Alternative investments: P2P loans are not a dubious business

A Bohemian village for me: P2P loans

I know a lot about investing - that's no wonder, after all, I've been in the financial industry for 27 years now. What we professionals like to tend, however, is a certain arrogance: Who has been there for so long, has seen everything before and quite like to believe that the well-trodden paths are the only true ways ... 
But since I already know the established banking and insurance business I have been watching for a long time, watching with joy that new developments are breaking out there.

One of these new developments is the so-called P2P business, ie lending from private to private - without the involvement of a bank that holds power in its hands. So, I've been eyeing this new section of lending for some time now, but have never found the time to focus more on the issue: Hey, being up to date on my own areas of specialization (financial education and ETFs) takes time and the day has come only 24 hours! 
But: standstill is regression (take a look at the banks, learning to look different!), So I'll take a closer look. It is of course extremely helpful that I also by chance, the experts for P2P loans on facebook and he is kind enough to support me and you on my journey into new unfamiliar investment funds:

Look forward to an introduction to the P2P business and the wonderful guest article by Lars Wrobbel!

Hello Anette, thank you for the invitation and for giving me the opportunity to broaden your investment horizons for your readers. 
Short to me: my name is Lars Wrobbel, I am 32 years old, live in Delbrück in the beautiful East Westphalia and am a professional IT consultant in a fairly large and well-known group. However, I am also independent and have been selling books on Amazon since 2013 , are interested in investment opportunities, sell children's shirts on the Internet and blog since early 2016 on p2p loans on the Internet.

What exactly is P2P and what does it mean?

P2P stands for "person to person" in this business model, which means "from person to person". When it comes to P2P, the words "social lending", "crowd lending" or simply "personal loans" often fall as well.

To understand P2P, let's take a look at the classic banking model:

On the one hand there are the lenders, who bring their money to the bank on their passbook and receive a certain return. They are unconscious lenders. On the other hand, we have the borrowers who need money and get it from the bank for interest if the credit standing of the borrower allows a loan payment. The bank now pays the lender less return than it receives from the borrower. This is called "margin" and is virtually the profit of the bank. Both borrowers and lenders have no real impact on interest rates.

P2P works similar, but different:

Again, we have a borrower and a lender again. Unlike the bank, the lender knows but consciously that he is a lender, and there are usually on a loan multiple lenders. The lender selects the borrower directly using the P2P platform, signaling investment interest. Hence the name P2P. Again, the borrower pays appropriate interest. However, the bank lacks the mediating and controlling role. For the classical bank now a so-called P2P platform enters, The sole purpose of this is to bring together both parties (borrowers and lenders) via a specially designed Internet platform. In some cases, the platform retains or earns some commission for this service, as does the bank at the margin between the borrower and lender offerings. When investing in P2P loans, you are therefore consciously investing your money in credit inquiries from people you do not know. In turn, the borrower can use the money for a variety of things. For a renovation or the budding self-employment, but also in the latest flatscreen or a luxury vacation.

What's the advantage for you as an investor?

As an investor, you have several advantages. The most important advantage, if you already have an existing equity or ETF portfolio, is diversification . P2P loans do not correlate with the stock market. Stock market fluctuations you will not notice there usually. The addition of P2P shares to the classic equity portfolio significantly increases diversification and reduces the correlation between asset classes.

Thus, adding private loans adds extra security to your total assets, which you can quite easily use. A pure equity portfolio correlates very closely, which is why investing in P2P loans can be used as a kind of stabilizer. As a result, the portfolio does not suffer as much from crises as it would normally do, and achieves a comparatively better return with no added expense .

Which platforms are there?

There are not too many platforms in Germany. Above all, and far from the rest, is the platform Auxmoney . For many years on the market, it shows the beginner how the basic tools of a platform work. Abroad, on the other hand, things are different. Especially in the Baltic States, currently the most popular providers such as Twino , Mintos and Bondora . As for the return, you can not even see Auxmoney there in the rearview mirror. But even technically, the Baltic are far ahead of the German platforms. Overall, there are currently almost 100 platforms in Europe with a sales volume of almost 500 million euros per month !

The thing with the edge of the plate

We Germans love our old-established investment forms such as the good old savings account. Auxmoney as a crowdlending platform is already a huge step for many investors. A plant abroad, however, mentally an impossibility. But the view beyond the box is worthwhile ! The following is a deduction of my public portfolio on the blog from the provider Mintos in Latvia:

The portfolio is now almost 1 ½ years old and brings me now a monthly cash flow of 20 - 30 EUR with mostly secured loans and few collection cases. The money is reinvested automatically, the account needs a minimum of care . We're talking about just under 5 minutes a month to be exact.

In my view, it is not riskier to invest abroad. The money is covered to the same extent and better than here in Germany. The much hyped buyback guarantee does not exist in this country. So you should put up with the supposed risk and take advantage of other platforms. My recommendation therefore: Start with Auxmoney, but at the same time create an account on a platform with a buy-back guarantee like Twino or Mintos to get to know the difference. Even with 10 EUR you can already invest in loans, and gain experience.

How much money should you invest in P2P?

As an expert in the subject, I am already very risky with 15 - 20% of my total portfolio. In general, I recommend an amount of 5 - 10% and not more . You can use P2P loans as a diversification to your existing portfolio, because P2P does not correlate with the stock market, but you should also be aware that it is still considered a high-risk investment . Why? Mainly because P2P loans have not yet survived the test of a financial crisis. Although there are data from the USA from the last crisis, in 2008/2009 P2P was not actually available in Europe.

So get into this asset class carefully, get to know them and benefit from the advantages.

Where can you learn more about P2P loans?

Last year, I tried to provide various offers for prospective investors. If you enjoy reading blogs like Anette's, I'd like to invite you to read passive-income-with-p2p on my blog . There are series of articles on many foreign platforms where I test them with my money and report them to you. In a regular newsletter I keep you up to date with other topics as well.

If you prefer more books, there is also a point of contact for you here. With many guest authors from the scene and with well over 1000 sold copies " Investing in P2P credits " by my co-author Kolja Barghoorn ( shares with head ) and me meanwhile became the standard work on P2P credits in Germany. We would be happy to win more readers who will invest successfully in P2P.

This is rounded off with an investor community on Facebook, which now has more than 850 active investors. Here, they help each other and questions are answered faster than with any platform support. Again, you are welcome!

I wish you every success in your investment and hope that we will hear from each other again.

Thank you, dear Lars - and yes, we certainly hear from each other! Because I've decided to set up a portfolio at Mintos and take my first steps. Your reasoning regarding our home bias ("I'm at home, since I know me!" Is a belietesten investment errors in the ETF area) is fully true to me - and I have decided not to give in. However, a hurdle I would not have jumped over would have been an English-language website for me (you never let yourself go into something you do not understand completely!) - but that falls away right here, you can start right at the top change over to German.

So: I'll go then. And I'm glad to be able to "hit you" in one of the next articles with my thoughts and questions about it: What I'm asking, surely others are asking themselves!

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Do you have questions to Lars? Or me?

Do not be shy, always with it: Down in the comments is just the right place for it!

And if you liked the article, we'll be happy if you share, like and spread what it takes!