.pp { padding-left: 30px; } Estimated reading time: 2 min The Financial Conduct Authority (FCA), which regulates financial services and markets in the UK, considers projects on the Collective to be high-risk investments due to potential for investment losses.
What are the key risks?
- You could lose all the money you invest
- If the project you invest in fails, you’re likely to lose 100% of the money you’ve invested.
- Advertised rates of return aren’t guaranteed. This is not a savings account. If the project you invest in does not generate profits, you could earn less money than expected. A higher advertised rate of return means a higher risk of losing your money. If it looks too good to be true, it probably is.
- While the Collective carries out due diligence on projects, we can’t guarantee the project will pay returns and repay your investment. You should always do your own research before investing.
- Some bond investments can be held in an Innovative Finance ISA (IFISA). An IFISA does not reduce the risk of your investment or protect you from losses, so you could still lose all your money. It only means any potential returns can be tax free.
- You won’t be able to access your money for a set length of time
- You can’t sell your investment or get your money back before the end of the investment term.
- Bonds investments on the Collective last for several years, so you should be prepared to wait for your money to be returned even if the project you’re investing in repays on schedule.
- Returns aren’t guaranteed and might not be paid regularly.
- You shouldn’t put all your eggs in one basket
- Putting all your money into a single company or type of investment is risky. You should consider spreading your money across different investments so that you’re less dependent on one doing well.
- A good rule of thumb is not to invest more than 10% of your money in high-risk investments.
- You are unlikely to be protected if something goes wrong
- You won’t be protected by the Financial Services Compensation Scheme (FSCS) if a project you invest in fails or performs worse than expected. See the FSCS investment protection checker for more info.
- You also won’t be protected by the Financial Ombudsman Service (FOS) if a project you invest in fails or performs worse than expected. However, if you have a complaint about the Collective, FOS may be able to consider it. Learn more about FOS protection.