In this article, I'll show you step-by-step how to invest $ 7,500 in P2P loans and how to build this asset into your asset allocation (if you have a larger dose of risk-taking in your hand luggage). So far, I've been sparsely investing aux-money in P2P loans through a single platform , and Bodo, my investment ape, has advised me to expand that a little to have value that is not correlated with stock markets.
Good Bodo.
To be honest, I bet he only suggested it to me because he also wants to invest on the weekend ;-)
Overview of P2P market
But since then, since this area has developed very strong and there are many new options and platforms for investors, I have decided to get more involved.
The market for P2P loans had a volume of approximately $ 1.2 billion in 2012, compared to $ 64 billion in 2015.So the market is growing so much and of course I want, as a rational capitalist does, to have my piece of cake. (Source: Statista )
Lars Wrobbel, the founder of the blog - Passive Income with P2P Personal Loans - helps me with this and I've already written a book on this topic.
For those who do not know what P2P loans are, here is a short explanation:
P2P, is the abbreviation for peer-to-peer . Peer means in German as much as peer , it is meant at P2P loans that two peers so two people together make a loan. Peter needs money that he does not have for a new car and is willing to pay more than he gets. Max is willing to lend money and, if all goes well, gets a return in the form of interest from Peter.
This does not work on a doner shop, but on P2P platforms, on which one can apply for loans, but also in the loans that others absorb, invest or finance these, so as to obtain a return in the form of interest , As rational investors, of course, we are on the side that receives the return and not on the debt, we become thereby, so to speak, a bank.
But I do not want to go into that any longer today, as I have already published a lot of information on this topic on my channel , but of course also in our book.
I will now invest in three of the largest platforms namely, Minto , Twino and Bondora . (Mintos and Twino affiliate links)
The three platforms are always praised in the P2P scene, where Lars is also very active, only to Bondora there is some controversial opinions, but he has so far made good experiences with all three. Incidentally, the blog article is also available as a video here:
How to invest 7,500 € in P2P Loans - P2P Mintos, Bondora, Twino Tutorial
Step 1: Registration & Deposit
Of course, before you can invest you first have to register. It works pretty easy. You do not need a post-ID procedure or anything else but can simply register as an investor with your ID number, the address, the name and a few more details. The individual platforms are linked up in the blog post and under this article.
If you have registered, you will get an investor account, to which you can transfer money from your checking account. I have done this before and have now deposited 2.500, - Euro on each of the three platforms.
When the step of registration and transfer is done, then you can start building your portfolio.
2nd step: Credit Selection - Manual or Automatic?
The first option you have is to invest directly in individual loans. One has for all three platforms an overview of the various loans in which one can invest.
Each credit has a rating, which is a credit rating. This shows how risky each loan is and how high the chance of getting back the money at the end of the term or how high the default risk is. The ratings are not produced by the platforms themselves but by independent financial service providers.
The rating system of Bondora:
Step 3: Which rating? Risk / Return Decision
This is similar to bonds issued by governments or large corporations, which are also rated by companies such as Standard and Poor's or Fitch depending on their credit rating. But just as with bonds, the ratings on P2P loans should be treated with caution.
One should not believe that credits that are rated with a top rating like A can not fail, in fact Lars has experienced at Aux-Money that more A loans have failed than loans with a lower rating. Of course, this has a lot to do with coincidence, but shows that these ratings are not a guarantee, otherwise there would be no return.
Of course, the lower-rated loans usually have more returns, but it makes no sense to invest only in very high-risk loans, as there is a maximum return on the loans that you can not beat anyway.
So this is not like the stock market, where you invest in Apple for example in 1980, and thus could achieve a return of about 3800% due to luck or an incredibly brilliant mind .
Wide diversification
Since you have no chance with P2P loans to achieve such horrendous returns, it does not matter how broadly diversified, one has by focusing, which can sometimes bring high returns on the stock market with P2P loans no benefits. Therefore, one can and should diversify very broadly in P2P loans.
In addition, in the case of P2P loans, default is more common than corporate insolvency, so there are no fluctuations in value, so you have a faster realized loss, so another reason to diversify very broadly.
Lars advises each loan with about one percent in the deposit to weight, so for me that is 25 euros, since I will invest on each platform 2,500.- €.
Now briefly to the main differences that exist between the different platforms.
Differences between the platforms
At Bondora, one learns a great deal about the person behind the loan, but less about the loan itself.
Mintos offers the most information about the loans. At Mintos, corporate loans give an overview of the company's financial position in the form of a somewhat simplified balance sheet, as well as providing various information about the loan itself. Other loans, such as house or car loans, provide information about the value of the loan Collateral deposited.
At Mintos, there is a measure that indicates how much of the loan is covered by the deposited security. The measure is called LTV, which means credit to value, the lower the LTV, the higher the return on the loan.(Loan-to-value)
The security behind the loans is also found in the details of the loan.
So if you want to deal intensively with the individual loans, Mintos offers the best alternative.
Twino is pretty much the opposite, there are no ratings or anything else. That's because with Twino the whole system is a bit different, while the other two platforms have yield differentials between loans, with Twino all loans have the same return.
This works by getting a buyback guarantee from Twino as an investor, so if the loan goes down you get your money plus interest that accrued during the time you had the loan in the deposit. As a result, the investor has the same risk for every investment and also receives a consistent return, which currently stands at 12%.
The risk with Twino is no longer the failure of the loan, but the fact that Twino has no more money to repurchase loans should they fail.
Especially for investors who do not want to deal so much with the individual loans, so Twino offers a good system.
Also with Mintos some loans have a buyback guarantee, they are marked with a sign.
Another difference between Twino, Mintos and Bondora is that there are a lot of short-term loans at Mintos and Twino, sometimes with terms of just one month, called pay-day loans.
What always annoyed me at Aux-Money was that it often happened that I invested in loans, but then they did not come about because not enough others have invested in the loan. The money came back to my account and I kept trying to find new loans and invest the money again.
That was annoying and time consuming ...
Mintos and Twino have found a solution to this problem. At Mintos, loans are pre-financed by so-called loan brokers. These are companies that pre-finance the entire loan, as an investor then you have the chance to participate in the already completed financing. The big advantage is that you are not dependent on other investors, it saves you a lot of time and does not always have to look for new loans, because you simply buy the desired share of the cake (credit).
Twino is itself the loan lender, but that does not really make any difference to us investors.
At Mintos, the loan lenders are also the companies that offer a repurchase guarantee on some loans.
This is actually one of the biggest differences between Mintos and Twino, Twino does the business on its own and offers not only the platform but also all the trappings. Mintos, on the other hand, only provides the platform, and the loan lenders make the loan transactions.
Incidentally, Mintos has seven such lending brokers, each specializing in a specific lending area. For all those interested here is a short list of loan-lenders:
ACEMA specializes in mortgages and is one of the leading non-bank companies in this field. The company is headquartered in the Czech Republic and has been active since 2002. Last year, the company has awarded more than 500 loans totaling more than 14 million euros. In December 2015, the total assets of the company amounted to more than EUR 36 million and the profit from the core business amounted to EUR 4.4 million.
Founded in 2007, Capitalia specializes in financing corporate loans for small and medium-sized businesses.The company has already lent more than 10 million euros to about 500 different companies.
Creamfinance, founded in 2010, is a leading consumer credit company with a strong presence in the fin-tec sector. Above all, the company offers consumer credit in economically developing countries. The company is active in the following six countries: Latvia, the Czech Republic, Poland, Georgia and Slovakia.Creamfinance has a total of 210 employees in its offices and lends about 60 million euros per year.
Debifo is the first factoring provider for small and medium enterprises in Lithuania. Factoring is a credit business in which Debifo or we as investors pay the bills of small companies. These are the companies that have large corporations as customers. The large corporations often have very long periods in which they can pay their bills, because the small companies with these payment delays but often difficult to handle can come into play. We pay off the big corporations' bills so to speak, the smaller companies stay liquid and when they receive the payments we get back our money plus interest.
Debifo has lent 1 million euros since May 2015 alone.
Founded in 2014, Hipocredit is one of the Mintos Group companies. The company also specializes in mortgage financing for both consumers and businesses. Hipocredit is very interesting in structure, because it only employs 5 people and relies heavily on outsourcing.
Mano Unija is Lithuania's largest lending company, established in 1996, making it the oldest of the seven loan lenders. To date, MANO has given UNIJA over 356 corporate loans worth 12 million euros. Although the company specializes in corporate loans, it also offers mortgages, auto and consumer loans
Mogo is one of the largest non-bank car loan providers and operates in Estonia, Latvia, Lithuania and Georgia. Since the company was founded in 2012, Mogo has lent over 60 million euros in loans and currently employs more than 200 people.
Incidentally, only Mogo and Creamfinance offer buyback guarantees, but the two offer almost all of these loans.
By the way, at Mintos, if a loan is 60 days late, it will be repurchased and bought back at Twino after 30 days.
Bondora does not yet have a system to pre-finance loans, so if you want to select the loans individually, you should look at the Funded / Left or Financed / Remaining indicator and see how long the financing lasts, which is right next to it the category "Financing Ends".
If a loan is already almost 100% funded and there is still a bit of time left, the funding will probably come to fruition. However, if the financing ends in a few hours, but the credit is only 60% funded, you should not choose this right, because otherwise you may have to look for a loan afterwards. This has happened to me before at Bondora more often, since I have been investing there for some time.
So far I have only talked about the possibility of investing in loans at the beginning of the term or the financing. But there is also another option for the Bondora and Mintos platforms, namely the secondary or secondary market.
The secondary market
As an investor, we are also 99% traded on the secondary market. If an AG has its IPO or a bond issue, then the stocks or bonds are still in the primary market. If you buy shares directly at the IPO, you buy them on the primary market. Once the buyers who bought the securities on the primary market sell their securities again, it is called a secondary market.
And when do investors sell their securities? Exactly when they have lost confidence in a positive development or think that stocks are worth less than their current price.
It is the same with P2P loans, when you buy financing right away, then you buy on the primary market. But if loans have been in arrears for a while or investors need their money ahead of time, they can sell their loans on the secondary market at a discounted or sometimes even more expensive price.
At Mintos, there is the price / discount ratio on the secondary market, below what percentage of the credit is cheaper or sometimes more expensive. It also stands if and how long the loan is already in default.
If a loan is listed with a decent discount, but in the end it does not fail you can improve your return on your investment, but you also have an increased risk.
On the secondary market, there are often interesting offers, with which you can generate a great return.Anyone who is interested can take a look on the blog - P2P Anlage.de - by Andreas, who specializes in secondary market trading and was thus able to achieve astronomical returns.
But you should be aware that this business requires a lot of time and you should never forget the ROTI (Return on Time invested). In addition, any return you receive in addition to the risk-free interest rate comes through a certain risk, even in this case.
For some of you, the secondary market is still a good option, but this article is more about passive investment in P2P loans.
But I will not invest in individual loans either directly on the primary market or on the secondary market.Instead, I will invest with the help of the Auto-Invest feature offered by all three providers.
Step 4: Building the Car Invest
It will automatically invest in a broadly diversified portfolio of P2P loans and I can set it to reinvest the money right away and much more, but we'll come back to that later.
For me, the goal in the case of P2P loans is to get a really passive income, which does not mean I have a lot of work with my three investments or deposits either now or during the term. There are also no fees or other.
For a while now, I have been dealing with the subject for a while and for myself, I have found that I can not make any claims about what the borrower does with my money. Whether he buys a car or finances his education is relatively unimportant to me, I just want a return for lending my money to him.
That's why I can just leave the work of credit selection to a computer. It may also be that with you is completely different, but that is the great thing about our time, everyone can choose what suits him.
Now we come to the practical part of this article, I am going to invest all my money on all three platforms with the help of the Auto-Invest function, Mintos and Twino or the portfolio manager function at Bondora.Although the names are different in the platforms, the principle is the same.
This is the easiest way for Bondora, with three different Portfolio Managers to choose from. A Conservative, Balanced and Progressive.
The expected return is minimal for the three, so it does not really make much of a difference. Interestingly, the balanced portfolio has a higher expected return than the progressive one.
Under this selection box you will find two graphs showing how the loans are divided into risk classes and countries. Of course, as mentioned above, the risk assessments should be treated with caution, because why should loans from Estonia be safer than loans from Spain?
I chose the balanced portfolio manager. Then you have to select this only, confirm the terms and conditions and all the money from the depot is invested in the portfolio.
So it works really easy with Bondora, which has both advantages and disadvantages. If, for example, I wanted to invest part of my money in the conservative and balanced portfolio, then I would have to create a new profile for this, as I can only ever invest in a single portfolio.
If I deposit new money, it will be invested immediately in the portfolio.
Lars says he did not have any worse experiences or returns than other platforms where you had more choices.
Bondora offers itself for the very passive investor, who does not want to deal with his P2P investments.
Next, I will invest in Mintos, as I said fall for the auto-invest function in any of the platforms costs, but of course can change again and again.
Mintos, for example, is a very young company, when it suddenly realizes that the strategy does not work and it incurs losses it can happen that at some point there will be interest charges. But this is a normal operating risk that you have when you put your money on a call money account.
In order not always to have to look on the platform if something has changed, or there are special offers, it may therefore make sense to subscribe to the newsletter of the platforms.
At Mintos you will find, if you are logged in, above a bar on the category "Auto-Invest" is listed. In this category, you can set up a new Auto Invest portfolio, which I'll just do now. There are many more choices than Bondora.
It is now also possible to choose how much you want to diversify, which term the loans should have, etc. Since this is always explained on the pages themselves, I will not go into more detail on the individual categories.
One thing to keep in mind, however, is not to over-string criteria, as otherwise the computer may not find enough credit to meet the criteria.
Once you have completed this, you have to click Save, then you have to activate the portfolio and the money will be automatically invested. If your own needs change, you can also change the portfolio, but as I said, you should always pay attention to the ROTI.
You can create many different portfolios at Mintos and Twino, depending on your needs.
Finally, I will still invest my money with Twino. For some, one drawback with Twino may be that the platform is in English only, while the other platforms also have a German page.
With Twino, the creation works similar to Mintos. You click on the Create button in the category Auto-Invest.Then you come back to a form in which you can specify various criteria again.
Almost finished ;-)
The form differs except for the terms not particularly from the form that had to be completed at Twino.
Then you can save the whole thing and the money is automatically invested.
The creation itself took less than twenty minutes in total. While I set up the other two portfolios, Bondora had already invested 2365 euros, and while I was hiring Twino, all of my capital was already invested in Mintos.
In the category "My Investments" you also get an overview of the loans in which the auto-investor has invested.
Now a few brief comments on P2P investments in general.
Many investors are dissuaded from P2P investments also because you have to specify the interest income in the tax return. This does not work automatically like online brokers, but it's a lot easier than you think.
Lars has written in his last article exactly on the subject of taxes on P2P loans. He shows you exactly how to get it done quickly and without much time overhead.
The fact that I no longer invest in Aux-Money is due to a few reasons above, but above all because Aux-Money does not allow me to invest on the platform with my Spanish business account.
However, I was not dissatisfied with Aux-Money and especially for beginners, the platform is well suited to gain experience as it also gives them a bit more exposure to the borrowers, which increases their confidence in the P2P business.
I've talked about diversification before, but it makes sense not only between loans but also between different providers, especially if you have larger sums of money.
Some investors only invest in one platform, making bad experiences and then condemning P2P loans in general. However, when you think that way you make two mistakes, on the one hand it does not mean that a school is bad just because a student stays seated. And secondly, the school system is not bad just because a school is bad.
As you have seen in this article, there are many differences between the platforms. Each one has its advantages and disadvantages which are more or less significant depending on the investor.
But in principle, P2P loans are a rationally understandable investment whose principle has existed for centuries, but only in ever-changing forms.
I hope you could take something for you from this article.
Ps: There will be updates of my P2P investments on a quarterly basis.
Here is the registration at the platforms:
Minto:
Twino:
Bondora:
Good Bodo.
To be honest, I bet he only suggested it to me because he also wants to invest on the weekend ;-)
Overview of P2P market
But since then, since this area has developed very strong and there are many new options and platforms for investors, I have decided to get more involved.
The market for P2P loans had a volume of approximately $ 1.2 billion in 2012, compared to $ 64 billion in 2015.So the market is growing so much and of course I want, as a rational capitalist does, to have my piece of cake. (Source: Statista )
Lars Wrobbel, the founder of the blog - Passive Income with P2P Personal Loans - helps me with this and I've already written a book on this topic.
For those who do not know what P2P loans are, here is a short explanation:
P2P, is the abbreviation for peer-to-peer . Peer means in German as much as peer , it is meant at P2P loans that two peers so two people together make a loan. Peter needs money that he does not have for a new car and is willing to pay more than he gets. Max is willing to lend money and, if all goes well, gets a return in the form of interest from Peter.
This does not work on a doner shop, but on P2P platforms, on which one can apply for loans, but also in the loans that others absorb, invest or finance these, so as to obtain a return in the form of interest , As rational investors, of course, we are on the side that receives the return and not on the debt, we become thereby, so to speak, a bank.
But I do not want to go into that any longer today, as I have already published a lot of information on this topic on my channel , but of course also in our book.
I will now invest in three of the largest platforms namely, Minto , Twino and Bondora . (Mintos and Twino affiliate links)
The three platforms are always praised in the P2P scene, where Lars is also very active, only to Bondora there is some controversial opinions, but he has so far made good experiences with all three. Incidentally, the blog article is also available as a video here:
How to invest 7,500 € in P2P Loans - P2P Mintos, Bondora, Twino Tutorial
Step 1: Registration & Deposit
Of course, before you can invest you first have to register. It works pretty easy. You do not need a post-ID procedure or anything else but can simply register as an investor with your ID number, the address, the name and a few more details. The individual platforms are linked up in the blog post and under this article.
If you have registered, you will get an investor account, to which you can transfer money from your checking account. I have done this before and have now deposited 2.500, - Euro on each of the three platforms.
When the step of registration and transfer is done, then you can start building your portfolio.
2nd step: Credit Selection - Manual or Automatic?
The first option you have is to invest directly in individual loans. One has for all three platforms an overview of the various loans in which one can invest.
Each credit has a rating, which is a credit rating. This shows how risky each loan is and how high the chance of getting back the money at the end of the term or how high the default risk is. The ratings are not produced by the platforms themselves but by independent financial service providers.
The rating system of Bondora:
Step 3: Which rating? Risk / Return Decision
This is similar to bonds issued by governments or large corporations, which are also rated by companies such as Standard and Poor's or Fitch depending on their credit rating. But just as with bonds, the ratings on P2P loans should be treated with caution.
One should not believe that credits that are rated with a top rating like A can not fail, in fact Lars has experienced at Aux-Money that more A loans have failed than loans with a lower rating. Of course, this has a lot to do with coincidence, but shows that these ratings are not a guarantee, otherwise there would be no return.
Of course, the lower-rated loans usually have more returns, but it makes no sense to invest only in very high-risk loans, as there is a maximum return on the loans that you can not beat anyway.
So this is not like the stock market, where you invest in Apple for example in 1980, and thus could achieve a return of about 3800% due to luck or an incredibly brilliant mind .
Wide diversification
Since you have no chance with P2P loans to achieve such horrendous returns, it does not matter how broadly diversified, one has by focusing, which can sometimes bring high returns on the stock market with P2P loans no benefits. Therefore, one can and should diversify very broadly in P2P loans.
In addition, in the case of P2P loans, default is more common than corporate insolvency, so there are no fluctuations in value, so you have a faster realized loss, so another reason to diversify very broadly.
Lars advises each loan with about one percent in the deposit to weight, so for me that is 25 euros, since I will invest on each platform 2,500.- €.
Now briefly to the main differences that exist between the different platforms.
Differences between the platforms
At Bondora, one learns a great deal about the person behind the loan, but less about the loan itself.
Mintos offers the most information about the loans. At Mintos, corporate loans give an overview of the company's financial position in the form of a somewhat simplified balance sheet, as well as providing various information about the loan itself. Other loans, such as house or car loans, provide information about the value of the loan Collateral deposited.
At Mintos, there is a measure that indicates how much of the loan is covered by the deposited security. The measure is called LTV, which means credit to value, the lower the LTV, the higher the return on the loan.(Loan-to-value)
The security behind the loans is also found in the details of the loan.
So if you want to deal intensively with the individual loans, Mintos offers the best alternative.
Twino is pretty much the opposite, there are no ratings or anything else. That's because with Twino the whole system is a bit different, while the other two platforms have yield differentials between loans, with Twino all loans have the same return.
This works by getting a buyback guarantee from Twino as an investor, so if the loan goes down you get your money plus interest that accrued during the time you had the loan in the deposit. As a result, the investor has the same risk for every investment and also receives a consistent return, which currently stands at 12%.
The risk with Twino is no longer the failure of the loan, but the fact that Twino has no more money to repurchase loans should they fail.
Especially for investors who do not want to deal so much with the individual loans, so Twino offers a good system.
Also with Mintos some loans have a buyback guarantee, they are marked with a sign.
Another difference between Twino, Mintos and Bondora is that there are a lot of short-term loans at Mintos and Twino, sometimes with terms of just one month, called pay-day loans.
What always annoyed me at Aux-Money was that it often happened that I invested in loans, but then they did not come about because not enough others have invested in the loan. The money came back to my account and I kept trying to find new loans and invest the money again.
That was annoying and time consuming ...
Mintos and Twino have found a solution to this problem. At Mintos, loans are pre-financed by so-called loan brokers. These are companies that pre-finance the entire loan, as an investor then you have the chance to participate in the already completed financing. The big advantage is that you are not dependent on other investors, it saves you a lot of time and does not always have to look for new loans, because you simply buy the desired share of the cake (credit).
Twino is itself the loan lender, but that does not really make any difference to us investors.
At Mintos, the loan lenders are also the companies that offer a repurchase guarantee on some loans.
This is actually one of the biggest differences between Mintos and Twino, Twino does the business on its own and offers not only the platform but also all the trappings. Mintos, on the other hand, only provides the platform, and the loan lenders make the loan transactions.
Incidentally, Mintos has seven such lending brokers, each specializing in a specific lending area. For all those interested here is a short list of loan-lenders:
ACEMA specializes in mortgages and is one of the leading non-bank companies in this field. The company is headquartered in the Czech Republic and has been active since 2002. Last year, the company has awarded more than 500 loans totaling more than 14 million euros. In December 2015, the total assets of the company amounted to more than EUR 36 million and the profit from the core business amounted to EUR 4.4 million.
Founded in 2007, Capitalia specializes in financing corporate loans for small and medium-sized businesses.The company has already lent more than 10 million euros to about 500 different companies.
Creamfinance, founded in 2010, is a leading consumer credit company with a strong presence in the fin-tec sector. Above all, the company offers consumer credit in economically developing countries. The company is active in the following six countries: Latvia, the Czech Republic, Poland, Georgia and Slovakia.Creamfinance has a total of 210 employees in its offices and lends about 60 million euros per year.
Debifo is the first factoring provider for small and medium enterprises in Lithuania. Factoring is a credit business in which Debifo or we as investors pay the bills of small companies. These are the companies that have large corporations as customers. The large corporations often have very long periods in which they can pay their bills, because the small companies with these payment delays but often difficult to handle can come into play. We pay off the big corporations' bills so to speak, the smaller companies stay liquid and when they receive the payments we get back our money plus interest.
Debifo has lent 1 million euros since May 2015 alone.
Founded in 2014, Hipocredit is one of the Mintos Group companies. The company also specializes in mortgage financing for both consumers and businesses. Hipocredit is very interesting in structure, because it only employs 5 people and relies heavily on outsourcing.
Mano Unija is Lithuania's largest lending company, established in 1996, making it the oldest of the seven loan lenders. To date, MANO has given UNIJA over 356 corporate loans worth 12 million euros. Although the company specializes in corporate loans, it also offers mortgages, auto and consumer loans
Mogo is one of the largest non-bank car loan providers and operates in Estonia, Latvia, Lithuania and Georgia. Since the company was founded in 2012, Mogo has lent over 60 million euros in loans and currently employs more than 200 people.
Incidentally, only Mogo and Creamfinance offer buyback guarantees, but the two offer almost all of these loans.
By the way, at Mintos, if a loan is 60 days late, it will be repurchased and bought back at Twino after 30 days.
Bondora does not yet have a system to pre-finance loans, so if you want to select the loans individually, you should look at the Funded / Left or Financed / Remaining indicator and see how long the financing lasts, which is right next to it the category "Financing Ends".
If a loan is already almost 100% funded and there is still a bit of time left, the funding will probably come to fruition. However, if the financing ends in a few hours, but the credit is only 60% funded, you should not choose this right, because otherwise you may have to look for a loan afterwards. This has happened to me before at Bondora more often, since I have been investing there for some time.
So far I have only talked about the possibility of investing in loans at the beginning of the term or the financing. But there is also another option for the Bondora and Mintos platforms, namely the secondary or secondary market.
The secondary market
As an investor, we are also 99% traded on the secondary market. If an AG has its IPO or a bond issue, then the stocks or bonds are still in the primary market. If you buy shares directly at the IPO, you buy them on the primary market. Once the buyers who bought the securities on the primary market sell their securities again, it is called a secondary market.
And when do investors sell their securities? Exactly when they have lost confidence in a positive development or think that stocks are worth less than their current price.
It is the same with P2P loans, when you buy financing right away, then you buy on the primary market. But if loans have been in arrears for a while or investors need their money ahead of time, they can sell their loans on the secondary market at a discounted or sometimes even more expensive price.
At Mintos, there is the price / discount ratio on the secondary market, below what percentage of the credit is cheaper or sometimes more expensive. It also stands if and how long the loan is already in default.
If a loan is listed with a decent discount, but in the end it does not fail you can improve your return on your investment, but you also have an increased risk.
On the secondary market, there are often interesting offers, with which you can generate a great return.Anyone who is interested can take a look on the blog - P2P Anlage.de - by Andreas, who specializes in secondary market trading and was thus able to achieve astronomical returns.
But you should be aware that this business requires a lot of time and you should never forget the ROTI (Return on Time invested). In addition, any return you receive in addition to the risk-free interest rate comes through a certain risk, even in this case.
For some of you, the secondary market is still a good option, but this article is more about passive investment in P2P loans.
But I will not invest in individual loans either directly on the primary market or on the secondary market.Instead, I will invest with the help of the Auto-Invest feature offered by all three providers.
Step 4: Building the Car Invest
It will automatically invest in a broadly diversified portfolio of P2P loans and I can set it to reinvest the money right away and much more, but we'll come back to that later.
For me, the goal in the case of P2P loans is to get a really passive income, which does not mean I have a lot of work with my three investments or deposits either now or during the term. There are also no fees or other.
For a while now, I have been dealing with the subject for a while and for myself, I have found that I can not make any claims about what the borrower does with my money. Whether he buys a car or finances his education is relatively unimportant to me, I just want a return for lending my money to him.
That's why I can just leave the work of credit selection to a computer. It may also be that with you is completely different, but that is the great thing about our time, everyone can choose what suits him.
Now we come to the practical part of this article, I am going to invest all my money on all three platforms with the help of the Auto-Invest function, Mintos and Twino or the portfolio manager function at Bondora.Although the names are different in the platforms, the principle is the same.
This is the easiest way for Bondora, with three different Portfolio Managers to choose from. A Conservative, Balanced and Progressive.
The expected return is minimal for the three, so it does not really make much of a difference. Interestingly, the balanced portfolio has a higher expected return than the progressive one.
Under this selection box you will find two graphs showing how the loans are divided into risk classes and countries. Of course, as mentioned above, the risk assessments should be treated with caution, because why should loans from Estonia be safer than loans from Spain?
I chose the balanced portfolio manager. Then you have to select this only, confirm the terms and conditions and all the money from the depot is invested in the portfolio.
So it works really easy with Bondora, which has both advantages and disadvantages. If, for example, I wanted to invest part of my money in the conservative and balanced portfolio, then I would have to create a new profile for this, as I can only ever invest in a single portfolio.
If I deposit new money, it will be invested immediately in the portfolio.
Lars says he did not have any worse experiences or returns than other platforms where you had more choices.
Bondora offers itself for the very passive investor, who does not want to deal with his P2P investments.
Next, I will invest in Mintos, as I said fall for the auto-invest function in any of the platforms costs, but of course can change again and again.
Mintos, for example, is a very young company, when it suddenly realizes that the strategy does not work and it incurs losses it can happen that at some point there will be interest charges. But this is a normal operating risk that you have when you put your money on a call money account.
In order not always to have to look on the platform if something has changed, or there are special offers, it may therefore make sense to subscribe to the newsletter of the platforms.
At Mintos you will find, if you are logged in, above a bar on the category "Auto-Invest" is listed. In this category, you can set up a new Auto Invest portfolio, which I'll just do now. There are many more choices than Bondora.
It is now also possible to choose how much you want to diversify, which term the loans should have, etc. Since this is always explained on the pages themselves, I will not go into more detail on the individual categories.
One thing to keep in mind, however, is not to over-string criteria, as otherwise the computer may not find enough credit to meet the criteria.
Once you have completed this, you have to click Save, then you have to activate the portfolio and the money will be automatically invested. If your own needs change, you can also change the portfolio, but as I said, you should always pay attention to the ROTI.
You can create many different portfolios at Mintos and Twino, depending on your needs.
Finally, I will still invest my money with Twino. For some, one drawback with Twino may be that the platform is in English only, while the other platforms also have a German page.
With Twino, the creation works similar to Mintos. You click on the Create button in the category Auto-Invest.Then you come back to a form in which you can specify various criteria again.
Almost finished ;-)
The form differs except for the terms not particularly from the form that had to be completed at Twino.
Then you can save the whole thing and the money is automatically invested.
The creation itself took less than twenty minutes in total. While I set up the other two portfolios, Bondora had already invested 2365 euros, and while I was hiring Twino, all of my capital was already invested in Mintos.
In the category "My Investments" you also get an overview of the loans in which the auto-investor has invested.
Now a few brief comments on P2P investments in general.
Many investors are dissuaded from P2P investments also because you have to specify the interest income in the tax return. This does not work automatically like online brokers, but it's a lot easier than you think.
Lars has written in his last article exactly on the subject of taxes on P2P loans. He shows you exactly how to get it done quickly and without much time overhead.
The fact that I no longer invest in Aux-Money is due to a few reasons above, but above all because Aux-Money does not allow me to invest on the platform with my Spanish business account.
However, I was not dissatisfied with Aux-Money and especially for beginners, the platform is well suited to gain experience as it also gives them a bit more exposure to the borrowers, which increases their confidence in the P2P business.
I've talked about diversification before, but it makes sense not only between loans but also between different providers, especially if you have larger sums of money.
Some investors only invest in one platform, making bad experiences and then condemning P2P loans in general. However, when you think that way you make two mistakes, on the one hand it does not mean that a school is bad just because a student stays seated. And secondly, the school system is not bad just because a school is bad.
As you have seen in this article, there are many differences between the platforms. Each one has its advantages and disadvantages which are more or less significant depending on the investor.
But in principle, P2P loans are a rationally understandable investment whose principle has existed for centuries, but only in ever-changing forms.
I hope you could take something for you from this article.
Ps: There will be updates of my P2P investments on a quarterly basis.
Here is the registration at the platforms:
Minto:
Twino:
Bondora:
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