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Risk summary for non-readily realisable securities which are shares:

Estimated reading time: 2 min

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the key risks?

1. You could lose all the money you invest

If the business you invest in fails, you are likely to lose 100% of the money you invested. Most start-up businesses fail.

2. You are unlikely to be protected if something goes wrong

Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker here.

Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated firm, FOS may be able to consider it. Learn more about FOS protection here.

3. You won’t get your money back quickly

Even if the business you invest in is successful, it may take several years to get your money back. You are unlikely to be able to sell your investment early.

The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange such as the London Stock Exchange. These events are not common.

If you are investing in a start-up business, you should not expect to get your money back through dividends. Start-up businesses rarely pay these.

4. Don’t put all your eggs in one basket

Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well.

A good rule of thumb is not to invest more than 10% of your money in high-risk investments. Read more about it here.

5. The value of your investment can be reduced

The percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most start-up businesses issue multiple rounds of shares.

These new shares could have additional rights that your shares don’t have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.

If you are interested in learning more about how to protect yourself, visit the FCA’s website here.

Diversity X is the licensed trading name of Overlooked and Underestimated CIC, a private limited company registered in England and Wales, registered number 14903594 with registered office, Heritage House, Newton Road, Sudbury, England, CO10 2RL.  

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DISCLAIMER: Any content on this website that refers to investors or investment opportunities is intended for professional investors and is for information purposes only. It should not be used or considered as an offer or solicitation to purchase or sell any securities.

CAPITAL AT RISK: Diversity X Angel Syndicate, a trading name of Diversity X Ltd, is unregulated by the FCA. Investor membership in Diversity X Angel Syndicate is limited to those who are “High Net Worth Individuals” or “Self-Certified Sophisticated Investors” as defined by the Financial Conduct Authority under the Financial Services and Markets Act (2000) “FSMA”. High Net Worth Individuals or Self-Certified Sophisticated Investors are exempt from COBS 4.12 Restrictions on the promotion of non-mainstream pooled investments as defined in COBS 4.12.6 and COBS 4.12.8. Investment in early-stage companies is risky: risks include illiquidity, lack of dividends, future dilution and potential loss of capital. Diversity X Angel Syndicate does not provide any financial or tax advice. Investment in SEIS/EIS eligible companies should only be done as part of a diversified portfolio. Angel investors use their own insight and experience to make their own investment decisions; they should inform themselves on availability of tax relief dependent on their individual circumstances and understand that may change in the future. Any material on this website is the property of Diversity X Ltd

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