October @ Savings4Freedom

Savings4Freedom October 2019 Portfolio Update

Hi Savings4Freedom friends!

Today I’m writing to you from Hangzhou, in China. I’m representing my company in an international competition and looking for new business opportunities. A beautiful city with more than 1000 years of history.

October was a strange month for Savings4Freedom. Due to personal reasons, I needed to withdraw a significant amount of funds from my portfolio. However, since I was predicting this particular need and kept the necessary funds on iban Wallet, I didn’t suffer any drop in my monthly S4F returns! The reason why I choose iban Wallet was exactly to allow me to have a small interest gain from my savings, but access to my funds immediately, without the need to sell loans or wait for liquidity.

By now, in case you follow the blog, you already know that I decided to set up a group of P2P lending investment principles. They have been crucial in supporting my decisions. Have you found yours? Let me know!

The Failure of P2P Lending Industry in China

Being in China, I decided to explore the reasons why, back in 2018, the local peer to peer industry collapsed, with significant losses to investors.

The Ezubao Scandal

Back in 2016, Ezubao one of the top 10 largest P2P lending platforms in China at the time, has been shut down and 21 executives have been arrested. Even though Ezubao only launched in July 2014, it quickly grew to attract hundreds of thousands of investors with promises of 9-15% returns.

The scale of the fraud was breathtaking. Around 900,000 individual investors have collectively been bilked out of US$7.6 billion, according to Chinese officials, in one of the largest Ponzi schemes ever conceived. It has been reported that an estimated 95% of all borrower listings on Ezubao were fraudulent. Meanwhile, the top executives used investor money to enrich themselves – spending on items and gifts including real estate, cars, and luxury goods.

From 2016 to 2018… More and more platforms…

But the industry rationalized this away as just one bad apple. The regulators announced new rules for the industry at the beginning of 2016 and there was a sense that the strong platforms would adapt and continue to perform well. And that is what happened for the next year or so. But by 2018 serious problems began to emerge. That year ended up being the year of reckoning for the industry.

The p2p lending industry had grown to around 4,000 platforms at its height which everyone agreed was not a sustainable number. The weak platforms were not going to make it but the trouble was as they failed they often took investor money with them. While there was definitely some fraud there were also cases of platforms that meant well but were simply unable to make online lending work.

Investors Guarantees and Losses

Many investors had put their life savings into a single P2P lending platform believing that their money was safe. Some platforms said they would guarantee investor principal and others implied they were backed by the government. What these investors did not understand was that once the platform went out of business these guarantees were worth nothing. But they truly believed the platforms should guarantee all these investments.

What Went Wrong?

Peer to peer lending was a failed experiment in China. It became so tainted by fraud and illegal activity that even the well-intentioned platforms have struggled.

When sourcing for responsibilities, the reason seems to go to a failure of the regulatory system. In 2013 the People’s Bank of China (PBOC) had identified many of the problems with P2P lending but did not do anything about it until it was too late. The reality is that it is really difficult to underwrite loans well. You need a lot of expertise, particularly when it comes to risk management, and only a small number of platforms fully realized this.

There was no signal of how trustworthy a platform was except for size and time on the market. So, there was a mad rush to grow very big, very quickly and there was little incentive to be a good actor. Many platforms that actually had effective risk management in place were overtaken (in size at least) by these young upstarts. It was a house of cards and in hindsight, it was no surprise that it all came crashing down.

What can we learn from it?

We need to actively ensure that the same mistakes don’t repeat themselves in Europe. It is our responsibility, as investors, to ensure we do proper due diligence and request greater transparency from the P2P industry. In a different approach, we need to push from decisive action from the regulatory bodies to establish a clear investor protection standard.

I truly want to see the P2P industry growth, but I believe everyone that reads the blog needs to be informed and consciously of the risks. Let’s learn from the Chinese experience and avoid painful surprises in the future!

What is your opinion on this subject? How do you plan your investment strategies to avoid too much risk? Let me know in the comments section.

But, without any further due, let’s check Savings4Freedom returns!

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September @ Savings4Freedom

Savings4Freedom September 2019 Portfolio Update

Apologies for the late publication, but I took some of the time I dedicate to Savings4Freedom to enjoy time with my family and friends. I’m sure you understand.

September was a very busy month for Savings4Freedom! The learning process since I started my investment portfolio is guiding me towards changing my platform choices. I will share with you all about my decisions on this update.

By now, in case you follow the blog, you already know that I decided to set up a group of P2P lending investment principles. They have been crucial in supporting my decisions. Have you found yours? Let me know!

Please let me know your thoughts on this subject. Do you agree with these principles? I welcome any ideas that can help me improve this list.

Why I’m avoiding Short Term Loans?

Over the past few months, I have been reducing my P2P lending investments on MintosViventor, and Robocash. Some of you contacted me to learn the reason behind my decision to act in this manner, especially when recently I added Mintos among the P2P lending platforms I would select if I started my crowdinvesting portfolio all over again.

Why I'm reducing my consumer P2P lending on Mintos Robocash and Viventor @ Savings4Freedom

The best way to provide a clear answer is to share with you my reflections on the topic. You can read the article by clicking the figure above.

But, without any further due, let’s check Savings4Freedom returns!

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Why I'm reducing my consumer P2P lending on Mintos Robocash and Viventor @ Savings4Freedom

Why I’m reducing my P2P lending investments on Mintos, Viventor & Robocash?

Over the past few months, I have been reducing my P2P lending investments on Mintos, Viventor, and Robocash. Some of you contacted me to learn the reason behind my decision to act in this manner, especially when recently I added Mintos among the P2P lending platforms I would select if I started my crowdinvesting portfolio all over again.

The best way to provide a clear answer is to share with you my reflections on the topic.

Investment Rationale: BuyBack Guarantee, Maturity & Type of Loans

One of the elements that I value when investing in P2P lending opportunities is the additional sense of security provided by the buyback guarantee associated with my investments on Mintos, Viventor, and Robocash.

The second element that I considered when evaluating Mintos, Viventor, and Robocash was the opportunity to loan my savings for a very short maturity term: 30 days to 3 months. This allowed me to plan my investments considering the repayment dates to prepare my next decisions.

The last element is the type of loan available, based on the two previous conditions being met on Mintos, Viventor, and Robocash. Typically, when we decide to follow this investment strategy, we are lending our savings to finance microloans, invoice financing loans, personal consumer loans, or short term loans. Typically 30-day deals.

Problems I faced with short term loans?

Now, I just need to explain the investment results that trigger my action:

  • Are the loans being paid on time?
  • When the buyback guarantee is triggered?
  • Does the penalization interest fee pay for the opportunity cost of not investing my savings on loans with longer maturity?
  • Are interest rates aligned with the opportunity cost?

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August 2019 @ Savings4Freedom

Savings4Freedom August 2019 Portfolio Update

August was a crazy month for Savings4Freedom! Everything happened so fast that almost feels like I was writing the July portfolio update yesterday.

The speed of the P2P lending industry is incredible. The amount of information required to access, process and decide over in order to take informed actions grows faster than my capacity to deal with it.

Based on this reality, I decided to set up a group of P2P lending investment principles that will make much easier for me to take action in the future.

My P2P Lending Investment Principles

If I was starting all over again today, I would follow in a religious manner my P2P Lending Investment Principles:

  1. Buyback Guarantee: Only invest in P2P loans that provide Buyback Guarantee (for security reasons);
  2. Minimum Return: Only invest in P2P loans that offer an interest rate above 12% per year (the ROI and Yield need to justify the risk);
  3. 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);
  4. Cashback and Bonus Offers: I want to maximize cashback and bonus opportunities to leverage my P2P lending returns (at the end of every platform month overview, 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).
  5. Diversification: I want to distribute my funds across different types of loans, geographic locations, maturity and mainly P2P platforms (diversity is king).

Please let me know your thoughts on this subject. Do you agree with these principles? I welcome any ideas that can help me improve this list.

How I Would Invest 10K in P2P Lending if I was Starting Today @ Savings4Freedom

I recently published one of the articles that more fun offered me writing it. I was challenged by some Savings4Freedom readers to reflect on what I did wrong and how I would do things differently if I started from scratch investing in P2P lending. It was a really important exercise for me in order to conscientiously realize the progress I have done until now. But the best part was realizing in a positive way that I’m really looking forward to experiencing what the future will bring in my path towards financial freedom.

You can read the article by clicking the figure above.

But, without any further due, let’s check Savings4Freedom returns!

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How I Would Invest 10K in P2P Lending if I was Starting Today @ Savings4Freedom

How I Would Invest 10.000€ in P2P Lending if I was Starting Today?

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…

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July @ Savings4Freedom

Savings4Freedom July 2019 Portfolio Update

With a small delay, here is our Savings4Freedom monthly update!

I’m really happy with the way my P2P investments are evolving this year. By choosing to invest in P2P lending, every single day I’m confronted with the need to learn new aspects of the industry and improve my processes for efficiency and security.

As I described in my previous update, I’m continuing to shift funds between P2P platforms to diversify and increase my average portfolio interest rate results. In July, I opened accounts in Monethera (very good experience so far) and iban Wallet (a nice complement to my P2P portfolio for money liquidity reasons). You can check my first impressions on both platforms later on this publication.

I also want to share that from now on, I’m sharing with the community my Financial Literacy Video Library to FIRE (financial independence and retiring early). I love to learn and I want to share some of the best videos I found with you.

Loan Originator Issues: Aforti

P2P platforms such as Viventor and Mintos shared this week that one of their Loan Originators (Aforti). One of the risks of investing in P2P lending is the loan originator. You can check the Risks section on this dedicated page to learn more about other aspects to consider before investing.

But, without any further due, let’s see the numbers!

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June 2019 @ Savings4Freedom

Savings4Freedom June 2019 Portfolio Update

And now is the time for a monthly update!

After the amazing P2P Conference in Riga last month, I revisited my entire investment strategy towards financial freedom. One of the most relevant lessons was to balance correctly the effort and investments made into P2P crowdlending platforms on my overall investment portfolio.

Below I will show how that will reflect for the future.

Savings4Freedom in Portuguese

I’m also very excited to publish the blog in Portuguese! I’m looking forward to your comments and suggestions on how the contents can be improved and how I can share better information in the future.

Understanding P2P Crowdlending

Based on messages from people asking questions about P2P Crowdlending, I decided to create a dedicated page that will be continuously improved based on the best available industry information. The initial information source for it was a White Paper published by Grupeer in the fall of 2018.

P2P Lending Platforms Comparison

I really need to thank all the feedback received over the last month regarding the P2P Lending Platforms comparison. I read all your messages and decided to simplify the way the information is shared. I hope that now it could be easier for you to check the best P2P platforms to invest. Let me know what you think!

N26, Revolut and Transferwise

In order to simplify my investment strategy, I decided to create dedicated accounts to manage my P2P investments. Now I follow the 3 buckets account approach:

  • One bank account for my daily expenses: Revolut;
  • One for my savings and emergency funds: National Traditional Bank;
  • And I just opened an N26 account to manage my P2P Investments.

This approach, combined with the use of Transferwise when I need to exchange currencies is simplifying my life and increasing my visibility over all transactions.

But, without any further due, let’s see the numbers!

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P2P Conference @ Savings4Freedom

Conference Report: Summary of the P2P Riga’19 Conference

On Friday the 7th of June, over 240 people among P2P platform representatives, P2P investors, and bloggers came together in Riga for the 1st edition of the European P2P Conference. This P2P Conference was certainly a memorable one! Taking place at the wonderfully unique RISEBA Architecture and Media Center H2O 6, this event brought together people from 24 nations representing the entire community to display just what makes P2P crowdlending so unique – its diversity, its cross-sectoral nature, and its collaborative spirit.

The event, hosting interesting keynote speakers, an array of informative presentations, and topped off with a fun evening and second-day entirely dedicated to networking opportunities.

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P2P Conference Riga’19

P2P_Conference_Riga2019
The European P2P investment community is gathering in Riga next June 7-8 to discuss the future of the industry.
You can join the conference buying your ticket here: https://bit.ly/2UtHuUZ
 
This is a great opportunity to learn and meet with leading platforms, investors and experts!
 
#S4F #Savings4Freedom #P2P #Peer2Peer #Investments #Riga

 

Portfolio Update: April 2019

Hi Savings4Freedom friends!

February was a specially painful month for me. The loss of a very important family member is always a defining moment in everyones life… apologies for not publishing last months report. I updated all information on the blog over time, but not a post… thank you for understanding.

Live goes on and here is the April 2019 S4F report.

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Investing in Crowdlending: some important notes…

©Photo. R.M.N. / R.-G. OjŽda

Hi Savings4Freedom friends!

Some quick notes before you start investing in crowdlending platforms…

When you research a new crowdlending platform, it is not only important to look after the expected return and platform usability… There’s quite a few other, more relevant details to evaluate before investing:

  • How old is the platform?
  • Who is the management team?
  • How do their financial reports look?
  • Is it a single- or multi-loan originator platform? How many loan originators do they have?
  • Do they offer buyback guarantee on your loans?
  • What is the minimum investment in loans?
  • Which loan types do they offer?
  • Do they have autoinvest functionality?
  • Do they accept investors from your country?

For each of the platforms I present on S4F you will find a review in their info pages, based on my experience. It is a mix description based on credibility, size, functionality and support as criteria for the review. I also try to read what is the word on the street from other investors in the personal finance ecosystem.

Please feel free to contact me over email [email protected] and share your opinion, comments or suggestions on the topic above.

If you enjoyed this post, please hit the like button below and/or share it with your friends. Thanks for the support!

Portfolio Update: December 2018

©Photo. R.M.N. / R.-G. OjŽda

Hello Savings4Freedom friends!

For the first time I’m sharing my monthly update.

I will try to offer you these updates on the 1st day of every month. The idea is to provide you with a transparent manner to check my monthly returns and the cumulative results of my investments.

Over the next month I will work to improve the blog layout and structure. I welcome any suggestions you may have to enhance how the information is presented. If you are here for the first time, please check out the other pages on the blog and let me know your opinion. Thank you for your support!

Without further due, let’s check the results.

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Telling my story towards financial freedom…

csmboto picture

I’m Carlos, a 33 years old PhD, and startup founder. I live in Portugal with my wife. I always had the mental drive to save money, but never with financial independence in mind. Only at the beginning of 2018, I decided to structure my efforts towards freedom. This blog tells you all about my path, decisions, and mistakes.

I face strong limitations regarding my financial freedom, however, I don’t have any doubt that I will be able to achieve this personal goal of becoming financially free. Anyone can reach financial independence. It’s all about the way you wish to live and the costs necessary to sustain such a living standard.

I learn to save money with my Father. He was a hardworking and honorable man, entirely committed to supporting his family. I saw his effort to support my studies and his energy to provide me the opportunity to fly high without financial concerns. My Father is my hero.

There are many different ways to achieve financial independence, but you always will need to follow these:

  1. Keep a simple lifestyle.
  2. Maximize your income streams.
  3. Save and invest wisely.

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