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.

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