The rise of the mass retail investor has significantly shaped the financial landscape over the past decade. Velexa, a fully customisable API-based investing platform, has delved into how fractional bonds are a tool for financial inclusion.
By 2021, everyday investors were managing 52% of global assets, a figure anticipated to climb to 61% by 2030. Retail investors have also increased their share of daily trading volume from just over 10% in 2011 to 22% by 2021, demonstrating their growing influence in the market. The individual investor market, valued at $7.2trn as of early 2023, highlights the pivotal role of digital trading platforms and innovative financial products in democratizing investment opportunities.
However, despite these advances, the investment realm can still appear as an exclusive domain to many, particularly within the traditional bond market. Bonds, known for their stable returns and diversification benefits, often require substantial initial investments, limiting accessibility for individuals with less capital.
The traditional bond market poses significant challenges for potential investors, including high minimum investments and a complex, often opaque environment. These barriers have historically restricted retail investor participation, leaving many unable to tap into the potential of this significant asset class.
Yet, the appeal of bonds for retail investors is undeniable. Bonds offer stability, predictable returns, and diversification, making them an attractive option for those seeking to balance income generation with capital growth. The benefits of bonds, such as risk mitigation and their role in a diversified portfolio, underscore their value to individual investors.
Enter the concept of fractionalisation. This innovative approach has already revolutionized investment in assets like real estate and stocks, allowing investors to own portions of high-value assets. The application of fractionalisation to bonds is now breaking down the barriers that have kept retail investors at bay, offering a way to participate in bond markets with significantly lower capital requirements.
For businesses, the fractionalisation of bonds presents numerous opportunities. It enhances market liquidity, expands the investor base, and offers a competitive edge by meeting the demand for accessible investment solutions. Velexa, a leading investment technology provider, is at the forefront of this shift, enabling access to fractional bonds through its platform. This initiative allows a broad range of retail-oriented businesses to offer their customers entry into the bond market with minimal investment.
Velexa’s infrastructure supports seamless integration of fractional bonds into existing channels or the creation of new investment offerings, making it simpler for companies to connect investors with a wide array of corporate and government bonds. With over 700,000 financial instruments available, Velexa’s technology facilitates a diverse and inclusive investment landscape.
The adoption of fractional bonds signifies more than just an investment strategy; it represents a movement towards a more inclusive and democratic financial system. By lowering entry barriers and enhancing accessibility, fractional bonds not only benefit financial institutions and disruptors but also empower individual investors, enabling them to achieve their financial goals and contribute to economic empowerment.
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