When the JOBS Act was enacted in 2012, a whole new world of investing began to take shape. This evolution has led to a growing popularity in the use of private markets, via so-called alternative platforms.
However, all signs indicate that these alternative crowdfunding platforms hold the key toward future investment activity. Sure, there’ll still be investments in municipal bonds and through the NYSE and NASDAQ, but the benefits of crowdfunding are simply too hard for most investors to ignore.
In fact, the future of crowdfunding is so bright that by 2020, having a stock market portfolio may be as uncommon to investors as it would be to subscribe to a print newspaper delivery service.
But how can we make this claim? To delve into the future, it’s always good to look toward the past.
Traditional investing has seen brighter days
Here’s a fact: the population of this country is growing at a steady rate. Yet, while there are more potential investors out there, there are almost 50% fewer publicly traded companies than there were just 15 years ago.
History tells us that the number of publicly traded companies can represent an economy’s health and stability. In fact, the US is the only developed country to not have an increase in public companies over the last two decades. Economists attribute this to a boom in mergers and acquisitions. Whatever the reason, this leaves little access to capital for businesses to grow and create jobs.
Now couple this with the paltry 1.9% average return of a typical investor with a blended portfolio (or 2.5% over 10 years), and you can see why alternative options are raising eyebrows and piquing interest.
Crowdfunding offers unmatched control and customization
The Internet has done a lot of things to improve our quality of life. One such benefit of the web has been our ability to find what we want with little effort or time commitment.
These days, savvy investors can conduct thorough research on chosen fields (real estate, tech industries, oil & gas), and whittle their options down to those options that offer the best possible return.
The future of crowdfunding suggests that investors will be able to easily build their portfolio with exactly the types of investments that they want, such as:
- Investing in a socially beneficial endeavor that still offers some return
- Investing in a young but exciting company that, if successful, promises huge returns
- Investing in real estate that offers a solid ROI
The good news is that the JOBS Act has brought that future into today’s world. And, just as newspapers and TV networks have adapted to the web, so too will the world of investment.
What you can look forward to with crowdfunding
It may be fair to call the current state of crowdfunding as the Wild, Wild West. We no longer live in a medieval time, where the concept is outlawed. However, there are still plenty of naysayers and luddites who remain skeptical. They’re working hard to “protect the public” by restricting who can invest, and how much they can invest.
However, while this one segment works hard to drag their feet, another group of early adopters and supporters are hard at work rewriting the future. They’re creating software solutions and conceptualizing funding platforms that will serve as the bedrock of future investing.
Investing in businesses online
This future will include increased investment activity online in small and medium-sized businesses (at the expense of the stock market). The reason is simple: when it comes to the Wild, Wild West, the stock market is the true champion. With the stock market, you can never be too sure what’s going to happen.
But with securities bought online, you’ll have a clearly stated projected return and well-articulated exit strategy, giving investors much more confidence and information before committing to an investment opportunity.
More options to choose from
Having fewer publicly traded companies means having fewer options for investors to peruse. If current trends persist, the stock market will have just a few thousands business in a few years, whereas the virtual world will be a hundred times that. Not only will there be more options online for investors to choose from, but it’ll be overwhelmingly easy to find exactly what you’re looking for (such as preferred industry).
The web is already a wealth of information. However, as crowdfunding grows, it’ll be even easier to pull historical and current data and offerings from a variety of platforms. Looking to get a specific return on an investment? No problem. One of many platforms yet-to-be-created will offer this information to you in moments.
This new and exciting environment will be hard to ignore, including for brokers and RIAs. As brokers and RIAs realize the earning potential of selling these online securities, they’ll offer these portfolio options to their clients, further strengthening crowdfunding’s foothold on the future of investing.
Stay-tuned to the new way of investing
At this very moment, people are hard at work recreating how we approach investments. Within a few short years, you can be certain that there will be regulatory compliances and safeguards in place to protect investors and companies against fraud.
This new way of investing simplifies liquidity, makes investment more global, and levels the playing field by making geography, gender, and race irrelevant factors in raising capital.
It’s not a matter of if, but when. Just a few short years ago, it was clear that print journalism was on the decline, yet there were still those who opposed this shift, and assumed the bottom would fall out from the digital news industry.
It hasn’t. Those companies that prepared for the shift positioned themselves as industry leaders capable of not only adapting to the future, but also helping to shape it. The same can be said for investing. Investors who insist on sticking with the status quo will find themselves missing out on incredible earning opportunities that could only be made available because of the earth-shattering impact that crowdfunding has – and will have – on investing.