Should you invest in unlisted companies ("penny stocks")?

In today's FT, I see that FundingCircle.com is offering small businesses the chance to sidestep banks and borrow directly from individual savers, using an online marketplace http://link.ft.com/r/4RNQTT/9ZSQM0/042P/JIBIQW/RNHR8O/HK/t

Is it a good idea to sidestep banks and so on, and to invest directly in small companies?

From the perspective of FundingCircle, yes. They should make a lot of money out of it.

From the perspective of an investor, the matter is more doubtful.

I maintain that you should invest:
- either in listed companies (where the system is doing at least some due diligence for you)

- or in those small companies regarding which you can do the due diligence yourself - i.e. you can visit the factory or office and judge the mood as well as the state of affairs for yourself, look the proprietor(s) or manager(s) in the eye and ask questions, and so on.

In fact, at present, my preference is definitely for the second option.

No one knows how the rules will change, and therefore how the profit/ loss for listed companies will change following the impact of current legislative changes, as well as the impact of global changes which may start as early as November this year. Sphere: Related Content