Last week we talked about what a portfolio is, and the importance of diversifying yours. The tl;dr version is that it’s important to hold a range of financial assets that vary in risk level, type, country of origin, and other attributes in order to protect yourself and your savings from shifts in the market.
A simple example would be investing in public equities in both the energy sector and the pharmaceutical sector: if something happens to oil prices and the value of your energy investments drop, you still have your other investments. A more complex example would be holding government backed bonds in addition to your public equities, and then having real estate and venture capital investments on top of that, as varied assets often behave differently in different situations.
But real estate investments like home ownership are out of reach for many Americans (especially younger ones). Likewise, the proportion of the population that has enough wealth to invest in startups like venture capitalists is miniscule. That all begs the question: do you have to be rich to be well-diversified?
Fortunately, the answer is not so much anymore. New technologies are making it easier and cheaper to invest in different kinds of financial products. They’re creating new connections between everyday people and innovative financial opportunities, or opening doors to the middle class that used to be more exclusive.
The niche that might benefit most from these new connections is socially responsible finance. Technology is empowering the average individual to not just make more money, but to do more with their money. Take the folks over at Neighborly, who are using municipal bond funds to allow citizens to fund projects like free higher education and environmental cleanup, all in their local communities. Our friends at CNote are turning savings accounts into funding for minority- and women-founded small businesses.
And venture capital is no longer only for the rich either. Republic allows you to invest in startups the same way crowdfunding campaigns allow you to invest in ideas or people you like. The investments of casual angel investors allow these companies to move forward with what might be world-changing visions.
While there are all kinds of companies on Republic, they make it easy for you to have a social impact with your money by helping you invest in companies with women and minority founders. Women, minority and LGBTQ founders barely get the crumbs from the pie that venture capitalists dole out to white male founders, but you can help change that.
The tl;dr for this post is this: you can diversify your portfolio while making change in your city, local economy, and Silicon Valley (and OpenInvest will help you diversify your investment account while making change across the globe).
Remember, every investment is inherently risky, and you should only invest money you can afford to lose.
*This article cannot and does not guarantee or predict a similar outcome with respect to any future investment product or strategy. OpenInvest makes no implications, warranties, promises, suggestions or guarantees whatsoever, in whole or in part, that by participating in any investment you will experience similar investment results.