P2P lending together with “risky assets” has all the potential to become an effective strategy for diversifying investment portfolios in terms of risk and return, according to an update from Robo.cash.
Analysts of the Robo.cash platform have reportedly “studied multiple portfolio combinations using the Sharpe ratio.” The maximum value of the ratio indicates “the optimal asset allocation.”
As a result, 4 options with the highest Sharpe coefficient “in each pair were chosen: P2P + Stocks, P2P + Bonds, P2P + Deposits and P2P + Crypto.”
Robo.cash analysts commented:
“One can see from the figures that P2P could replace bonds in terms of its fixed yield. But like any investment, P2P lending has certain risks, although it is proving to be effective. To cover the inflation rate, an investor still needs to take risks. As we can see from the results, the combination of P2P with riskier assets looks like a “golden mean” between bonds and deposits in the risk/return ratio.”
When comparing two assets with nearly the same expected return, investing in the asset with the higher Sharpe ratio will be less risky.
The analysts at Robo.cash added:
“P2P lending is a fixed-income instrument, therefore, by the nature of its use it can be compared to deposits or bonds. In the case of assets with non-fixed returns, an aggressive portfolio of P2P and cryptocurrencies, for example, will be more profitable than one of P2P and stocks.”
With maximum diversification of the portfolio in terms of permissible monthly risk and yield levels, investments in deposits “remain the best option.”
Despite the fact that P2P are proving their efficiency, it will “take time for conservative investors to switch from bonds or deposits to this instrument.”
In another update from Robo.cash, it was noted that by the end of 2022, the value of net assets per average resident of Europe reached €50,000, according to an update from Robocash.
According to a report from Robocash, the largest share is occupied “by conservative instruments with noticeably growing alternative sources of financing.”
Analysts of the Robocash platform examined “the structure of assets and liabilities of households with further determination of the Net Wealth indicator in 27 European countries.”
As noted in a blog post by Robo.cash, the results of the study showed “that the average European most likely owns assets worth approximately €50,200, compared to €23,500 at the beginning of the 21st century.”
Robocash analysts comment on the statistics:
“It is important to remember though that the price of goods and services is growing day to day because of inflation, so the real value of assets and their purchasing power are gradually falling. Hence, at current prices, the value of the assets has increased by 113%, but if we take into account the prices of the year 2000, we’d be looking at 28.3% growth in real value.”
In terms of portfolio structure, conservative elements “such as deposits and IPSG account for more than half of all instruments.” Over the past 22 years, their share has “increased by 4.2 pp and 4.7 pp accordingly.”
Risky instruments such as Unlisted and Listed shares, Investment fund shares and units are rapidly “declining along with Debt securities.”
The analysts added:
“This is probably strongly related to the European mentality and cautious attitude to monetary risks.”