Peer to Peer Lending Performance – My First Five Months of Investing

I’ve been investing in Peer to Peer lending through TruePillars for just over five months now and I thought it would be appropriate to give an update on how I’ve gone towards my initial goal.  To recap, my initial goal was to have no loan greater than five percent of my portfolio value and diversify the loans through a number of different industries.  Overall I’m happy with the progress I’ve made and the returns I’ve achieved.

Portfolio Loan Diversification

While it has taken its time I’ve slowly grown my loan Portfolio to have investments in 56 different loans and still actively working to increase this number by reinvesting the capital and interest received into new loans.  I’ve also now achieved my target diversification with the largest loan attributing to 4.7% of my total portfolio. 

Portfolio Loan Industry Diversification

To calculate the industry diversification I have achieved, I have utilised the industry details provided by TruePillars on the summary tab of each of the loans I own.  I’ve then used a 100% pie chart of the current outstanding values of all the loans associated with the different industries.  This can be found in graph below.  

It should be noted that Other Services covers a very board range of businesses… For example, the complete list of businesses associated with other services ranges from a pet boarding house to hair dressers to nail salons to windscreen replacement to automotive smash repairs to management consulting business to indoor trampoline park… The list goes on and as can be seen a very diverse range of industries… 

Portfolio Returns

As I mentioned in my blog on performance management (insert link), I’ve been tracking the performance of my portfolio in two ways.  The first is the returns as provided on the Truepillars website (return on invested funds), the second is calculated based on total funds sitting in my Truepillars account (money invested + money available to invest).  This way I could see the overall return of the capital I have tied up in the TruePillars account.  My performance is as per the graph below.

It should be noted however the overall performance calculation will be skewed lower as it included the additional capital I’ve added during the months of August, September, October and December of which purchased loans may not have been due to pay out until the following month.  

To put all of this in perspective I’ve received the equivalent of 3.2% of the current total portfolio as interest income.  In the new few months I will have received enough interest to cover the largest loan potion I own.  

In summary I’m happy with my TruePillars performance and am keen to see how it progresses and grows over time.  I’ll give an update at the one year mark to show the progress made and how it has changed in that time.  In my next blog I will talk about the learnings I’ve acquired along the way of applying my current TruePillars investment strategy.  

Kiva – a different kind of Peer to Peer Lender

Kiva is a non-profit organisation that facilitates Peer to Peer Lending to low-income entrepreneurs and students the world over with the intent to help people help themselves build a better life.  The great thing about Kiva is rather then one off donations to charity, as loans are paid back you can continue to help others by loaning your money again.

I’ve been a member of Kiva since 2011 when my brother gave me a gift voucher for Christmas.  Since then, I’ve been making ad hoc loans as they are repaid.  During that time I’ve periodically added additional funds.  Surprisingly, I didn’t make the connection to Peer to Peer lending until recently when my wife pointed it out…  So as it turns out, I’m an old hat at this peer to peer lending thing.

Kiva is a US based non-profit organisation with all transactions in US Dollars.  Loans are broken down into $25 USD portions.  Kiva typically work with a number of field partners around the world to facilitate loans where they are needed.  Kiva do not charge interest on loans funded, thus fund their operations through donations of investors like you and me.  Typically when you make a loan Kiva request a donation (currently defaults to 15%) to go towards the running costs of the non-profit organisation.  These donations are only tax deductable in the US.  While the system automatically sets the amount for donation you can change this from nothing to more than the recommended amount.  According to the website the recommended amount is to cover their costs (which are not passed on) to lend out your money.  Personally I do like to make the donation as I would hate to see the platform not be able to continue the great work it currently completes.

While Kiva do not charge interest, most borrowers will pay interest to the field partner for the loans to cover the necessary cost of operations.  Kiva selects their field partners based on partners having a social mission to serve the poor.   As part of this mission some partners also provide additional services such as training and financial literacy classes as part of the loan process.  Kiva monitor field partners to ensure fees are not excessive.

From a user experience the website is super easy to use.  To sign up you actually need to click Sign in and it has Sign up for Kiva link.  Once you click on this you can sign up with Facebook or you can enter your first and last name, an email and a password.  You can use this link here.

Once your account is created, funding is easily done by clicking on the Add Credit link on your Portfolio home screen.  You either enter the amount of US dollars you want to add to your account or set up a monthly deposit.  Either way payments are processed by Paypal making it an easy transaction to complete.  Likewise you can withdraw your available funds to your Paypal account by clicking the Withdraw credit from your portfolio home screen.

To lend money you simply browse the many loans and categories available and select who you want to lend to and away you go.  Like all lending there is risks.  Late payments and defaults are the standard risks we take and given the lending in foreign currency there is also a currency loss risk.  While these risks exist, I take them with a grain of salt as I consider this part of my portfolio is a portion of my charitable donations.

An added feature of Kiva is the ability to create teams to show the impact all team members have through their pooled individual lending.  With this feature I thought it would be great to set up our own team called Pete2Peer.  You can search for it in the teams section or click the link here and sign into your account to join our team.  Overall I like Kiva with its user friendly platform and unique twist to your peer to peer lending portfolio.

First user experiences of MoneySpot

While it has been a while since I’ve updated everyone where I’m at, my peer to peer lending journey has been continuing.  It is here I want to talk about my first user experiences in signing up for my second Peer to Peer Lending investment platform, MoneySpot.  MoneySpot offer small consumer loans of short duration (up to 3 months) and according to the November 2018 performance report the average loan size was $861, 67 days in duration and has a 12 month rolling bad debt rate of 3.822%.  Given the nature of the loans, Moneyspot works by drawing on a pool of money (supplied by people like you and me) and they handle all day to day operations.  The outcome is MoneySpot provide a distribution of the earnings to the investors based on the overall fund performance.

The application process was fairly straight forward, although I found the sequence of information requested a little weird and the user interface not as user friendly as other registered website platforms.  After verifying your email, you selected the type of account you were opening (individual, company, trust, etc) and then you are required to enter the details of the investment.  There were a few things I found odd about this step, primarily that it came before you’re asked to enter your name and address.  The second thing that stood out for me is that the online application form has the bank details for the funds transfer.  In this case you are required to provide details of the amount transferred, date funds transferred and reference comment (surname, trust, name, etc) so MoneySpot can identify your deposit into their trust account.  This indicates to me that you are depositing your funding into a general bank account and not a specific trust set up for you as part of the sign up process.  You also answer a few questions about where the money comes from that you’re about to invest and what your goals are.

The next step after you’ve put in you transfer details is to enter your personal details and a few additional questions around if you are politically exposed.  The rest is all straight forward after this with things like your tax file number, bank account details.

Although it was an online form I somehow managed to submit the form while missing one of the checkbox questions about what to do with the distributions (payout to my bank account or reinvest into the fund).  MoneySpot emailed me the application form of which I had to print, mark my preference, scan and send back.  About a week after I signed up and transferred the money I received a letter in the mail with the details of my fund allocation.

While you apply online to be a part of the fund it does not automatically set you up with an online portal for you to view your investments.  After I had applied I found I still had to create an account to view my investment.  The online investment portal is not run by MoneySpot but by One Registry Services and it appears anyone can create an account without an Investment to link to it…  All you need is to enter you name, email, phone number and set up a password.

Once you have registered your One Registry Services account you need to link your MoneySpot investment to the account.   To do this, all you need to do is to click add investment on the home page once logged in and enter the details sent to you by MoneySpot and click add.  The reporting available on the website appears minimal to giving you the basics of transactions and distributions. 

Overall while I did not find the signup process difficult, I would say that the process could be better refined to make the user experience less cumbersome.  But given now I just sit back and let the distributions roll in, let us hope the process was worth the effort.  Interested to hear other people’s thoughts and experiences in using MoneySpot.