Investing Guide for Beginners: Platforms and Finding the Right Fit

Photo by Anne Nygård on Unsplash

 

Imagine stepping into a vast supermarket of investments, where the aisles are overflowing with options like stocks, bonds, cryptocurrencies, and real estate. Feeling overwhelmed? That’s where investment platforms come into play – they act as your personal shopping guide in the sprawling world of finance.

 

For the newbie investor, the journey to growing your wealth might seem daunting. You know that your money should be working for you, but where do you start? This guide is designed specifically for you – the beginner who is ready to dive into investing but needs a clear path through the complex landscape.

 

We’ll break down the various types of investment platforms, outline the essential features to look for and help you choose the platform that aligns with your personal financial goals – not just the preferences of some Wall Street guru. Whether you're looking to save for a rainy day, plan for retirement, or build substantial wealth, understanding the right tools and platforms is your first step toward investment success.

 

What Are Investment Platforms?

Investment platforms are digital marketplaces or interfaces where individuals can buy, sell, and manage a portfolio of financial assets. These platforms serve as intermediaries between the financial markets and individual investors, offering tools and resources to facilitate the process of investing. 

From traditional brokerage firms to modern robo-advisors and peer-to-peer (P2P) lending platforms, like Loanch, and each type provides unique features tailored to different investment styles and goals.

The role of investment platforms in personal finance cannot be overstated. They democratize access to financial markets, making it possible for anyone with an internet connection to participate in global investment opportunities. This accessibility is crucial for building personal wealth and managing financial assets more effectively.

Benefits of Using Investment Platforms for Asset Management

1. Accessibility

Investment platforms provide easy access to a wide range of financial instruments, including stocks, bonds, ETFs, and alternative investments like peer-to-peer loans, real estate or cryptocurrencies. This accessibility makes it feasible for everyday investors to diversify their portfolios and explore new investment avenues.

2. Cost-effectiveness

Many platforms offer lower fees and commissions compared to traditional investment brokers. The competitive digital landscape has led to more cost-efficient structures, making it less expensive for investors to buy, sell, and manage their investments. 

For example, Loanch allows investing with zero fees and starting with just 10 eur, meaning you can dip your toes with virtually no risk, just rewards.

3. Educational resources

For beginners, the learning curve in investing can be steep. Investment platforms often provide educational tools and resources, such as tutorials, webinars, and articles, that help new investors understand the basics of investing and make informed decisions.

4. Automated tools

Many platforms feature automated investing tools, like robo-advisors, which can manage investments based on predetermined criteria and algorithms. This automation helps investors stick to their investment strategies without the need to actively manage each trade, which is particularly beneficial for those who lack the time or expertise to do so manually.

5. Real-time data and analytics

Investment platforms offer real-time market data and analytics tools that help investors track their investments and market trends. This information is critical for making timely decisions and adjustments to one's investment strategy.

6. Community and support

Some platforms also foster a community where investors can share insights, strategies, and advice. Coupled with professional customer support, these communities can enhance the investment experience and provide support through the ups and downs of market fluctuations.

 

Types of Investment Platforms: Not All Platforms Are Created Equal

Just like there's no one-size-fits-all shoe, there's no single investment platform that's perfect for everyone. Each platform caters to different needs, budgets, and levels of experience. Let's explore the diverse landscape of investment platforms and find the perfect fit for your financial journey.

Robo-advisors or Investing on Autopilot

Imagine having a personal financial advisor, available 24/7, without the hefty fees and stuffy office meetings. That's the promise of robo-advisors, the digital investment platforms that use algorithms to build and manage your portfolio based on your risk profile and financial goals.

The basics:

• You answer a few questions about your investment objectives, risk tolerance, and time horizon.
• The robo-advisor's algorithm creates a diversified portfolio of ETFs or other investments tailored to your needs.
• The platform automatically rebalances your portfolio, invests your contributions, and even harvests tax losses, keeping your investments on track with minimal effort on your part.

Pros:

• Beginner-friendly – Perfect for those new to investing or those who prefer a hands-off approach.
• Low fees – Robo-advisors typically charge lower fees than traditional financial advisors.
• Automated investing – Takes the guesswork out of investing and helps you stay disciplined.

Cons:

• Limited control – You have less control over individual investment choices.
• Not ideal for complex strategies – Might not be suitable for those with sophisticated investment needs or those who want to actively manage their portfolios.

Examples:

• Scalable Capital. A popular European robo-advisor offering diversified portfolios and low fees.
• Moneyfarm. Another European robo-advisor with a focus on personalized advice and goal-based investing.
• Nutmeg. A UK-based robo-advisor with a wide range of investment styles and risk profiles.

DIY Investing with Online Brokers

If you prefer to be in the driver's seat of your investment journey, online brokers are your vehicle of choice. These platforms provide access to a vast array of investment options, from stocks and bonds to ETFs and mutual funds, empowering you to build and manage your own portfolio.

The basics:

• You open an account with the online broker and deposit funds.
• You can then buy and sell investments, track your portfolio's performance, and access research and analysis tools.
• Online brokers typically offer a range of order types, allowing you to execute trades with precision and control.

Pros:

• More control – You have complete control over your investment choices and trading decisions.
• Lower fees – Online brokers typically charge lower fees than full-service brokers.
• Wide range of investments – Access to a vast universe of investment options, including stocks, bonds, ETFs, mutual funds, and more.

Cons:

• Requires more knowledge – You need to understand investment basics and be comfortable making your own decisions.
• Time commitment – Managing your own portfolio requires time and effort to research investments and monitor the market.

Examples:

• Degiro. A popular European online broker known for its low fees and wide range of investment options.
• Interactive Brokers. A global online broker offering advanced trading tools and access to international markets.
• XTB. A European broker with a user-friendly platform and a focus on CFD and forex trading.

Full-Service Brokers with The White-Glove Treatment

If you prefer a more hands-on approach and value personalized guidance, full-service brokers might be the right fit. These brokers offer a comprehensive suite of services, including investment advice, research reports, and even wealth management solutions.

The basics:

• You work with a dedicated financial advisor who understands your financial goals and risk tolerance.
• Your advisor provides personalized investment recommendations, manages your portfolio, and offers ongoing support and guidance.
• Full-service brokers often provide access to exclusive research reports, market analysis, and investment opportunities.

Pros:

• Expert guidance – Benefit from the expertise and experience of a professional financial advisor.
• Personalized service – Receive tailored investment advice and portfolio management.
• Access to premium research – Gain insights from exclusive research reports and market analysis.

Cons:

• Higher fees – Full-service brokers typically charge higher fees than online brokers or robo-advisors.
• Less control – You might have less control over individual investment decisions.
• Minimum investment requirements – Some full-service brokers have high minimum investment requirements, making them less accessible to smaller investors.

P2P Lending Platforms: Direct Lending, Real Impact

 

P2P lending platforms, like Loanch and Esketit, offer a unique way to invest by connecting you directly with borrowers seeking loans. You become the lender, earning interest on your investments while potentially making a positive social impact.

The basics:

• You choose from a variety of loan listings, each with its own interest rate, term, and risk profile.
• You invest in loans that align with your investment goals and risk tolerance.
• As borrowers repay their loans, you receive principal and interest payments.

Pros:

• Potentially higher returns – P2P loans often offer higher interest rates than traditional savings accounts or fixed deposits – up to 14% per year.
• Diversification – You can diversify your investments across multiple loans and borrowers.
• Social impact – You can support individuals and businesses in need of funding, contributing to economic growth and development.

Cons:

• Credit risk – There's a risk that borrowers might default on their loans, leading to potential losses. This is usually covered by a buyback guarantee, though.
• Liquidity – P2P loans typically have fixed terms, meaning you might not be able to access your invested capital until the loan matures.

Examples:

• Loanch. A P2P lending platform focused on emerging markets, offering potentially higher returns, buyback guarantee, and diversification benefits.
• Esketit. A P2P lending platform with a secondary market and buyback guarantee, providing an additional layer of security for investors.
• Mintos. A European P2P lending marketplace with a wide range of loan options.

Crowdfunding Platforms: Backing the Next Big Thing

Crowdfunding platforms allow you to invest in startups, real estate projects, or even creative endeavors, offering the potential to support innovative ideas and potentially reap significant rewards.

The basics:

• You browse through various projects seeking funding and choose the ones that resonate with you.
• You invest in the projects you believe in, typically in exchange for equity or other rewards.
• If the project is successful, you could potentially earn a significant return on your investment.

Pros:

• High growth potential – Investing in early-stage companies or projects can lead to substantial returns if they succeed.
• Supporting innovation – You can contribute to the development of new ideas and technologies.
• Community engagement – Crowdfunding platforms often foster a sense of community and shared investment goals.

Cons:

• High risk – Early-stage investments are inherently risky, and there's a significant potential for loss.
• Illiquidity – It can be difficult to sell your investment in a crowdfunded project before it reaches maturity or goes public.

Examples:

• Seedrs. A European equity crowdfunding platform that allows you to invest in startups and early-stage companies.
• Crowdcube. Another European equity crowdfunding platform with a wide range of investment opportunities.
  
  

Key Features to Consider: Beyond the Basics

When selecting an investment platform, there are several key features that go beyond the simple availability of different asset types. Understanding these features can help you choose a platform that not only meets your investment needs but also offers security, affordability, and a user-friendly experience.

Investment Options or What's on the Menu?

Variety is key

The range of available assets is a critical consideration. Does the platform offer the types of investments you're interested in, such as stocks, bonds, ETFs, cryptocurrencies, or alternative investments? The breadth of options can significantly impact your ability to diversify your portfolio.

Niche platforms

Some platforms specialize in specific types of investments, like real estate crowdfunding or exclusive access to private equity. If you have a particular investment focus, consider a platform that specializes in that area to benefit from tailored services and expertise.

Fees and Costs: The Silent Portfolio Killer

Trading fees

Every transaction on an investment platform comes with a cost. These can include commissions, spreads, and other trading fees. It's essential to compare these costs across platforms as they can eat into your investment returns over time.

Account fees

Beyond trading fees, some platforms charge monthly or annual maintenance fees, inactivity fees, or other administrative costs. Consider how these fees might affect your overall investment strategy and portfolio growth.

Transparency is key

Ensure that all fees are clearly disclosed upfront. A trustworthy platform will ensure that there are no unpleasant surprises in the form of hidden charges down the line.

Platform Usability: User-Friendly or User-Frustrating?

Intuitive interface

The ease with which you can navigate the platform and access its features is paramount. A user-friendly interface that allows you to quickly find and execute trades can enhance your investment experience.

Mobile access

Today, the ability to manage your investments on the go is crucial. The overwhelming majority of internet users globally — 96.2% — access the internet via a mobile phone at least occasionally. Mobile phones are responsible for 56.9% of total online engagement and generate 61.6% of global web traffic. So, does the platform of your choice offer a robust mobile app that provides full functionality?

Research & tools

The best platforms provide comprehensive research tools, including real-time charts, news feeds, and analytical tools. These resources are invaluable for making informed investment decisions.

Customer Support in the Time of Need

Responsiveness

Effective customer support should be easily accessible. If you encounter an issue, how quickly can you reach a knowledgeable representative who can assist?

Multiple channels

A platform that offers several communication channels, such as phone, email, and live chat, ensures that you can always reach someone in a way that suits your preferences.

Protecting Your Hard-Earned Cash: Security Measures

Regulation

Ensure that the platform is regulated by a reputable European authority. Regulation offers a layer of investor protection and ensures that the platform adheres to certain operational standards.

Security measures

Look for platforms that implement robust security measures such as two-factor authentication, data encryption, and secure servers. These technologies help protect your financial information and investments from unauthorized access or cyber threats.

 

Loanch and Esketit – P2P Lending with a Personal Touch

Peer-to-peer, or P2P, lending platforms like Loanch and Esketit offer a unique way to invest, connecting you directly with borrowers seeking loans. It's like cutting out the middleman (the bank) and becoming your own lending institution, with the potential for attractive returns and a direct impact on individuals and businesses.

Loan Originators are The Gatekeepers of Quality

Loanch and Esketit partner with various loan originators across different countries to source and vet borrowers effectively. These platforms perform substantial due diligence to ensure the quality and reliability of the loans offered to investors. 

However, it's still crucial for investors to understand the specifics about the loan originators that these platforms collaborate with. For instance, Esketit works closely with loan originators like AvaFin (previously Creamfinance), which has a notable presence in countries such as the Czech Republic, Spain, and Poland, among others.

These partnerships are vital in maintaining the robustness and diversity of the investment options available on the platforms​

Diversification and Risk Management

Both Loanch and Esketit encourage investors to spread their investments across multiple loans to mitigate risk. They facilitate this through features like auto-invest, which automatically diversifies investor funds across different loans according to predetermined criteria set by the investor. This tool is particularly useful in managing risk by ensuring that investors do not overly concentrate their funds in a single loan or borrower​

Loanch's Emerging Market Focus – Higher Returns, Greater Impact

Loanch distinguishes itself with a strong focus on emerging markets, primarily in Southeast Asia, offering a unique avenue for investors seeking higher returns and greater social impact. 

This focus on emerging markets can potentially offer higher yields due to the underserved nature of financial services in these regions. However, investing in emerging markets also involves a higher risk, making the due diligence on loan originators even more critical​.

Buyback Guarantee: A Safety Net for Your Investments

Both Loanch and Esketit provide an additional layer of security through their buyback guarantee. If a borrower fails to follow the payment schedule for 30 or 60 days or defaults on the loan, the loan originator is obligated to buy back the claim right from the investor, thus providing a measure of protection against borrower defaults. 

It's important to note that while this guarantee provides a safety net, the ultimate reliability of this promise depends on the financial stability of the loan originator itself. Therefore, investors should consider the financial health of the loan originators in addition to the platform's buyback policy​.

 

Conclusion

Choosing the right investment platform is akin to finding the perfect pair of shoes: it needs to fit your personal needs and goals precisely. Just as you wouldn’t run a marathon in high heels or wear flip-flops to a formal event, you shouldn’t choose an investment platform that doesn’t align with your financial objectives and comfort level.

Don't be intimidated by the world of investments. The vast array of platforms available today means there's something out there that can help you take control of your financial future. Whether you're a seasoned investor looking for advanced tools or a beginner seeking a user-friendly interface with robust support, the right platform can make all the difference.

Take the first step today. Explore platforms like Loanch, and compare them with other investment options available in the market. Assess their features, such as the diversity of investment options, fee structures, user interface, security measures, and customer support. 

By making an informed choice, you can begin your investment journey confidently and watch your financial goals come to fruition.