John Peterson
So far, most different crowdlending and peer to peer lending platforms offer a secondary market where you can sell your loan shares if you would like to release your investment for use elsewhere. However, it requires that you give them a discount and you cannot sell loans that have not been repaid. That way, crowdlending and peer to peer lending investment is very much a buy and hold strategy. With P2P investments and platform reviews you can find your way out there.
There are certain methods where you can successfully invest in crowdlending and peer to peer lending. The idea is to maximize returns while minimizing risk. Here are some basic tips that can help with this:
Diversification
We’ve been into it before, but it’s worth mentioning again. Since you can invest down to 10 Euro in each loan through most crowdlending platforms, you should be ready to invest in as many loans as possible. This will minimize the risk of loss of investment.
Spread out on different platforms
This is actually reminiscent of the above as it is also about spreading its investment. However, once you have got off to a good start with crowdlending and peer to peer lending, and have built a solid portfolio through one platform, you should also spread out on multiple platforms to minimize the risks of the simple platform.
Limit your investment
Because there is the possibility of poor payers, especially in a financial downturn, you should not invest all your money in crowdlending. Rather, limit your investment to a smaller percentage of your portfolio. As an example, you can keep 25% of your portfolio invested in crowdlending and peer to peer lending investments, and use it as a way to increase your average annual return without drastically increasing the risk. According to the P2P review on Bondora you can expect the best return.
Always reinvest interest and repayments
As crowdlending and peer to peer lending investments gradually decline in return as the loan is repaid, you should always reinvest the repayments and interest you received. If you do not, your return will decrease as the loan is repaid to you. The whole idea of this is to stay fully invested, by constantly buying new loan shares.
If you see crowdlending and peer to peer investing as a way to increase getting a fixed return investment in your portfolio, then it should also help keep your return more stable.
However, like any other type of investment, one should not have a single investment to dominate its portfolio of investments.
Conclusion
Crowdlending and peer to peer lending give investors the chance to earn a competitive annual return by investing in loans through platforms like Mintos and PeerBerry as mentioned here in the article. Some crowdlending and peer to peer lending investors earn a double digit return, but there are of course risks that you should be aware of before investing.
