In this post we will discuss about the recent events in the P2P and crowdlending industry, how we can protect our investments and in what way the P2P Lending Monitor, a new tool I built, will help us do exactly that.
Yeah, I know, I really love my tools 🙂
Joke aside, I think this tool is awesome! It will help all of us stay updated and react quickly when needed to protect our P2P and crowdlending investments.
Table of contents
- Recent events
- How to stay prepared?
- Keep the P2P lending allocation to minimum
- Conduct minimum of due diligence
- Stay informed and updated
- So what’s the best way to stay informed and react quickly?
- Introducing the P2P Lending Monitor
- As a conclusion
- Share your opinion
New year is around the corner and I can’t help to notice that 2019 seems to have been a tumultuous year for P2P and crowdlending industry.
Mainly in the last couple of months.
We started early with Lendy from UK, which is a little bit ironic, knowing that in this country the platforms are actually regulated and in general they have more strict rules to follow.
Someone would think that it was just a matter of time for dark clouds to appear for the Baltics platforms as well.
And so it happened!
It began with Aforti on Mintos and Viventor. They stopped making payments to investors. It was and there still is quite a lot of confusion around what happened.
It carried on with Rapido Finance which defaulted.
Then Metrokredit who lost its license in Russia.
Then IuteCredit and Monego who also got their licenses revoked in Kosovo.
Wait, there is more.
Fast Invest got a compulsory strike-off notice. They basically forgot?! to fill their taxes. Really?
Robocash in Philippines seems to also lost their license just a couple of days ago.
And probably the most notable problem, which is really bad for the industry, is Kuetzal. After great investigation from ExploreP2P blog they revealed a possible fake project, with chances that the whole platform is a scam. Read this, this and this.
Now, I don’t think things are that bad.
I believe is mainly a coincidence that all of these events happend in this short time which makes everyone feel like is the apocalypse.
I am sure the industry will move forward, as it consolidates, and it will do that stronger than ever as everyone will have learned a lesson.
We just need to see things from a different perspective.
The investors will be more cautious and hopefully they won’t chase just the highest returns anymore, without taking into considerations other factors.
And the platforms would know how to better handle situations like these where communication and transparency should be top priority in moments of crisis.
Personally, I didn’t lost any money during these times (just long time ago with Bondora – different story). And I like to believe it was due to my precautious strategy.
Of course, that doesn’t mean this will never happen to me, but I am trying to do my best to mitigate risks as much as possible.
How to stay prepared?
Number #1 rule when you invest is to not lose money.
We are in the business to reach financial independence some day, and not to throw money away on the window.
Therefore, it has never been more important to define a strategy for your investments in general, and for P2P and crowdlending specifically.
And of course, to stick to it.
Let’s go through a few things we can include as part of our strategy to protect our P2P and crowdlending investments.
Keep the P2P lending allocation to minimum
In my opinion this first recommendation is also the most important.
Figuring out how much of our investment portfolio should be allocated to P2P lending is not easy, as we are all allured by the high returns.
But let’s not get tricked by this.
We need to stay with feet on the ground and think more about risks as well. Moreover, I am afraid many don’t even think about it at all, and the decision is more or less left to chance.
I strongly recommend to allocate less than 10% to P2P lending and crowdlending from your entire investment portfolio.
Read my post about this if you want to learn more.
The industry is still young and not regulated enough, if at all, and until things will become more stable, this is one the best method to protect yourself.
Think about it.
How would anyone know that a platform is a scam without doing extensive detective work, not just online, but also in real world? At best you will do just basic research, read a few blog posts, ask people around, and that’s really it.
Or, in what way you’ll be able to properly research all the loan originators or the business / real estate projects that are being posted daily? Best you can do is just check the financial reports, if they exists, read projects description, check the LTV and not much else.
Most of the time you won’t be able to make really informed decisions. It’s impossible with the lack of info we have so far.
Investments should be boring, not a roller coaster of emotions and certainly not a full time job.
To be honest, we should rely on platforms to do the work for us, do proper due diligence and ensure that our investments are as safe as they can be.
But when you see a platform like Kuetzal (which seemed fine at first from what people say) with such shady things going on, limiting your exposure is the right thing to do.
At least for the foreseeable future.
Conduct minimum of due diligence
Even if we limit our exposure to 10%, we still don’t want to lose any of those money, right?
So let’s see what else we can do.
I think it’s important to do a minimum due diligence on the platforms, loan originators and business or real estate projects we’re investing.
For platforms, a good starting point will be the tool I recently launched: the P2P Platforms Helper. Should help you get an overall idea and give you some hints on which platforms you should expand your research and dig more into.
When referring to loan originators, things are a little bit more complicated here.
For IuvoGroup they have great documentation on their originators.
For Peerberry make use of ExploreP2P lending ratings.
And so on. If a platform is not transparent enough about their loan originators, just skip it.
And that leads us to business and real estate projects. Biggest mistake we all tend to do is to rush to invest in projects just because we’re afraid we’ll be missing them out due to high demand (FOMO).
Is hard to resist, but I think I am now handling this much better and not rushing it anymore or feel bad if I missed some random project.
I strongly recommend to spend a few extra minutes to learn a bit more in what you’re getting into. This might save you some money in the future.
Will say one more thing about this and will wrap up this idea.
When we do our due diligence let’s forget for a second about the high returns. I know they are all related, the risk/reward ratio, but it’s extremely important to have an unbiased opinion as much as we can.
Stay informed and updated
To further more improve our chances to stay out of trouble I think we need to stay informed as much as possible and react quickly when needed.
There are probably two things we can do to achieve that, but they are not ideal.
Either read the monthly updates of P2P bloggers or/and follow the dedicated Facebook groups (or any other kind of forums).
They are both far from perfect, each one having its own downsides.
We will discuss them in depth, one at a time.
And afterwards I will show you how we can do things much better.
Let’s get to it.
Follow monthly P2P bloggers updates
This is a good way to stay informed but I would say is not great.
I am not a big fan of monthly updates, and that’s why I am not doing them, although, many people do seem to love them.
Maybe I am wrong, but let me explain how I see things.
There are two major problems.
Lack of real time component.
You need to wait up to a month to be able to learn something and react to it. In situations of critical events that would be too late for anyone to take any action to protect themself.
For example, if a loan originator on Mintos got its license revoked, like it happened with IuteCredit or Monego in Kosovo, you still got the chance to sell your loans on the secondary market, if you knew early enough.
In most situations there are little changes from one month to another which means you would end up repeating the information. And that means less value and usually lower quality content.
Are monthly updates really that bad?
Not at all.
You’re definitely going to get valuable information.
I guess they are just not my thing, not right now. If things change in the future, maybe.
However, I do recognise the need for passing on critical information when a major event happens, as it happens.
And I may just have an interesting solution to do exactly that. Keep reading to learn more.
Follow Facebook groups
However, following them can be time consuming, information is scattered and may be hard to understand it. You can definitely get confused easily.
In addition, some people don’t like to use Facebook anymore due to the many privacy concerns over the years and I can understand and relate to that.
If it wasn’t for Facebook Groups, I would have dropped using Facebook long time ago.
So what’s the best way to stay informed and react quickly?
I’ve been thinking and my conclusion is that we all need a better way to stay informed and react quickly when shit hits the fan with any of our lending investments.
Having the right information, at the right time, seems to be the key for an improved risk management in P2P and crowdlending space where sometimes it feels like the Wild West.
I think I have the solution that will make everyone’s life easier, including mine.
And if you’re following me regularly, you probably noticed my love for creating tools, helpers (as I call them), to help ease my work, and hopefully yours.
And in the end protect our investments.
Introducing the P2P Lending Monitor
Without further due, I would like to introduce to you the P2P Lending Monitor.
It works like a timeline with alerts and warnings of all the major events that happened in the P2P and crowdlending industry, with a focus on delivering them on time.
It will contain important information, things that any P2P lending investor should be aware of.
Why I built it?
I wanted to provide a simple way to stay informed and react quickly in case of troubles with any of the platforms, so that we can increase the chances to keep our investments safe.
More than that, I am hoping to also increase awareness among investors regarding state of the industry, which will lead to increased pressure on the platforms to do things the right way.
How it will work exactly?
It was designed in such a way it will be easy to use, with a focus on delivering to you the information that matters as soon as possible.
Here is below a list of the main features of the tool:
- Deliver critical information (alerts and warnings)
- Deliver information on time
- Present the information on a chronological timeline, so you can easily make sense of everything that’s going on
- Ability to filter out events just for a specific platform
Four types of events
On the tool you will be able to find different types of events, based on their nature, severity, etc. Check out below the list of currently supported events with a description for each one:
|Info||Will be used to let you know about something that is good to know, but not necessarily important. It won’t affect your investments if you’re not aware of it.|
|Warning||Will be used when an important event happened, that may or may not affect your investments now or in the future. You may need to take some actions to protect your investments.|
|Danger||Will be used when something critical happened. It is very likely that your investments will be affected. You need to take immediate actions.|
|Ok||Will be used when some major event that got reported previously was resolved and things are getting back to normal.|
How can I get notified real time when something happens?
Twitter is probably the best medium for this sort of information so I really recommend that.
I will use the #p2plendingmonitor hashtag when posting to make it easier to follow. Will also include #danger and #warning hashtags, depending on the severity of event.
Why not send an email instead?
I feel that sending an email might be too much. And I hate spam and I am sure you do as well, so for now I won’t make use of the newsletter. Will stick to Twitter and Facebook for starters.
Maybe, in the future, if there is demand, I can also make a dedicated newsletter for this.
What’s the source of information?
I rely on Facebook groups, other bloggers and, of course, you, my readers to help me keep the P2P Lending Monitor updated.
More than that, I am also receiving newsletters from many platforms and following their blogs.
In the end, I combine the information I get from all of the sources, aggregating it for easy consumption in the P2P Lending Monitor.
If you feel that I missed something important that should have been included in the P2P Lending Monitor, please message me or post a comment.
I will be grateful for that!
No affiliate links in the P2P Lending Monitor
You heard that well.
You won’t see any affiliate links in this tool.
Is not fair for my readers and also for my various sources of information.
I am doing this because I believe in the future of P2P lending as an asset class, and I really want to make a change for the better in the industry and not just earn a few euros short term.
As a conclusion
It all started with this chain of unfortunate events for the P2P and crowdlending industry.
This made me think that there should be some better ways to keep me and everyone else updated when something notable happens, so that I can take immediate actions and protect my investments.
And that’s how I ended up building the P2P Lending Monitor.
Share your opinion
And we are done!
Do you think this tool is going to help you?
How can I make it better?
What ever you think, feel free to leave a comment in the section below.
Until next time,
Disclaimer: This is a personal blog, containing our opinions and views, and nothing you read here can be used as investment advice or recommendation. You should also know that some of the links in this post may be affiliate links, meaning, at no cost to you, I may earn a commission. Read the full disclaimer here.