Monday, 24 June 2019

Do you have time to invest in Peer to Peer Lending?

I’ve have been asked recently by several followers how much time I actually spend managing my peer to peer investments and at first I didn’t really have an answer.  Having thought and reflected on this, it’s a valid question as you must place a value on your time.  Thinking through what I do, I’ve broken down my thoughts on how much time I dedicate to managing my Peer to Peer Lending accounts.  As I currently invest in four different platforms, I’ve split out my thoughts on each.

TruePillars – If you are a regular follower, you will know TruePillars was my first peer to peer investment platform.  As such I spent a lot of time on the site in the beginning learning about the platform and understanding how the process worked and buying up loans on the secondary market as well as new loans when available.  Now I spend much less time on the site.  I would check the account once a week or so to take note and track any loans that are overdue (5 minutes a week).  In addition to this when new loans are listed (which I’m notified by TruePillars via text) I’ll log on and place a bid on the new loan (5 minutes to log on have a quick read through the loan on offer and place a bid).  However I’ve just activated the auto bid function to reduce my time commitments now I’m comfortable with how the platform works and keen to test this functionality out.  In addition to the above at the end of the month spend about half an hour reviewing and updating my performance tracking.

MoneySpot – This platform takes no time on my part to manage.  The platform is based on pooled fund where you are paid a return on the funds you have invested.  Apart from the time to fill in the application form, it’s checking once a month to have a read of the monthly report and taking note of the returns I’ve received which would take less than 10 minutes.  In my case I’ve opted for auto reinvestment to allow my investment to grow at a compounded rate.

RateSetter – This platform also takes little time on my part to manage.  When I add funds in I log in a few times to split up the funds I’ve commit to loans to help me feel comfortable I’ve diversified across multiple loans.  Each time it might take a few minutes.  On top of this I’ll log in once a week and reinvest any repaid funds sitting in the account (5 minutes).  I’ve not used the auto invest on this platform as I believe I can get a slightly higher rate by manually entering noting there is a time commitment on my part.  On the flip side if you are time poor and prepared to accept the auto bid prices this could be used as a time saver.  Like the other platforms at the end of the month I’ll also spend about 10 minutes or so reviewing and updating my performance tracking.

OurMoneyMarket – This platform is still relatively new for me and is currently where I’m spending more time while I work out how to get the best out of the platform and get my funds invested across multiple loans.  This would typically look like logging in every day or two to check for new loans to invest in (5 mins a go).  Again at the end of the month to track my monthly performance.

Adding up the different times spent, overall it would equate to under 45 minutes a week and an extra half an hour at the end of the month while document my performance of the different platforms.  While this is my experience investing over multiple platforms, I realise not everyone is the same and may not have similar time available.  To be honest, you can be as active or passive as you like, as each platform I invest in, offers a form of auto investing to cater for the time poor.  I’m comfortable with the time I spend as I like to be more actively involved and want to understand what I am investing in.  As I become more familiar with the platforms, I’m more comfortable with using the auto invest functions where appropriate.  Interested to hear about other people’s lending experiences and times commitments they make.

Monday, 10 June 2019

Learnings and Strategy Update

Investing is all about learning, applying and adjusting the strategy you adopt as you go along.  Having taken this principle on board, I’ve been adjusting and refining my strategies as I learn more about the Peer to Peer lending market and each of the platforms I invest on.

Having invested with a TruePillars now for about nine months, there is much that I’ve learnt, which if I were to start over, I would apply straight away.  The first and most important takeaway for me is that the diversification takes time.  Don’t be tempted to over commit to any one loan just to get money invested.  I think I may have been a little overly keen at the start but soon learned the value of patience to invest lower amounts into each loan.  This has allowed me to better diversify my TruePillars portfolio, which now has just shy of 100 loans.  My biggest exposure in a single loan currently sits at 3.7% and new loan investments are going in at just over 1% of the current portfolio valve.

While I am fortunate to not have had a default yet, my journey is still young and I’m sure I will experience this as time progresses.  Default is the final outcome of a bad loan and while I’ve not experienced this, I have experienced a number of late payments on different loans.  Some only have one late payment and then continue on paying on time while others have continued on to multiple late payments.  At this stage, I’m not sure on the best approach to manage these loans to ensure maximum returns.  On TruePillars there is the option to sell out of a loan if the last payments have been on time.  I’ve done this for a number of loans that experienced late payments, however looking back at these loans, you can see some have continued to pay on time while others are still at risk.  Stay tuned as I continue to refine this part of my strategy.

What I’ve noticed is there are a number similarities between TruePillars and OurMoneyMarket in the way you can invest in individual loans (albeit business versus consumer loans respectively).  As such I’ve taken the learnings to date from TruePillars and started applying them to this new platform.  I’ve started with a smaller investment per loan and aiming to going to grow this loan book slowly.  With the focus on consumer loans (that start as low as a few thousand dollars) I am expecting that there should be more loans to invest in.

What I’ve perceived to date is that there does not appear to be the same amount of investor activity on OurMoneyMarket as I’m currently experiencing on TruePillars or RateSetter.  This I think is hampering how quickly I can grow my diversified investment portfolio.  This is evidenced by having a number of loans not get funded before the 14 day on market period ends.  Compare this against the last TruePillars loan that was fully funded within a few hours of listing (for a loan 10x the size).  I’m sure as more people become aware of OurMoneyMarket and investment on the platform this will change.

As a general observation of the consumer loan market, it seems a lot more fickle than the business loan space.  Loans appear and disappear (without being fully funded) in what look like the borrower changing their mind and withdrawing their application (and as such any committed funds to that loan are returned).  It is still early days with OurMoneyMarket and although there are similarities, there are differences which I’m still working through to get the most out of the platform. 

If anyone does use OurMoneyMarket, or any other Peer to Peer Lending platform, I would like to hear your experiences.

Monday, 27 May 2019

Nine months into P2P lending: update and general observations

Having invested in peer to peer lending now for about nine months with active investments in four platforms, I thought I would give a general update on what I’ve seen and experienced.  For each of the platforms there are subtle things I’ve noticed about either the platform or lending market it operates in, that I think is worthy of sharing. 

Starting with TruePillars, which was my first investment platform, the biggest thing I’ve noticed is investor activity has picked up a lot over the last few months.  This is noticeable from how quickly new loan auctions have taken up, quite often fully subscribed to the lowest rate on offer.  While this is good for TruePillars, it does mean you need to ensure you get your bid in early for a piece of the loan.  This activity is also driving down the overall returns investors are seeing.  TruePillars has recently acknowledged this and are aiming to increase the number of loans issued. Therefore, at the present time, TruePillars is best utilised by those keen to be actively involved on a daily basis in their peer to peer portfolio.

MoneySpot has been a consistent earner which has taken no time on my part.  One thing I recently noticed in the April monthly investor report was the average bad debt increased for the first time from what I can see going from 3.82% up to 4.85%.  Even with the increase in bad debts, however, the annualised monthly returns were comparable with previous months. This is something I intend to keep an eye on to ensure it doesn’t begin to impact on my overall returns. 

While I’ve only been investing in RateSetter a short time since February this year, I’ve seen a fairly rapid drop on interest rates by about 1% in the 5 year lending market.  This drop has occurred between March and April with the the interest rates dropping about 1.3%. Interest rates have come back a little, however they are still trading about 1% below my first investment.  Again I believe this is linked to the amount of money people have sitting there ready to invest, where you can commonly see over one million on the market for investment just in the five year leading market.  The other markets also having significant investor funds sitting there ready for investment.

While I’m still very new to Our Money Market, I can say that they have excellent customer service.  I had a couple of questions on the account and as such called Our Money Market.   My phone call was answered immediately by a real person who was extremely helpful. I really appreciated that this is one of the few occasions I’ve attempted to access customer service without first being directed through an automated service.  A second time I had some clarification questions, and given it was Thursday night, I emailed them through not expecting a response until the next day.  To my surprise Our Money Market responded that night.  While it is still early days with investing on this platform, I’ve been very impressed with their customer service.

These are just a few of the things I’ve picked up on my journey to date which I thought were noteworthy. As always keen to hear about your experiences whether they be good or bad and what platforms people are using.

Monday, 6 May 2019

First User Experiences of Our Money Market

Having selected Our Money Market for our fourth peer to peer lending investment platform, I will go through my first user experiences from the sign up process to navigating the platform to make my first investments.

The sign up process was very straight forward with the online application form indicating it takes about five minutes and an additional two minutes to fill out the identity verification checks. Overall the process didn’t feel like it took that long with the entry of all the usual details of your name, email, date of birth, address, etc.  You then move onto the ID verification checks.  What stood out to me during this process was it was the first platform to require two forms of ID (eg your driver’s licence and Medicare card or passport).  Needless to say it was a seamless process and we were signed up in minutes and ready to transfer funds in.

Transferring money into your account was particularly easy due to Our Money Market having its own unique Bpay details.  Transfer some money in (minimum of $50) and you are ready to start lending.
This platform allows you to view all details of available loans once you have verified your account.  The details provided on each loan include a sections on;

  • Loan details (all the typical items such as loan amount, rate, term, repayment frequency, loan purpose and loan grade), 
  • Non identifying personal information (gender, age range, occupation, residential status and city)
  • Credit history (credit score, number of consumer enquiries, defaults, etc)
  • Financial information (Monthly expenses, employment details, income and existing credit obligations).

The provided information gives you the necessary details to make an informed decision on whether you wish to invest in the available loan or not.  The platform provides three ways to invest your money: Quick Invest, Invest and Auto Invest.

Quick Invest is a simple way to build a portfolio of the available loans based on a risk profile you choose.  While I think this is a great feature, when there are only one or two loans on offer (which is all I’ve seen at the moment) the feature seems a little redundant at this point in time.

Invest is where you can review each individual loan and select the loans you want to invest in.  This is my preferred method as I like to be actively involved in the selection of the loans I invest in.

Auto Invest is a function to set up the auto investment of funds.  It has the ability to set a maximum percentage exposure to any one loan and a maximum exposure to each loan grade.  This gives you the ability to set up your maximum preferred exposures to each loan grade.

The grades of loans cover A+, A, B, C and D with each loan grade divided further into five sub-levels.  Our Money Market ranks each loan with one of these categories.  A+ is considered the best ranked loan with the lowest risk of lender default and returns on these loans are lower. D rated loans, on the other hand, have a higher risk of default and corresponding higher interest rate to compensate for the risk.  Knowing that we are investing in individual loans and thus exposed to the risk of default, diversification is the best course of action to minimise potential losses.  This means investing smaller amounts in more loans to reduce the risk.  This risk can be reduced further by having a combination of different grade loans.

The process of investing in a loan seems fairly straight forward where you add the amount you want to invest and click through to invest.  It brings you to a page showing the projected returns and you confirm you are committing the funds to the loan.  One thing I found odd was that a number of loans I’d committed funds to, disappeared prior to the funding closing period and the money was returned with no details why.  I’m assuming this occurred because the borrower changed their mind and withdrew their application, but never the less it is something to keep an eye on when you are working to invest your funds.

The general account overview looks good allowing you so see a good account summary showing Net Annualised return, total interest received, invested funds, committed funds (assigned to a loan not yet issued) and funds available to invest.  Scrolling down you can get more details on your portfolio.

Reporting is key to understanding how your investment is preforming.  One thing I found while going through the available reports on this platform, was that statements appeared to only include the total loan repayments (not split out into principle and interest) which means I couldn’t find a report that shows how much interest I’ve earnt during the month.  Unless I’ve missed something, to me this is a shortcoming of on the available reporting but will keep you posted if I find out its user error on my part…

Overall I like the platform which seems relatively straight forward to use.  I like the visibility of the loans you are investing in which gives you better understanding of the potential risks you are getting involved with.  If other people have experience with investing on Our Money Market, interested to hear your feedback and experiences on the site.

Do you have time to invest in Peer to Peer Lending?

I’ve have been asked recently by several followers how much time I actually spend managing my peer to peer investments and at first I ...