The Age of “Micro-Investment”

It’s tough to find good investments. Especially these days.

There’s so much investment capital sloshing around the world. Pouring into all things buyable. Driving up prices for stocks, bonds, commodities, real estate… you name it.

There’s mounting evidence that the world is simply over-invested. CME Group set record trading volumes this week on its crude oil futures. Two weeks ago CME’s Treasury futures and options hit record volumes. The group’s interest rate products also put through all-time highs in trading.

But all this buying makes it almost impossible to find good investments. If everyone is investing in everything, prices are driven to unviable levels.

Savvy investors have tried to find returns by seeking obscure markets. Junior mining stocks ten years ago. Emerging markets 15 years back. Increasingly exotic derivatives have been one of the latest frontiers.

But a new report suggests people are increasingly turning to a simpler solution: invest in things that don’t exist yet.

The 2012 Global Entrepreneurship Monitor report came out last month. Showing that American entrepreneurship is at record levels. Today, 13% of the adult U.S. population is engaged in some form of self-started business.

Here’s the really interesting part. Those people aren’t getting funding from banks, or even venture capital funds. 82% of entrepreneurs said they were starting up with money from personal savings or from family and friends.

People are increasingly investing in ideas. Their own, or that of someone they know well. The “pitch” doesn’t happen with suits, Powerpoint or boardrooms. Investors hear about these opportunities at the dinner table or over a latte at Starbucks.

Such “micro-investments” are beyond the reach of the mega-billion investment pools. Which means valuations will be more reasonable. Not all of them will work. But at least investors are getting in at a price that gives them a chance for a significant return.

Smaller, nimbler, more personal. In an investment world that’s gone hyper-global, the next step may be to buy hyper-local.

Here’s to investing in what you know,

Dave Forest

dforest@piercepoints.com / @piercepoints / Facebook

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