How to spread your risk across different investments

Why you might want to invest at all

Most people keep money in a bank account for safety. A bank account is useful: your money is there when you need it, and it is covered by your country's deposit-guarantee scheme. But holding all your money in cash means you are not doing anything with it. Over time, the value of what cash can buy tends to change.

Some people decide to put some of their money to work instead. They might lend it to a business, buy a share in a company, or swap euros for an asset they believe in. When you do this, you are an investor. You own something. The value of what you own can go up or down, and you might get back less than you put in.

Investing is not about getting rich quickly or replacing your income. It is about having money do something useful while you hold it, rather than sitting idle.

The idea of spreading your risk

If you decide to invest, one straightforward idea is not to put all your money into one place. Imagine you lend money to a single business at a high interest rate. That business might do well and you earn good returns. But if something goes wrong at that business, you could lose a lot.

This is called spreading your risk, or diversifying. It does not mean you will avoid losses entirely. If economic conditions turn difficult, many businesses might struggle at once. But it does mean you are not betting everything on one outcome or one company or one idea.

The same logic applies to other investments. You could buy shares in one company, or shares in several. You could put money into a fixed-term deposit with one bank, or split it across a few. You could hold only one type of investment, or a mix of different types: deposits, lending, cryptocurrencies, traded assets.

Different types of investment on Investfora

Investfora lets you choose from four types of investment today. Fixed-term deposits are money you place with a bank for an agreed length of time at a rate agreed upfront. The money is covered by that country's deposit-guarantee scheme up to one hundred thousand euros per person per bank.

Business lending is different. Real businesses list loans they want to take out. Each listing shows the interest rate, how much they want to borrow, what will secure the loan, and how often they will repay. You choose which businesses to lend to and how much to lend to each one.

Cryptocurrencies are fifty coins at live prices. You swap euros for a coin in seconds, and you can swap back whenever you choose. The price moves moment to moment. Crypto is volatile: the value can rise or fall sharply. Trading lets you trade currencies, indices, shares, ETFs and commodities on a broker's platform using money from your Investfora account.

Real estate is coming to Investfora soon. For now, you can choose from the four types above. Spreading your money across all four, or across some of them, is one way to spread your risk.

How to think about which investments suit you

Before you put money into anything, ask yourself what you are comfortable with. If you cannot sleep at night worrying about whether an asset price has moved, you probably should not put a large share of your money into crypto or trading.

Think about how long you can leave money invested. If you might need it in three months, deposits with short terms or crypto make sense because you can access it quickly.

Think about how much you know about what you are investing in. If you have never traded before, jumping into an active trading account with money you cannot afford to lose is risky. If you understand how to read a business loan listing and assess risk, lending might suit you. Investfora does not give advice or recommendations.

How spreading works on Investfora

When you open an account, you transfer euros by bank transfer using a reference shown in your dashboard. The money lands and is matched usually within one to three working days. It then sits in your Investfora cash balance. Nothing is invested unless you instruct it. You are in control of every decision.

From your cash balance, you choose what to put money into. You might open a fixed-term deposit with one bank and another with a different bank. You might lend to three different businesses, putting different amounts into each. You might buy some crypto and also trade some shares. Each investment is held separately and shown on its own screen.

This makes it easy to spread your money across different things without complication. You do not need different accounts or platforms. Everything is in one place, but each investment is kept separate and is yours alone. If you later decide to move money from one investment to another, you can do so, or you can leave everything where it is.

What to watch for

Spreading your risk helps, but it does not eliminate risk. The value of investments can go down as well as up, and you may get back less than you put in. If many things go wrong at once—if the economy weakens, for instance—several of your investments might suffer together.

With business lending, read each listing carefully. It shows a risk grade, which tells you how likely the business is to repay. Lending to high-risk businesses offers a higher rate, but there is a real chance you do not get your money back. Lending to low-risk businesses is safer, but the rate is lower.

With deposits, remember that the guarantee covers you up to one hundred thousand euros per person per bank. If you put more than that into one bank's deposits, the extra is not covered. Spreading your deposits across different banks is a way to stay within the guarantee across all your deposits.

With crypto and trading, remember that prices move fast and can move far. Do not put in money you cannot afford to lose. Do not borrow to invest. Understand what you are buying before you buy it.

Getting started

To open an account, you will need to verify your identity and provide some basic information. The first deposit is a minimum of two hundred and fifty euros. After that, you can deposit any amount you choose.

Once your money lands, you are ready. You can look at each type of investment available, understand what it is, and decide how much—if any—to put into each one. You do not have to choose everything at once. You can start with one type of investment and add others later, or change your mind and move money around.

Investfora is regulated by Spain's financial regulator, the CNMV, under register number two hundred and forty-four. You can invest as much or as little as you choose, and you can withdraw your money whenever you want—though some investments have terms that lock your money up for an agreed period.