Personal Experience: Crowdfunding

My personal experience with crowdfunding come from nearly being an active member of a crowdfunding website called SellAband. With Sellaband (SAB) you are known as a "believer" who "believes" in artists music by buying parts (parts cost $10 each) in the artists next album which will be made when the artist reaches $50,000 in credit. As a reward for investing your money with with the band you gain a Limited Edition CD and a small percentage of the revenue the album makes through CD and digital sales.

I fell in love with the concept as soon as i read about it in the paper. It brought together my two loves (music and money!) and there was no way i was not going to sign up. I left it a few days before i bought any parts as i thought i would test the water before i invested. However i caught the SAB bug and within a week i had invested over $100.

Like i said i've been with the site for few years now and over the time I've invested a fair amount of money, i mean we are talking $1000+ here on un-signed artists. This may not seem a considerable investment to some people considering the risk factor that comes with it as very few artists make it big with major record labels so its very unlikely that a small independent label like SAB with an unusual concept could produce stars (although it is still possible, watch this space!)

As of the week beginning the 13th of December there have been 26 artists that have gained the $50k needed to record their album and 14 artists have released their album to the world. Each on with differing amounts of success.

After investing $1000+ some people out there would expect a good return on their investment however as it turns out the amount I've received back from SAB is just over $2 from record sales of the albums. This doesn't take into account that none of my LECDs have been sold or the fact that i'm investing in bands because i genuinely like them and wish for them to do well.

SAB to me is a real hobby i know I'm not going to make millions from it but i enjoy browsing the artists and investing in the occasional band that catches my attention. The music is great and any money i makes is just a bonus as i will most probably just re-invest it when i get enough money!

Here is my Sellaband account so you can see in what bands I've dabbled in and hopefully it will inspire you to take the plunge and invest in some artists that one day could make it big!

Lottery Bonds

Lottery bonds are a unique way of investing money. Basically its like a respectable lottery, however instead of buying tickets every week you invest money and depending on how much money you have put into the account you get a certain amount of tickets. Every month you keep you money into your account your ticket gets put into a draw. There is very little risk with lottery bonds as normally you can take out your money at any time. Lottery Bonds are often set up by governments.

An example of Lottery Bonds are Premium Bonds set-up by the UK government. They have 2 £1,000,000 jackpots that are won by members every month. There are also a million other prizes ranging from £500,000 and £50. The rate at which you are able to win with your investment is 1 in 24,000. The winners are picked at random by a machine once a month. One ticket costs £1 to with a minimum of £100 to be invested initially and you are able to invest a maximum of £30,000 in Premium bonds.

There is a Premium Bonds calculator available here which can analyse how much money you can win over time with your amount of investment. With this information you can compile the following information depending on how much money you invest.

Hold £100 over a year and the chance of winning anything is one-in-20.

Hold £1,000 over a year and 57% of people win nothing.

Hold £10,000 over a year and you have a 19% chance of winning £500 or more.

Above source form wikipedia.

Premium bonds are available to anybody even if you don't live in the UK. Currently there are 23 million investors in Premium Bonds and its been running since 1956.

For more information about buying premium bonds visit: National Savings and Investments

Microfinance

Microfinance is an unusual way to invest your money and really became widely used with the invention of the internet. Microfinance is where you can either gain a loan by asking many members of a community site for small amounts of money each or you can lend money to someone only giving a small amount of money to them. Sites have been set up to use cope with this function.

The idea is that an investor can put money into the website and then choose where the money goes. Its best to spread the money across several people wanting a loan and its also best to see how much you will be gaining from each person. The website is like a bank so usually if the user can't afford the payments then collateral is often put up. Like with most things there is a risk factor in investing but if successful you could be earning impressive amounts of interest on small investments.

For people wanting to take out a loan, the site will often check your credit history and see whether youe eligible to take out a loan and if you are able to afford the repayments. Then you will get to choose the amount of money you wish to loan and the interest you wish to put on it. Too low and few people would want to invest their money with you and too hight and you may not be able to make your repayments.

The best use of Microfinance I have seen is a website called MicroPlace where you can invest your money in developing countries to support local buisnesses while still earning interest.


The best advice I can give you for lending and borrow money through Microfinance

1. Borrowers: Find the right amount of interest that you will be able to pay back.
   
2. Lenders: Only lend small amounts of money to begin with.
   
3. Borrowers: keep up to date with your payments.
4. Lenders: Look for the best interest rates.
   
5. Both: Find a reputable site to trade your money in.
   

Top Tip for Investing Money on the Internet

When it comes to investing money on the internet and elsewhere there will always be an element of risk. If there wasn't that risk then you should be thinking whether the scheme is a scam. Whatever method you choose to invest your money into just remember this one tip.

Only invest as much money as you can afford to lose.

It way seem obvious but once you get caught up in all these investment schemes you may want to risk more than you can afford to risk. Just be patient and if something seems to good to be true it probably is.

Shares

Millions are won and lost over the stock market and the internet has meant that its available to more people than ever. There are three ways in which you can buy shares. Each have their advantages and disadvantages.

First there is the Execution only which means a stock broker will buy or sell the shares you want without any advice taking place, this leaves the risk solely with you. If you have enough time to study the stock market in detail and are sure you will make money with a certain share then this is the best option for you.

Advisory dealing is another way to buy shares where the Stock Broker advises you on where and when to buy/sell the shares. The advice is valuable as Stock Brokers experience can make the whole process safer. However Advisory dealing is just that, advisory at the end of the day if you don't like the information the stock broker is giving you then you don't have to invest.

Finally there is discretionary dealing where the stock broker takes full control of your money and it is them who decide exactly what to do with it. This way the stock broker is able to manage your shares in the quickly changing environment of stock broking.

Shares and stocks are risky business but with great risk you can get great rewards. Each of the three options carry a risk factor and obviously the more the stock broker is involved the more money will be spent on them.

The best advice I can give you for investing money in Shares is

1. Keep an eye on the ever changing market.
   
2. Only invest in what you know you can afford to lose.
   
3. When using a stock broker make sure they have the correct experience.
   
4. Shares can be a long term and a short term investment so keep that in mind.
   
5. Experience is important when it comes to the stock exchange
   

High Yield Investment Programmes

High Yield Investment Programmes or HYIPs as they are sometimes known are websites that let you invest small amounts of money for a small (sometimes even daily) amount of interest. I personally have found these to be very dangerous ways of investing money. The company on the other end of the transaction is very unlikely to be a legitimate trading company as if everyone could make money in HYIP schemes then surely everybody would be doing it.

I have found HYIPs to be the pyramid schemes of the internet as people often test the water with small amounts of money and then when they see that that has made them some interest then they invest lager sums of money. This is where the mistake is often made as its very unlikely that larger investors will gain their money back as the website will probably close down as the website owner is now much better off with your large investment.

Treat these as scam sites as the only real person making money is the person who owns the site, and its very unlikely that they will want to share their wealth with.

The best advice i can give you for investing your money in HYIPs

1. If you are going to invest only do it in small amounts.
   
2. Use several HYIPs to make more money.
   
3. Remember every HYIP will have a shelf life.
   
4. Don't get carried away.
   
5. Although the real best advice i can give about them is don't use them!
   

Crowd Funding

A very novel way of investing your money is to invest projects that you feel passionate about. Key examples of Crowd Funding are music albums and independent films. These both require you (the fan) to invest money to record an album or produce a film. You can make money from the sales of albums/DVDs that the project manages to sell.

As with most things it has its good and bad points, on some websites you aren't able to make money from investing instead you are rewarded in other ways like with seats to watch a film or a copy of the album. Even if you do manage to find a site that lets you keep a cut of the sales pie, the volume of items sold is usually low as few people are aware of project happening in the first place. In most cases its rare that you make money from the amount you put into the project because of this reason alone.

It is however a fun way to invest your money and you are kept updated regually with the recording/filming process. To be able to have fist hand contact with the artists is interesting and there is normally a great community behind it.

The best advice I can give you for investing your money in Crowd Funding

1. Find a site and community that is right for you.
   
2. Only invest small amounts as you may even lose money.
   
3. Keep active on the site as you may recieve other benefits.
   
4. Spread your money out on many different projects as you never know which one will make it to the big time.
   
5. Enjoy yourself while doing it, if your not having fun then pull the money.