Know The Stock Market Risk Warning

OVERVIEW

¿Cuáles son los riesgos clave?

Key risks: you could lose your entire investment. That’s not an exaggeration—most startups don’t make it, and when they fail, investors usually walk away with nothing.

You also can’t rely solely on the investment platform to vet these companies. Sometimes their due diligence is minimal, or honestly, nonexistent. You need to run your own analysis—dig into company fundamentals, projections, management, all of it.

Early-stage and small businesses do offer significant upside potential if things go well. But statistically, the odds are stacked against you. High risk, sometimes high reward, but more often it’s just high risk. Don’t assume previous success stories mean you’ll see the same results. There’s no guarantee the future will look anything like the past.

The most likely way to recover your money is if the company is acquired by another company or if it is listed on a stock exchange like the New York Stock Exchange. These events are not common.

The companies you invest in through CIDEH are emerging companies or startups. These types of companies rarely distribute dividends (a distribution of profits obtained to shareholders), as they prioritize reinvesting the profits obtained in growing the company and generating more value for their shareholders. Therefore, you shouldn't expect to recover your money this way.

Don't put all your eggs in one basket

Investing all your money into just one business or type of investment can be pretty risky. By spreading your funds across various investments, you reduce the chance of relying too heavily on the success of any single one. A solid guideline is to keep high-risk investments to no more than 10% of your total money.

The value of your investment may decrease

The value of your investment isn't guaranteed to hold steady—it can decline. When you invest in equity, your ownership percentage drops if the company issues additional shares. Startups typically go through several equity rounds, so dilution is pretty standard. If the company’s growth doesn’t keep pace, your stake’s value might take a hit.

Issuing new shares also brings side effects. You could lose some voting power or see dividends reduced. Sometimes these new shares come with extra privileges—like a fixed dividend—that your shares don’t have. That puts you at a disadvantage and can decrease your potential return. This is a common risk you need to watch out for in equity investments.

You won't be able to make decisions on all invested projects

You’re not going to have control over every project you invest in—especially if you’re a minority investor. Your influence on company decisions is pretty limited, so you basically have to rely on the management team’s competence and judgment before you put your capital on the line.

Now, if you’re making direct investments in Haiti and you’re involved from the very beginning—like, during the company’s formation—you’ll have voting rights and decision-making power equal to other founders, as laid out in the company’s bylaws. Otherwise, expect your role to be more hands-off.

It's a bit of a gamble when it comes to protection if things take a turn for the worse

When it comes to claims against regulated companies that have gone belly up, protection entities won’t cover losses from poor investment performance.

For instance, the Central Bank Complaints Service in some countries, like the Spanish Central Bank (BdE), doesn’t extend its coverage to poor investment performance. If you have a grievance against a platform regulated by the CNMV, the BdE might take a look at it. It’s a good idea to familiarize yourself with the protections offered by the central bank in the country where you’re investing your money.

If you’re keen on finding out more about safeguarding your investments and diving deeper into investment-based crowdfunding, you’re in the right place!