Dutch lawyer Coen Barneveld Binkhuysen has good insight into the peer-to-peer lending industry as he advises numerous clients and international platforms on a great variety of legal questions in this industry. Furthermore, he has been an active investor for many years now.
What is keeping you up at night?
Actually not too much. The first thing I learned as an investor is not to make any investments that may keep me awake at night (in a bad way). Therefore, I only invest the money I can miss without any problems.
What was your first investment, how did it go and what did you learn from it?
I am not sure whether you will consider it is as a real investment, but as a teenager I put most of my money on a subordinated savings account at a Dutch bank. Normally, saving accounts in the Netherlands are covered by a guarantee of the Dutch National Bank in case of a bankruptcy of the bank. However, I decided to lock my funds on this savings account for 5 years without such guarantee in exchange for a (substantially) higher interest rate. My investment paid out including a decent return, just a few days before the bank went bankrupt… I actually had to call and convince the help desk of this “online bank” to immediately transfer all of my funds to a different bank as the website was already unavailable due to an “attack by hackers” (or actually because of the bankruptcy rumors).
Did the fall-over of the bank had longer-term implications on your investment strategy?
It made me fully aware of the fact that banks are never too big to fail before it became common knowledge. Obviously this risk also applies to companies and marketplace lending platforms. Therefore, I always take bankruptcy risks very seriously and I aim to diversify my investments in terms of platforms, companies, countries and instruments in order to reduce these risks.
If you look back at your years as investor – is there anything you have learned you wish you would have known when you started?
People tend to talk a lot and they repeat each other. If someone tells a story, suddenly everyone is repeating that same story without checking any facts. I learned that I needed to do my own research, check facts and only listen to experienced investors who actually base their story on facts and analysis.
Furthermore, just like many others I underestimated the risk of peer-to-peer lending in the beginning. The high interest rates sound very appealing but the risks of losing your investments are very real. As a result, too many of my early investments vanished. This knowledge could have saved me quite a few euros.
How would you describe your investment strategy?
It depends, on Bondora I am a passive investor. I used to be very active in the beginning when the Portfolio Manager offered more options to select loans based on certain criteria. I actively acquired/sold loans on the Secondary Market based on my analysis. After Bondora simplified the Portfolio Manager I did not see the purpose of the manager anymore. At the moment I am consolidating my real ROI on Bondora before investing more.
For equity investments, I have a preference for companies which also have a professional investor on board such as a private equity firm. These firms have far more knowledge, time and information to base their investment decision on than we have as a P2P lenders. Furthermore, I review the business plans and check whether there is a real interest in the products/services that these companies are trying to sell.
Is there any ground rules you follow for diversifying?
I do not have any real ground rules, but I have been using the same maximum investment amount per loan for a couple of years on Bondora. Furthermore, I also try to invest similar amounts on different platforms, just to figure out what works and what does not. I diversify less in relation to equity investments, mainly because the investment amounts are substantially higher. The amount I invest really depends on the offers being made.
Do you prefer short or long term investments? Does that reflect on your personality?
Equity investments are long term investments in any case. I actually write off an equity investment the moment I invest in start-ups. I hope to see the investment back at some point of time but I am aware that it will take many years. In my experience as a legal adviser to many start-ups, only a few companies will survive. And most probably I will not find that unicorn everyone is looking for…
With respect to loans I tend to go for the short terms loans as I prefer to create a decent cash flow on a monthly basis with a relatively low risk profile.
The fact that Bondora provides new information about the loans on a daily basis creates quite an addictive situation.
My girlfriend seems to consider me an impatient person, which may reflect the fact that I really like these daily changes.
In your opinion, what is the best way to start investing?
Do not invest large amounts in the first year and take it from there. Start with small amounts and test your strategy for at least a year. Do your own research and discuss your strategy with many experienced investors who base their stories on facts and analysis.
Although it is a cliché, only invest the money you can lose without a tear drop in order to make sure you will not have any sleepless nights.
Would you call that a golden rule of investing?
If it sounds to too good to be true, it normally is.
How did you find Bondora?
As I intended to diversify my investment portfolio a few years ago, I was looking for a pan-European platform that provided many investment opportunities to invest in loans with different maturity dates. At that time Bondora was the best (and perhaps even the only) feasible option available to me.
How has your experience been so far?
I like the fact that Bondora is actually trying to be transparent about all (or at least most) of the information it has on the loans. It creates an opportunity for investors to analyze the performance of all loans. In my opinion, transparency is a huge advantage for an investor and absolutely a big plus for a marketplace lending platform. As far as I am aware Bondora is the only platform that provides such detailed information. However, I was disappointed when Bondora decided to decrease the selection criteria to select certain loans using the Portfolio Manager since this was one of the main reasons I started investing at Bondora.