Are there any arguments in favor of still investing in P2P loans in 2021? I say: Yes!
2020 was a turbulent year for the P2P sector, but we should remember to also focus on the benefits of this asset class. Here are 4 reasons why you should continue investing in P2P loans in 2021.
Hi, I’m Denny Neidhardt from the finance blog re:think P2P loans. I had my first experience with P2P lending in October 2017. A year later, I made my first visits to the P2P platforms in the Baltic States and established my blog on P2P loans, which now includes a YouTube channel with more than 5,000 subscribers.
My approach has always been to help retail investors better assess the opportunities and risks of this asset class with in-depth analysis and authentic experience reports. Although I am rather critical of many issues, in this article, I would like to deliberately focus on what I consider to be the significant advantages of P2P lending.
1. The liquidity
The investment horizon question is one of the most important questions to ask before investing. Why? It is not uncommon for a pre-mature and forced sale to be at the expense of the return. This loss can be avoided by a realistic self-assessment of the investment horizon.
Personally, I rate this question, depending on the asset class, quite differently. For example, my ETF savings plans are the basic building blocks of my retirement savings, and, therefore, I won’t touch them for the next 30 years. Thus, the volatility of the markets plays a minor role so that, historically speaking, I can assume a standard market return.
On the other hand, in P2P loans, I tend to look at a short-term and liquid character. One of my favorite investment products is Bondora Go & Grow, where I get the interest on my capital credited daily.
2. Predictability of cash flow
Especially for income-oriented investors, P2P loans offer the great advantage that the cash flow can be predicted relatively well. If you want to make regular payouts at certain intervals, you can usually implement this with this asset class.
3. Automated investing
Investors should look more closely at the Return on Time Invested (ROTI) factor. The idea is that the more actively you manage an investment (resource time), the lower the actual return (return). In other words, time is money.
Here, P2P investments offer the advantage that most companies no longer have; to select the loans manually, but that you can configure an “Auto Invest” option in advance, whereby the returns are automatically reinvested. Less time = more money.
4. Low entry barrier
Each asset class has different entry barriers. Let’s take the purchase of a property as an example. On the one hand, the process of real estate acquisition can take several weeks or months. On the other hand, this decision is often accompanied by a significant financial commitment.
P2P loans, on the other hand, are much easier to access. The registration is completed in a few minutes, and you can start testing your investment with just a few hundred euros and, if necessary, expand it further.
Take advantage of P2P lending!
If you would like to know more about P2P loans, please visit my blog. There you will find, among other things, a P2P platform comparison of different providers, as well as my P2P credit platform rating 2021. If you prefer to interact with other retail investors, check out the re:think P2P credit community on Facebook and connect with other investors.
I look forward to your visit!
Disclaimer: The views and opinions expressed in this article are those of the guest blogger and do not necessarily reflect the official policy or position of Bondora.