also buy and sell on the platform.
One important factor to consider with bullion: Gold and silver have no intrinsic value. They aren’t a productive asset. Compare them to stocks. When you own a share of stock, you own a piece of a business that produces goods and/or services to consumers. A good business generates a profit. Every year that passes, gold remains sitting in the vault, but the owner of a company such as Apple or Nike might have a giant pile of cash from the profit generated over that same year.
When evaluating the performance of gold as an investment over the long term, it really depends on how long a term one is considering. Over a 45-year period, gold has outperformed stocks and bonds; over a 30-year period, stocks and bonds have outperformed gold; and over a 15-year period, gold has outperformed stocks and bonds.
Gold returns in recent decades
Many investors don’t really consider bullion to be an investment at all. Rather, the precious metal acts as a hedge, or a way to try to protect wealth against the risk of loss in such asset classes as real estate, equities, and bonds. There’s the doomsday scenario reasoning too, which argues that in the case of a global financial collapse or armageddon, gold and silver will be some of the only things with value attached. People will first value food and shelter that cover their basic needs, and soon after demand will start again for gold and silver as people seek to build a store of wealth or impress others.
Needless to say, gold and silver are a very contentious asset, with strong arguments both for and against. In my opinion, if you have money to spare, it wouldn’t hurt to keep some of your net worth in gold as a hedging mechanism. I would give priority to nailing good investments in some of the other categories above, however.
You can use Bullionvault to invest in gold.
Expected yearly return: Nobody knows really, it could be negative returns to double-digit positive returns. It’s more of a hedging mechanism than something you invest with hopes of a specific rate of return.
Online Properties
By online properties, I mean websites or mobile apps. Chances are you know of a friend or friend of a friend who has achieved some degree of success by owning a website or a mobile app. This is your chance to do the same, but rather than starting from scratch, you buy an existing up-and-coming website, or indeed one that’s well established and turning a healthy profit.
You need to be careful in evaluating such online properties, but they can give returns of 40% plus per year, which is super attractive compared to other opportunities. If you know what you’re doing, the risk-reward ratio is very much in your favour.
To learn more about buying and selling online properties, I recommend the following resources:
Expected yearly return: 40%+
Cryptocurrencies
This is probably the only current way to make really big profits (or losses) in a relatively short time. You can refer to my post about cryptocurrency resources to learn more about this area. It’s definitely a super interesting way to invest your money, and possibly cryptos will revolutionize our lives in the very near future. At the very least, you should keep yourself informed about what’s happening in this space, even if you don’t invest.
If you’re looking for a few cryptocurrencies to start off with, here are my current favorites.
As for resources, you can check out my list of favorite cryptocurrency resources.
Expected yearly return: 100%+
Forex
I have very little experience in this area of investing, but from what I can gather you really need to know what you’re doing to be successful. It is also very hands-on and you need to be monitoring charts daily to buy and sell currencies for profit. I would suggest staying away from forex unless you’re really attracted to it and love technical analysis and charting.
Expected yearly return (with a good dose of luck): 30-40%
I hope this short summary will help you get a good idea of all the options available. If you have any questions or would like me to write more in-depth about any of these topics, please let me know.
Great overview Jean – thanks for sharing! I’ve been toying with investing online but never got around to setting time to read up on the subject – mostly due to the fact that I know that you need some extra effort to really be careful what to read, and which sources to trust since you’re the entering territory where online scammers like to wait for their next target 😉
Glad you like the post Daniel. Since most of these things are relatively new, it’s normal to feel a bit hesitant about trusting your money on these platforms. On the other hand, being an early adopter gives you the opportunity to possibly make higher returns. It’s just a matter of educating yourself as much as possible by reading and asking other people for their experiences. One example of the early adopter advantage can be found in the area of loans. People who started doing loans on platforms like Bondora and Mintos just two to three years ago obtained returns of up to 20% yearly. As the platforms became better known and more investors joined, the returns went down, and now the average is only around 11%.