Here are Equity Crowdfunding Trends you Need to Know in 2021

It’s a New Year, and everyone is looking for new ways to make money. Well, here’s one thing you should know – crowdfunding investments are expected to explode. Crowdfunding is the process of raising funds to finance a project or business from the public through an online platform. Crowdfunding exists in three forms: donation-based, reward-based and equity-based crowdfunding.

The global crowdfunding market was valued at $10.2 billion in 2018 and is expected to reach $28.8 billion by the end of 2025, growing at a Compound Annual Growth Rate of 16 percent between 2018 and 2025. 

In Nigeria, most crowdfunding platforms have helped to finance businesses in various sectors of the economy. However, there is a word of caution for willing investors: you must ensure that any crowdfunding investment you decide to put your money in is registered with Securities and Exchange Commission (SEC). The capital market regulator recently created a new registration category just for them. Endeavour to check that out. 

That said, let us now take a deep dive into some of the  registered equity crowdfunding platforms to watch out for in 2021.

Mutual Funds 

A mutual fund is a form of investment that pools cash from a variety of investors, for the purpose of investing the cash in different types of portfolios such as stocks, bonds, etc. 

Profit derived from the diversified pool of investments is shared to investors in the funds annually, semi-annually or as stipulated in the fund prospectus.

Mutuals, with particular reference to the Nigerian market, are sold and administered by stock brokerage firms, banks, and other specialised investment corporations. See below some of the available mutual funds you may consider investing in this New Year.

i. Fixed Income Funds 

These are funds that are meant mostly for investing into fixed income securities. Fixed Income Securities are investments that pay a fixed return on investment. 

For example, treasury bills offered by the Government are issued at a coupon (rate) of say 10% per annum — meaning, they pay an interest of 10% on any amount invested. 

Mutual Funds that are Fixed Income related lookout for safe investments that can guarantee a good income stream.

They are mostly suited for investors with a long-term view of returns. Fixed Income Funds are safe investments as they mostly involve securities in government securities. Due to the nature of government securities their returns are typically low.

ii. Equity Funds

These are Mutual Funds that invest mostly in stocks and shares of publicly quoted companies.

Some funds can also use fund assets to subscribe to shares for private placements. Equity Funds offer high returns but are associated with high risks.

iii. Mixed Income Funds

Mixed-Income funds are a hybrid of Equity Funds and Fixed Income Funds. Because of their diversified nature, they often offer low risk for investors. Low risk, as usually expected, is associated with low returns.

iv. Dollar Funds

One thing that all investors have in common is getting good value for their monies, both in terms of interest income and capital appreciation. Investors seeking to hedge their savings against currency risk in Nigeria mostly look towards the “greenback” as a viable option.

A dollar-denominated asset or investment simply refers to an asset that has an underlying value in dollar terms. Investors invest and earn returns in dollars.

Typically, investors outside the United States opt for this class of investments due to the strength of the dollar currency and as a way of hedging against exchange rate volatility. 

There are various classes of dollar-denominated securities/investments. These include, Sovereign Eurobonds, Corporate Eurobonds, Money Market Instruments, Stocks, among others. Eurobonds are a common example of dollar-denominated assets…

EDITOR’S NOTE: Read the entire piece here. It’s on pages 38 – 40 of our latest edition, ’25 Entrepreneurs & Brands to watch in 2021‘.