Over the past week, I received a significant number of messages with questions on how to start investing in P2P lending. During the preparation of my replies, I realized that the best way to share my experience and opinion was imagining that I was starting all over again today…
Rules for the Exercise: Amount, Maturity & Moment in History
Let’s define for the purpose of this exercise a budget of 10.000€ for P2P lending investments. Let’s consider a timeline for deploying my investments of 12 months and take into consideration my current knowledge within the European P2P lending industry in August 2019.
Key Questions to Answer
Now, I just need to answer the following questions:
- Which steps would I follow to invest 10.000€ in P2P lending?
- Which P2P crowdlending platforms would I choose for my investments today?
- How would I spread my 10.000€ among my selected P2P platforms?
- What strategy within a 12 months timeframe would I follow to maximize earnings with the least time effort from my part?
- And why I took each of these decisions…
Before I start, I want to remind everyone that no information contained on this publication constitutes tax, legal, insurance or investment advice. I just want to share how I would invest 10.000€ in P2P lending if I was starting all over again today.
My P2P Lending Investment Principles
Like anyone, I learned from my mistakes. This growing experience and reflection around my errors allow me now to share a perspective on how I would make my decisions in a different way if I started all over again today. I truly believe that my returns and portfolio distribution would be much different from what my current P2P lending investments portfolio looks like right now.
If I was starting all over again today, I would follow in a religious manner my P2P Lending Investment Principles:
- Buyback Guarantee: Only invest in P2P loans that provide Buyback Guarantee (for security reasons);
- Minimum Return: Only invest in P2P loans that offer an interest rate above 12% (the ROI and Yield need to justify the risk);
- Early Exit: The majority of my investments should have available some type of early exit from the P2P loan position (through buyback or secondary market, for liquidity reasons);
- Cashback and Bonus Offers: I want to maximize cashback and bonus opportunities to leverage my P2P lending returns (at the end of every selected platform description, I share the cashback and bonus opportunities available in case you use my referral links, that I really appreciate if you do to support this blog).
- Diversification: I want to distribute my funds across different types of loans, geographic locations, maturity and mainly P2P platforms (diversity is king).
How my 10.000€ P2P lending investment portfolio would spread among P2P platforms today?
Now, I will describe my process step by step towards building my ideal portfolio and explain why I decided for each one.
- Before I begin my investments, I would create an N26 account.
I already explained in a different page why I like my N26 account so much. my first step would be this one. The goal is to have a dedicated account for my P2P lending investments.
I cannot emphasize enough how complex the tracking of transfers becomes once you start managing a small number of P2P lending platform accounts. The complexity growths in an exponential manner and in case you want to save time and money, an N26 account could be ideal. It works for me.
- In order to earn money with immediate liquidity, in special from funds you plan to use for P2P lending investments, but that are waiting for the best opportunities, my choice if I was starting all over again today, would be to keep them earning interest daily on my iban account.
I recently shared my first impressions and review about iban wallet. If I was starting all over again today, opening an account at iban wallet would be my second step. The goal is to allocate assets available on your N26 account, waiting for the best opportunities within P2P lending platforms, and earn money on a daily basis, with full and immediate liquidity. Even if 2.5% is low, better than zero!
If any particular moment I need to transfer my savings to a specific P2P platform, the process is quick and simple: from my iban account to my N26 account and from this to my P2P lending platform of choice. By following this strategy, I earned money from my iban account while waiting for more interesting interest rate loan opportunities.
Special Savings4Freedom Blog Bonus: until October 31st every S4F reader who joins iban Wallet and adds the promo code – TRYIBANNOW – and invests 200€ (or more) will get 1% bonus on their iban Wallet account for 3 months!
- If I was starting all over again today in P2P Lending Platforms, I would allocate my budget funds to each one of them before moving to the next one. By following this approach, I would be able to maximize the initial bonus and cashback opportunities, when you create your account using my referral links, each I really thank you for.
This would be my 10.000€ asset allocation among P2P lending platforms:
|Platform||Loan Type||Buyback?||Amount (EUR)||Bonus & Cashback (EUR)|
|Monethera||Enterprise & Real Estate||Yes (5% fee)||2.000€||15€ (5€ + 0.5%)|
|Envestio||Enterprise & Real Estate||Yes (5% fee)||2.000€||15€ (5€ + 0.5%)|
|Kuetzal||Enterprise & Real Estate||Yes (10% fee)||1.000€||5€ (0.5%)|
|Grupeer||Enterprise & Real Estate||Yes. But no Early Exit||2.000€||25€ (1.25%)|
|Mintos||Consumer||Yes. Secondary Market||2.000€||20€ (1%)|
|FastInvest||Consumer||Yes||1.000€||No bonus, but you can create your account using my referral link|
In order of preference, I would start investing one platform at the time. However, in the cases of Kuetzal and Envestio that doesn’t make sense, since the lack of a sufficient number of investments available would drag money in a significant way. I will discuss these limitations below. My goal is to maximize returns and diversification across my P2P lending investments.
Let’s now explain the why for selecting each individual P2P lending platform and how I would implement my investment strategy:
- Monethera: 2.000€ (interest rates above 18%, enterprise & real estate loans, with buyback guarantee).
To begin, I would transfer 2.000€ to my Monethera account. Since the number os investors in the platform are still in the hundreds, it is possible to invest the full budget across the multiple available projects.
At the moment I write these lines, 5 projects remain open to investment in Monethera, all with Buyback Guarantee, even if with a fee of 5% in case of an early exit. Interest rates all above 18% and maturities from 3 months to 1 year.
My investment strategy would be allocating 400€ to each individual project available. Again, all projects offer Buyback Guarantee, and interest rates above 18% with maturities from 3 months to 1 year. Taking into consideration that Monethera pays initial cashback immediately after each investment, I can reinvest the cashback in my next investment. Another aspect that I really like in Monethera is that all projects pay interest since the moment I invest on day 1 of the next month. This means that if I invest on August 31st I will earn interest on September 1st.
I remind that during the first 90 days of investments in Monethera I get 0.5% from the investment amount in immediate cashback in my account to invest in other projects.
SPECIAL CASHBACK BONUS: in case you use the promo code: savings4freedom0919, you will get cashback for 180 days instead of 90 days. This is a limited offer! Only the first 25 accounts to add this promo code enjoy this cashback bonus.
- Envestio: 2.000€ (interest rates above 15%, enterprise & real estate loans, with buyback guarantee).
My next platform of choice is Envestio. To start, I would transfer 400€ to invest in any of the projects available at the time, or new projects that may become available. The reason why I would not transfer the full 2.000€ immediately is to avoid money drag. Due to the low number of projects available for investment and the high demand from investors, any time a new project becomes available, it is funded in a matter of minutes.
Even if recently Envestio presented a new auto-invest feature, the best approach is to keep close attention to the email inbox and run to invest manually on the new loans.
In order to invest in Envestio, I would keep 200€ always available to invest in new projects. My investment strategy for Envestio would be investing 200€ per loan if they offer interest rates above 15% and maturity date below 12 months. The goal would be to allocate the full 2.000€ across 10 different projects. All Envestio projects offer Buyback at any moment, with a 5% fee in case of an early exit.
I remind that during the first 270 days of investments in Envestio I get 0.5% from the investment amount in immediate cashback in my account to invest in other projects.
- Kuetzal: 1.000€ (interest rates above 18%, enterprise & real estate loans, with buyback guarantee).
In parallel with my investments in Envestio, I would start transferring funds to my Kuetzal account. Even if the platform lacks auto-invest tool, you can invest manually without significant restrictions.
Exactly as in the case presented above for Envestio, I would transfer 400€ to my Kuetzal account, invest in projects offering buyback guarantee and interest rate above 18% and keep 200€ always available to invest in new projects. My strategy is to invest 200€ per project, only if they offer interest rates above 18%, maturity up to 12 months and Buyback Guarantee!
Not all projects available on Kuetzal offer Buyback Guarantee, but I only would invest in the ones that do. The goal would be to allocate the full 1.000€ across 5 different projects.
I remind that during the first 180 days of investments in Kuetzal I get 0.5% from the investment amount in immediate cashback in my account to invest in other projects.
- Grupeer: 2.000€ (interest rates above 12%, enterprise & real estate loans, with buyback guarantee but no early exit).
Now that 50% of my assets are allocated to high return P2P platforms, I would search for platforms established on the P2P market for a longer time, with a continuous flux of new projects, but lower interest rates. My first choice would be to transfer 2.000€ to my Grupeer account.
In order to automate as much as possible my investments in Grupeer, I would take full advantage of the auto-invest feature.
My Grupeer auto-invest program is the one presented in the image above:
- Create a customize auto-invest strategy with a clear name to remind that this is a 1 year portfolio strategy;
- Choose all Types of Loans, without exclusion (5 available);
- Choose all Countries of origin, without exclusion (195 available);
- Choose all Loan Originators, without exclusion (29 available);
- Choose the Interest Rate interval with 12% as the lower end (up to 50% just to have an absurd top limit);
- Define the Term Interval for loan maturity between 0 and 12 months;
- Define Auto-invest Limit as 3000€, to ensure reinvestment of interest;
- Limit the Maximum Amount per Loan to 100€;
- Accept all Repayment Type options (3 available);
- Establish the Deadline for the strategy to be valid until the end of 2020;
- And finally, confirm that only investments available in EUROS receive my money (to avoid currency exposure).
This approach will kickoff a source of passive returns over time. All loans available through Grupeer offer Buyback Guarantee. But keep in mind that Grupeer does not have a secondary market for an early exit. This limits the liquidity of your investments in this particular P2P lending platform.
I remind that during the first 6 months of investments in Grupeer I get 1.25% from the investment amount in immediate cashback in my account to invest in other projects.
- Mintos: 2.000€ (interest rates above 12%, consumer loans, with buyback guarantee);
In the case of Mintos I would take close attention towards excluding some of the Loan Originators from my investment portfolio. This decision has an impact on the potential returns from my Mintos portfolio but offers additional guarantees that my investments remain secure.
My Mintos auto-invest program is the one presented in the image above:
- Create a custom strategy to invest;
- Invest exclusively on EURO denominated loans (no currency exposure);
- Define the system to invest just on the primary market;
- Choose only Loan Originators with Ratings of A and B (5 out of 7 available);
- Select all type of loans, without exclusion (8 in 8 available);
- Select all Countries, without exclusion (30 in 30 available);
- Define, as crucial criteria, to invest only in loans that offer Buyback Guarantee (1 in 2 available);
- Define a rule to invest in loans with an interest rate above 12%;
- Limit the maturity date up to 12 months;
- Select the options to reinvest; exclude from investing in loans that I already have in my portfolio; and select the option for diversification (even if with 2.000€ the auto-invest feature fails on providing the right balance);
- Write a name for my 1 year strategy, define the portfolio size to 3.000€ to allow interest reinvestment and define a minimum investment amount of 40€ and maximum of 50€.
This approach will allow you to enjoy interesting returns in the short term without breaking a sweat.
I remind that during the first 90 days of investments in Mintos I get 1% from the investment amount in immediate cashback in my account to invest in other projects.
- FastInvest: 1.000€ (interest rates above 12%, consumer loans, with buyback guarantee).
To close my ideal portfolio, I would transfer 1.000€ to my FastInvest, and take full advantage from the auto-invest feature available on the P2P platform.
To employ minimum effort and maximize returns, these would be the list of tailor-made choices for my FastInvest auto-invest tool:
- Create a custom auto-invest strategy, with a name suggestive of my 1 year timeframe;
- Define the portfolio size to 3.000€ in order to allow the reinvestment of interest received during the next months;
- Check the option to just invest in loans with interest rates above 12%;
- Check the option to reinvest to turn it on;
- Keep the multiple Countries available;
- Define the minimum investment value as being 40€;
- Define the maximum investment value as being 50€;
- Finish by keeping the maturity of the loans between 1 and 12 months.
Following this approach, in less than 2 months I would start receiving around 10€ each month in interest payments. All loans available on FastInvest offer Buyback Guarantee.
Strategy for the Next Steps
In order to continue the growth of my initial portfolio, I would, on a monthly basis, add funds to each individual P2P platform on my portfolio in order to grow the asset value of at least 100€ every month. This, taking into consideration the interest received. This approach makes much easier for you to track the returns every month from all platforms and also creates a sense of commitment and success of watching your portfolio growth through passive returns.
I suggest that this approach should be followed until a goal amount is reached for the platforms and I feel the need to add a new one to the portfolio for diversification reasons.
Conclusions & What do you think?
Now you know the steps I would follow if I was starting all over again today investing 10.000€ in P2P loans. In my opinion, the allocation of investments respects the idea of maximizing returns while providing an interesting diversification across platforms, countries, and type of loans.
Around 70% of my loan investments would be invested in enterprise and real estate loans, while 30% would go to consumer loans.
At the same time, I would benefit from cashback and bonus in the value of 80€. It is clear that I could follow a more aggressive approach to improve in a significant manner these values, however, I prefer to diversify and reduce the exposure of my portfolio to a single platform.
I enjoyed very much this reflection and I hope you consider it to be good information to support your own decisions! I will try to update this article every 6 months in order to improve the potential returns of an initial 10.000€ taking into consideration the most recent market conditions.
What do you think? What would be your ideal allocation if you were starting again right now? I welcome your feedback and loved to learn what you would do in a different way!
Do you want to Invest?
Check among the P2P crowdlending opportunities available on Savings4Freedom, always taking into consideration that all information is entirely based on my personal experience.