To help you understand the risks involved in investing in shares of companies on Broccoli, please read the following summary of risks. Invest consciously and diversify your investments.
The need for diversification when investing
Diversification means spreading your money across different types of investments with different risks to reduce your overall risk. However, this will not reduce all the risks. Diversification is an essential part of investing. Bear in mind that you can always invest part of your available funds for investment through Broccoli, but also remember to balance your investments with safer, more liquid investments.
Risks when investing in shares
Investing in shares (also known as sharefunding or equity) on Broccoli does not give a regular return on your investment, in contrast to lending money via crowdfunding platforms, for example, which offer regularly paid interest.
Consider the following specific risks for investments in shares:
Loss of investment
The majority of start-ups fail or do not scale up as planned, and investing in them can therefore pose a significant risk. It is possible that you may lose all or part of your investment. It is best to only invest an amount that you are prepared to lose, and you should build a diversified portfolio to spread the risk and increase the likelihood of an overall return on your investment capital. If a company in which you invest goes bankrupt, neither the company nor Broccoli will reimburse your investment.
Lack of liquidity (marketability)
Liquidity is the ease with which you can sell your shares after you have bought them. Purchased shares in companies that sharefund through Broccoli cannot easily be sold to third parties. Depending on the company, you might be able to sell your shares to third parties at a later stage. Read more about the option to sell in the FAQs of the specific company in which you wish to invest.
Rarity of dividends
Dividends are payments made by a company to its shareholders out of the company's profits. Most of the companies that sell their shares (sharefund) on the Broccoli website are start-ups or early stage companies, and these companies will rarely pay dividends to their investors. This means that you are unlikely to see a return on your investment until you can sell your shares. Profits are usually reinvested in the company to stimulate growth and build shareholder value. Companies are not obliged to pay dividends to shareholders.
Dilution
Any investment in shares through Broccoli may be subject to dilution in the future. Dilution occurs when a company issues more shares. Dilution affects every existing shareholder who does not buy any of the new shares that are issued. As a result, an existing shareholder's proportionate shareholding in the company is reduced, or ‘diluted’ - this has an impact on various things, including voting rights, dividends and value. At the same time, it is also likely that there will be an increase in value in the event of dilution. This increase in value is often greater than the dilution, which ensures that the dilution does not have a negative impact on the value of your investment. If dilution occurs, you will be informed and told more about the value of your investment.
Risk warning
Investing in start-up and young companies involves risks including lack of liquidity, rarity of dividends, loss of investment and dilution, and should only be done as part of a diversified portfolio. Broccoli focuses exclusively on investors who are sufficiently educated to understand these risks and make their own investment decisions.
Sharefunding campaigns on Broccoli are not public offerings, and investments can only be made by users of broccoli.eu based on the information provided by the relevant companies in the business environment. Further restrictions and Broccoli’s limitation of liability are set out in the user terms.
Seek independent advice if necessary, as Broccoli does not provide investment or tax advice.