Do you want to invest in a movie, a brewery or maybe in a loan to your neighbour?
As of this year, it's become a lot easier for the average investor to put their money into high-risk, high-return start-ups and small personal loans.
The Financial Markets Conduct Act has made it possible to offer peer-to-peer lending and equity crowdfunding in New Zealand.
Crowdfunding allows you to take a small stake in a company that's looking for cash to get through another stage of growth.
Peer-to-peer lending offers the opportunity to deposit an amount of money with a lending platform provider that is then lent out to people.
Previously, this sort of thing was available only on a charitable basis. You could pledge some money to someone whose project you liked via a crowdfunding site but you couldn't expect anything in return.
Now, you can take a small stake in the company and get dividends via equity crowdfunding, and can be paid interest that is higher than what you can get from the bank on loans via peer-to-peer lending.
But it's not straightforward. This is high-risk stuff. People who seek loans via peer-to-peer lending will usually be those the bank won't lend to. Companies do not have to offer the same levels of disclosure that they would in other investment circumstances.
Make sure you know exactly what you're investing in and what you can expect to get in return, and when.
Some of the information I've looked at is vague - companies say they'll reinvest profits for the first few years and look to pay dividends eventually but don't say what or when.
If receiving a dividend is important to you, that may not be good enough.
If you're going to invest via crowdfunding or peer-to-peer lending, only invest what you can afford to lose.
That way, any return you get will be a bonus. Who knows, you might end up with a stake in one of New Zealand's next big success stories.
By Jeremy Tauri
Phone: (09) 438 3322
Fax: 438 8455
134 Bank Street, Whangarei
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