Investors all over the world want the same thing: returns. And usually, the bigger those returns, the better.
Unfortunately, in recent years, generating high and consistent returns has become harder and harder to do.
Bond yields are still near record lows and failing to keep up with inflation, partly because central banks around the world have helped keep them there in response to the coronavirus pandemic – and US stock markets are hitting record high after record high.
That’s great news if you’re already fully invested, but not so great news if you’re looking to invest more. Remember, investors try to buy low and sell high, if they sell at all.
That’s helped open the door to cryptocurrency, which has hit the mainstream. Bitcoin’s worth over $30,000 and the value of all cryptocurrencies combined is around $1.4 trillion – roughly the value of Facebook and Walmart combined.
But cryptocurrencies like bitcoin are extremely volatile: in May, for instance, bitcoin’s value halved. Crypto prices can also rise rapidly too, so it might be a good choice for some of your cash, but it’s likely too risky for investors who’re looking for more predictable returns to put a lot of their money into.
The good news is there are other options. One alternative area is investing in online businesses: they offer the potential to hedge against market downturns and earn you attractive returns.
The world’s biggest online businesses are household names: think Facebook, Amazon, and Google-parent Alphabet. Even tech giants Apple and Microsoft are arguably online businesses in their own right: Apple’s services business, which includes App Store, Apple Music, and iCloud, account for 20% of the company’s revenue – and Microsoft’s cloud computing and Office 365 subscription segments represent over half of its earnings.
Historically, investors have backed these internet behemoths for “capital appreciation”. In other words, they buy the stock, its price rises, and they sell and lock in a profitable return. More recently, though, some investors have bought into these now mature online businesses – like Microsoft and Apple – for the dividends they pay thanks to their consistent cash flows.
The ride some of these online businesses have been on – from the bursting of the dot-com bubble to now – and the value they’ve created for investors has been phenomenal. Microsoft and Apple are each worth in excess of $2 trillion, while Amazon, Alphabet, and Facebook are worth more than $1 trillion.
They’re now among the biggest companies in the world: even if these stocks all doubled again, an investor would “only” have a 100% gain compared to the thousand-plus percent returns they’d have had as earlier investors.
That leaves investors trying to pick the next online business that’ll make it big. It’s not impossible, but it’s risky: looking at current small- and mid-cap online businesses could become trillion-dollar giants, seeing their values rise 10, 100, or 1,000 times – but you’ve got to get comfortable with not being paid a dividend along the way (as these companies typically reinvest for growth) and the higher level of risk that typically accompanies smaller company investments.
There’s an alternative to buying shares in a large publicly traded online company and potentially accepting lower returns going forward than internet businesses have delivered historically, or to buying shares in smaller online companies that have the potential to become the next giants but also come with much higher risk: direct investment.
Direct investment is essentially taking a large stake in a company, without having to buy shares via the stock market. Direct investors usually have significant control over the business’ operations and assets, and work to drive growth with the aim of creating a large amount of value in the long term.
But it’s usually very active work: you’ll need to find a company worth buying and negotiate a purchase price and once that’s done, you’ll be responsible for its day-to-day operations. Most people don’t have the cash to make such a significant investment (or to launch their own), and most investors don’t have the time to spend running an entire company.
And when it comes to online businesses, in particular, there’s a lot of risk. For instance, the internet is constantly changing, and if Google updates its search algorithms, your online business could lose all its traffic overnight – and if you can’t adapt quickly enough, you could lose your entire investment.
Luckily, there are investment platforms that will manage direct investments in online businesses for you. These platforms both lower your initial investment cost and make investing directly in online businesses a more passive, less risky endeavor.
Onfolio is a platform that fits the bill: its team of industry experts identifies online businesses that are established, profitable, and that have high growth potential. The firm acquires and actively manages these businesses, and Onfolio’s investors can sit back and earn a passive income.
Onfolio’s investors receive an annual dividend of 12%, paid quarterly – which looks attractive compared to Microsoft and Apple, whose dividend yields are less than 1% at present.
And there you have it: a guide to investing in online businesses and one way to get involved that aims to balance risk with reward: making investing directly in online businesses more affordable and less risky than it’d otherwise be.
There’s no such thing as the perfect investment, but if you’re trying to balance risk and reward, and the long- and short-term, then Onfolio could help you do just that.
This guide was produced in partnership with Onfolio.
Check out Onfolio’s mini-website at finimize.com.
Onfolio is a diversified holding company that owns and operates online businesses. Investors can buy preferred shares which offer a 12% annual dividend yield, paid quarterly, allowing you to generate income from online investments, with mitigated downsides.
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.