European P2P lending platform Bondora recently looked into whether there are any arguments in favor of “still investing” in loans offered via peer to peer platforms this year.
As stated in a blog post on the Bondora website, we should still consider investing in P2P loans during 2021. The P2P lender pointed out that last year was definitely a turbulent time for the P2P space, however, we need to remember to focus on the potential benefits of this asset class.
Denny Neidhardt writes in a blog published by Bondora that his first experience with P2P lending came in October 2017. And then just a year later, Neidhardt reveals he made his first visits to the P2P platforms in the Baltic States and started his own blog on P2P loans.
Neidhardt explains that his approach has “always been to help retail investors better assess the opportunities and risks of this asset class with in-depth analysis and authentic experience reports.” Neidhardt claims he’s quite critical of many different issues, but he has shared what he considers to be the “significant advantages” of P2P lending.
Neidhardt notes that the investment horizon question is “one of the most important questions to ask before investing.” He adds that it’s “not uncommon for a pre-mature and forced sale to be at the expense of the return” and that this loss may be “avoided [with] a realistic self-assessment of the investment horizon.”
He also notes that his ETF savings plans are the basic or fundamental building blocks of his retirement savings, and, that’s why he claims that he “won’t touch them for the next 30 years.” Thus, “the volatility of the markets plays a minor role so that, historically speaking, I can assume a standard market return,” Neidhardt added.
Meanwhile, with P2P loans, Neidhardt says that he “tends to look at a short-term and liquid character. One of my favorite investment products is Bondora Go & Grow, where I get the interest on my capital credited daily.”
He further notes that “especially for income-oriented investors, P2P loans offer the great advantage that the cash flow can be predicted relatively well.” He points out that “if you want to make regular payouts at certain intervals, you can usually implement this with this asset class.”
While sharing other strategies, Neidhardt notes:
“Investors should look more closely at the Return on Time Invested (ROTI) factor. The idea is that the more actively you manage an investment (resource time), the lower the actual return (return). In other words, time is money. Here, P2P investments offer the advantage that most companies no longer have; to select the loans manually, but that you can configure an “Auto Invest” option in advance, whereby the returns are automatically reinvested. Less time = more money.”
Neidhardt further explains that each asset class has “different entry barriers.” For example, if you take the purchase of a property, “on the one hand, the process of real estate acquisition can take several weeks or months.” And “on the other hand, this decision is often accompanied by a significant financial commitment,” Neidhardt added.
He also mentioned:
“P2P loans, on the other hand, are much easier to access. The registration is completed in a few minutes, and you can start testing your investment with just a few hundred euros and, if necessary, expand it further.”