How to Succeed in P2P Investing
Short thoughts about passive investment, in our fast and chaotic world we live. We seek %10000 of profits we should not forget passive and safe investment!
While, when it comes to any form of investing, there is no fail-safe formula, there are steps that you can take to first, protect your assets, and second, to increase your chances of a worthwhile return. Some of these steps can be applied in broad brushstrokes to all forms of investments, others are more specific to P2P.
If there is one single golden rule of investment success, it has to be diversification. While everyone knows the adage of not putting all of one’s eggs into a single basket, it can be easy to forget the sense of this when you think that you’ve found a killer investment. The thing is, even if something looks like a sure bet, you can’t be absolutely, 100% certain that it’s going to succeed, so even though, for example, we’re completely positive that the FastInvest ICO is going to be a huge success, we still wouldn’t tell you to put every last penny into it, simply because it doesn’t make good business sense to put all of your assets in one place.
Diversification can spread your risk so thinly that if done properly, any potential losses will be completely absorbed by your gains, so you won’t even notice that they’ve happened unless you look into the paperwork in detail. So, if you’re thinking of starting investing with £100, split it between five different opportunities — whether five P2P loans, or a mixture of digital and fiat options — that way, if one fails, the other four will cushion the blow.
Depending on the type of investment that you opt for, there are also a variety of tools available to help maximise your return. Many people prefer to retain complete control of their assets, which is fine, but if you’re leading a busy life you can often miss out. Auto investment tools — such as the one developed by FastInvest for P2P — use algorithms to recognise new potential investments based upon user’s pre-selected criteria. This means that your money is never idle — in P2P, for example, when your monthly return gets paid, it can be automatically reinvested in a new opportunity, and thus your income continues to grow, while you continue to go about your normal business. It’s one of the quickest ways to generate a passive income.
Once you’ve settled on your investments your focus needs to shift to your net return; this is how you will be able to ascertain whether your strategy is working. Because P2P is a slightly slow-burner (although most contracts are only 1–12 months) it’s best to leave a short time before studying your returns; twelve to eighteen months is ideal, as this will give your original investment time to mature and complete, so you’re able to take an overview of the entire cycle.
Carry out the following equation:
Take the current value of your assets and deduct the original value (or the value at the start of the time you’re reviewing), then minus any fees incurred.
Divide this figure by the original value, then multiply that by 100%.
That will give you your basic rate of return. For your true net return, however, you will also need to deduct the rate of inflation for the investment period — so at the moment in the UK that is 2.8%.
This equation will show you exactly what your investment has given you in real terms, allowing you to make an informed decision about whether this form of investment is working for you.
There are lots of external factors that will influence the above, many of them will be entirely out of your control — such as the economy and the borrowers you’re working with — but one of the biggest influencers is one that you can manipulate; the platform you are investing through.
Different P2P lending investment platforms charge different fees and offer different protections and different rates of interest, so it’s important to look carefully before you place your money, as surface numbers are rarely what they seem — even a promised 20% ROI can be quickly eaten if the platform takes a 19% cut. Then you need to look at other factors beyond return rate. Unlike the majority of other platforms, however, FastInvest also provide buyback and default guarantees, meaning that should you need to withdraw your investment suddenly, FastInvest will purchase the remainder of your term from you and return your assets within 24 hours, and if a borrower defaults on their payment, FastInvest will cover the deficit, thus removing the greatest potential risks from this form of investment.
P2P loan investment is not inherently risk-free. Neither does it guarantee a high rate of return. As an investor, you have to play your part. It’s down to you to research what’s available; to look at the fees and securities that are on offer; to spread your investments to avoid having them be swallowed whole by an unsuccessful venture; and to utilise the tools available to you. IF, however, you do all of these things, you stand a really good chance of making yourself a passive income that’s really worth the having. Give it time, reinvest your interest, make every penny work for you and before too long your original £100 will have numerous new friends to play with.