Best Marketplace Investment
A marketplace investing company provides an online platform where users can invest their money into an asset class (or classes) to earn returns.
These platforms make it easier for smaller investors to directly invest in a range of asset classes, from consumer credit to commercial real estate projects. Plus, they make investing convenient and easy.
Common Questions
How to compare marketplace investing companies
When you compare marketplace investing companies, consider the following factors:
- Accounting rate of returns (ARR).
- Minimum investment limits.
- Investor fees.
- Investor requirements.
- Investment types.
- Investment vetting by the marketplace platform.
- Returns.
- Reviews.
Let’s break down why those factors are so important.
These are some of the questions you should ask before choosing a marketplace investing company.
What is the average accounting rate of return (ARR) of the marketplace investment platform?
A company’s average rate of return (ARR) indicates how much you can expect to earn, on average, per year from an investment. You can calculate a company’s ARR by dividing its average annual net profit by its average investment.
For example, say you invested $5,000 in 2015, $10,000 in 2016, and $15,000 in 2017. The average investment over the three-year period would be $10,000. Now say you earned a net return of $250 in 2015, $500 in 2016, and $750 in 2017. The average net return would be $500 over the three years.
To get the ARR, you would divide the average net return ($500) by the average investment ($10,000) which equals .05. ARRs are expressed as percentages, so this company would have an ARR of 5%.
The higher ARR a marketplace investment offers, the more money you can make. Most marketplace investing platforms’ ARRs range from 5% to 10%.
What is the marketplace's minimum investment?
Every marketplace investing platform has a minimum investment requirement. In other words, in order to become an investor on a platform, you must invest the minimum amount or more in your initial investment. Minimums range from $25 up to $250,000.
This factor is important, as you’ll need to find a platform which aligns with the amount you want to invest.
What investment types does the marketplace offer?
Marketplace platforms vary in which asset classes they offer. For instance, Lending Club lets you invest in consumer credit, while EquityMultiple offers commercial real estate investment opportunities, and Roofstock offers investments in the single-family rental (SFR) sector.
Depending on your situation, current investment portfolio, and background, you may prefer one asset class over another.