CIM

What are the risks facing investments and their funding?

Funding can be precarious because the majority of funders provide non-recourse funding; this means they could potentially lose their investment if there is no recovery from court judgements or lawsuits.

The funding market evolves at a rapid pace. Still, it would be a mistake to assume that an expansion of this market automatically means that the task of obtaining funding is made easier. The challenge still remains in navigating the individual process and risk of each investment a person makes, as securing funding remains a complex and time-consuming process. Increasing the chances of success and shortening the deliberation period could be the crucial decision for an investor.

Should I invest?
This really is a personal call; it’s a question that needs a lot of deliberation, as we can’t tell you whether investing is right for you. At CIM, we’re here to support your investment decisions and can help to find you the best opportunities when it does come to investing money into something. Here’s our advice:

● Investing is generally a long-term option and ideally, we would say that you should invest for at least five years as the five years allows enough time to ride out any bumps in the financial market.
● We would recommend factoring in certain fees, as these can eat into your investment. The performance of the investments within the fund dictates your rate of return, but you’ll need to account for fees too.
● The costs associated with funds, the fees from the provider you choose to use and to buy and selling charges, will need to be subtracted from any profit (or losses) you make.
● You could also invest small amounts on a regular basis, which in investment terminology is called ‘drip-feeding. This will give you a big benefit of something called pound cost averaging.
● If you’re contacted out of the blue by a company or individual asking you to invest in a fund, definitely say ‘no’. It is probably a scam, as fraudsters will often cold-call investors offering them overpriced or non-existent funds.
● And finally, remember, if it sounds too good to be true, it probably is.

It might be tempting to try to time or predict the market, but it’s almost impossible; the most experienced investors get it wrong a lot!

Because some investments are sometimes risky, it’s worth minimising how much of your portfolio is committed to them. Probably no more than 10%, is what we would recommend as we’re used to seeing people invest and it comes crashing down. At CIM, we aim to help you make the best investment decisions; our team of experts recommend making sure you’re investing in the right opportunities that suit your goals for that money.

Regardless of who is investing, one other question will be answered in 2021: What effect the coronavirus pandemic and any ensuing economic downturn will have on the number of lawsuits filed due to lack of funding. So far, it might not be possible to tell straight away but what we do know is that it’s always going to be a hard decision.