12-01-2021, 01:41 AM
Why does seemingly nobody talk here about investing in P2P loans?
<!-- SC_OFF --><div class="md"><p>It seems like very interesting financial instrument. It's similar to bonds, but with higher interest rate, but not necessarily more risk. It seems to be bellow stocks in pure profitability, but is much less volatile. During minor economic downturns (like current C19 crisis, adequate performance was also achieved in 2008 crisis) it is the best performing asset class. Seems like a complete no brainer to have it in your overall investing portfolio, along with ETFs and bonds, but hardly anybody does that. I get that in US it has shit track record, but in Europe has quite good track record. It also seems to be doing well in South Asia (and doing exceptionally well compared to their stock market). There have been some scams like Envestio, but if you look at stock brokerage scams, those are more common than P2P lending scams. Also if you are new to P2P lending, but follow safe investing guidelines (diversifying your capital into many small loans, avoiding questionably high interest rates and even better, spreading your investments in several P2P lending platforms) you are very unlikely to lose money, meanwhile in stock market you are overwhelmingly more likely to lose money. And the last benefit of P2P investing is that it's very easy to get in and start doing it, as many people are already familiar with what interest rate, debt, collateral and etc are, meanwhile stock (including ETFs) and bond market is completely alien, unless you read a lot about them beforehand. </p> <p>​</p> <p>I invested some money in P2P lending starting 2020 winter (December) and so far after 127 completed loans I have an average interest rate somewhere in 11% range, with lowest being 8% and highest being 18.5%. I only invested in loans issued in EUR to avoid conversion rate fluctuations and only in loans that had left up to 12 month remaining term. I did purchase some secondary market loans too. Many loans had delayed payments, but most of them didn't get dangerously long delayed (over 60 days). I haven't had any defaults so far. In case of default, there is buyback obligation, but hopefully I won't have to find out if it's actually functional. Some people have said that it's only as strong as company backing it (which is true). Some people didn't see it working, meanwhile others have seen it working without problems. The chance of ir working is in 60%-80% rate on my rough estimate, but if you avoid lending operators with poor reputation or poor financial situation, you can increase your chance of buyback obligation working as intended. </p> <p>​</p> <p>Anyway, I think that unlike many alternative investments like crypto or angel investing, P2P lending looks sensible, risks are obvious and well communicated, there's proper reason why it would be profitable and it's not speculative, not volatile, but with varying interest rates depending on time, lending platform, quality of loans, how much lending operator takes as profit and some other things. Why they have nearly no recognition? Other alternative investments are far more well known, despite being way more controversial and probably not great investments at all (more like speculatives).</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/The_red_spirit"> /u/The_red_spirit </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/r5vixv/why_does_seemingly_nobody_talk_here_about/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/r5vixv/why_does_seemingly_nobody_talk_here_about/">[comments]</a></span>Kind Regards R
<!-- SC_OFF --><div class="md"><p>It seems like very interesting financial instrument. It's similar to bonds, but with higher interest rate, but not necessarily more risk. It seems to be bellow stocks in pure profitability, but is much less volatile. During minor economic downturns (like current C19 crisis, adequate performance was also achieved in 2008 crisis) it is the best performing asset class. Seems like a complete no brainer to have it in your overall investing portfolio, along with ETFs and bonds, but hardly anybody does that. I get that in US it has shit track record, but in Europe has quite good track record. It also seems to be doing well in South Asia (and doing exceptionally well compared to their stock market). There have been some scams like Envestio, but if you look at stock brokerage scams, those are more common than P2P lending scams. Also if you are new to P2P lending, but follow safe investing guidelines (diversifying your capital into many small loans, avoiding questionably high interest rates and even better, spreading your investments in several P2P lending platforms) you are very unlikely to lose money, meanwhile in stock market you are overwhelmingly more likely to lose money. And the last benefit of P2P investing is that it's very easy to get in and start doing it, as many people are already familiar with what interest rate, debt, collateral and etc are, meanwhile stock (including ETFs) and bond market is completely alien, unless you read a lot about them beforehand. </p> <p>​</p> <p>I invested some money in P2P lending starting 2020 winter (December) and so far after 127 completed loans I have an average interest rate somewhere in 11% range, with lowest being 8% and highest being 18.5%. I only invested in loans issued in EUR to avoid conversion rate fluctuations and only in loans that had left up to 12 month remaining term. I did purchase some secondary market loans too. Many loans had delayed payments, but most of them didn't get dangerously long delayed (over 60 days). I haven't had any defaults so far. In case of default, there is buyback obligation, but hopefully I won't have to find out if it's actually functional. Some people have said that it's only as strong as company backing it (which is true). Some people didn't see it working, meanwhile others have seen it working without problems. The chance of ir working is in 60%-80% rate on my rough estimate, but if you avoid lending operators with poor reputation or poor financial situation, you can increase your chance of buyback obligation working as intended. </p> <p>​</p> <p>Anyway, I think that unlike many alternative investments like crypto or angel investing, P2P lending looks sensible, risks are obvious and well communicated, there's proper reason why it would be profitable and it's not speculative, not volatile, but with varying interest rates depending on time, lending platform, quality of loans, how much lending operator takes as profit and some other things. Why they have nearly no recognition? Other alternative investments are far more well known, despite being way more controversial and probably not great investments at all (more like speculatives).</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/The_red_spirit"> /u/The_red_spirit </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/r5vixv/why_does_seemingly_nobody_talk_here_about/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/r5vixv/why_does_seemingly_nobody_talk_here_about/">[comments]</a></span>Kind Regards R