P2P bloggers: lessons learned in 2020

2020 so far has been a crazy year for P2P investors - many platforms have changed rules, shut down or found some other ways to mess with investors. And it has not been easy for P2P bloggers either.

I checked the list of those blogs that I made fun of in January, and picture is bleak:

7 from 16 blogs that I reviewed have stopped writing:

  • financiallyindependentmom.com - shut down

  • investforfinancialfreedom.com - shut down

  • investmentjourney.eu - website not working, “Gateway Timeout”

  • liveandinvest.net - last post about Jan, 2020

  • mycrowdlending.eu - last post on March 10th, 2020

  • crowdexpert.eu - last post on May 11th, 2020

My biggest disappointment is about financiallyindependentmom.com shutting down:

But many are still continuing even after losing lot of money in P2P scams. In my view - that must take a good amount of courage and I hope that these guys will recover their losses with smarter investments in future and educate their audiences as well.

So I thought it would be interesting to ask several P2P bloggers following questions:

  1. Expected return? When you started investing in P2P, what return did you expect? What is the result right now?

  2. Red flags? If you invested in any of the shady platforms, did you notice any red flags in the beginning?

  3. Leassons learned? Have you changed your investment strategy, based on last year's events?

Batman Slapping Robin Meme |  P2P IS SAFE AS LONG AS YOU INVEST IN LOANS WITH BUYBACK GUARANTEES! WHAT ABOUT ENVESTIO, KUETZAL, MONETHERA, WISEFUND, GRUPEER, FASTINVEST? | image tagged in memes,batman slapping robin | made w/ Imgflip meme maker

P2P Millionaire:

Expected return?

I first started investing in P2P about 6 years ago in the UK where returns are lower than European platforms. For those UK platforms my expected return at the start was approx. 6% p.a. and has since dropped to around 4% p.a.

For EU platforms I expect the medium term returns to be c. 8-10%, but I expect over time they will fall to lower levels seen in more mature, regulated markets such as UK and USA.

Almost 2 years since I started tracking my returns publicly on our blog, my EU platforms return is just over 8%. This is down from around 12% thanks to writing down the value to zero for all of the shady/scam platforms (Grupeer, Envestio, Monethera etc).

Red flags?

One major red flag was when one of the platforms refused to give my auditor a basic ‘statement of account’ document – at that time I decided to wind down the account by withdrawing funds as they became available and I managed to get most of my capital out before things went totally south.

The other shady platforms highlighted a failure in my due diligence process for The €10K Club which was by my own admission ‘light’ due to the smaller amount of capital at risk.

Lessons learned?

Whilst I believe that most investors in Mintos understand that the BBG is only as good as the entity that issues it, I think one important lesson for a large majority of investors has been just how little a Group Guarantee matters when SHTF. When we look at the Finko debacle, it is difficult not to feel deceived by both Finko and Mintos with regards to the Group Guarantee.

I think all investors should try to have a logical but fluid strategy – there is always room for improvement and adaption. When the economy is doing well “a rising tide raises all the ships” but when the economic tide goes out it becomes much riskier to invest in something that is in the growth/startup phase and has not yet reached the critical mass required for profitability. This holds true for many kinds of investing, not just P2P.

So I think all investors should have a different strategy now that the Economy is in rough shape.


Roasted PeerDuck:

Expected return?

I target 9% return. For now I have Mintos + Estateguru + Iuvo with the result of 12.59% total, mostly due to the successful Mintos secondary market speculation during spring 2020. Still I don't expect to hold above one-digit return threshold in a mid-term.

Red flags?

I have never invested in Grupeer, Envestio, Kuetzal and others.

Lessons learned?

I have invested in KFP (Iuvo) and so far it is the most problematic part of my portfolio, though a tiny one.  Most of my expectations regarding P2P market materialized, in somewhat exaggerated scale due to COVID.


The Italian Leather Sofa:

Expected return?

P2P is a debt instrument, so your gains are capped, but the potential loss is unlimited: I try to invest in platforms that at least offer a return high enough to compensate those potential losses. First I did not even look if initial returns were less than 10%, now I am comfortable in selected situations for 7 / 8%. I never put together a comprehensive excel to calculate my returns to date, worst platform so far are Bondora and Fellow Finance which returned ~3%. DoFinance is still a question mark, I might lose 70% of my initial investment; everything else is close to 10%.

Red flags?

Sector is so young and unregulated that I approach every platform as shady. I have two rules: 1) risk management: never invest too much in a single platform, only money that you are comfortable losing 100% 2) are the offered returns plausible? Crowdestor offering a 20% return for a loan to produce a movie is a great example: there is no way in the world this makes sense. This is the other side of the coin of point 1., there is a sweet spot, you want high returns but not so high that is clearly a scam. Obviously there are other ways, like looking at the financials of each company but that is a too time consuming effort for me... and in a lot of cases useless because, again, sector is too young. I free ride a lot the research other bloggers do in the space, in time you recognise valuable resources and those 'P2P lifestylers' that go so far to visit each platform but then never ask the important questions.

Lessons learned?

I did my first investment 25 years ago, I am professional investor since 17: investment vehicles, asset classes might change but my investment principles are valid for everything. The lesson here is the same: stick to your rules, do not be greedy, use common sense, read everything you can (do your homework).


Mr. Cheese:

Expected return?

I started in January 2020 expecting returns at around 12%. Right now I made a Profit of about 2.4k EUR but also losses of ~7.4k (see my blog posts for exact numbers typing by phone). So net loss of around 5k EUR due to shady platforms. Plus more potential loss if Crowdestor turns out to be a scam too and lots if money locked in with Mintos & Grupeer & FastInvest (another 8k or so)

Red flags?

I managed to avoid Kueztal but lost money in Envestio and Monethera. They both had business loans and projects with great marketing material in common, something which is true for Crowdestor & Wisefund too.

Lessons learned?

Yep, I'm pulling out of P2P completely because as you mentioned in many blog posts it's often closer to a MLM/Ponzi scheme than a legit platform. I allocate the whole P2P money now to my Stock portfolio (Single ETF: VT plus some 10-15k play money to ride the TSLA rollercoaster).


Savings 4 Freedom:

Expected return?

I expected annual returns of 10% on my P2P investments, with compounding over time. The reality is quite different: on September 15th, 2020 I invested 38.108€ in my P2P portfolio having lost 18.718€... almost 50% of my total investments. This resulted entirely from a stupid decision in 2019 to concentrate my entire P2P portfolio in high-interest peer-to-business platforms that in reality were scams. If P2P was my entire investment portfolio it would be a nightmare.

Red flags?

I'm among the "scam bingo" winners: K, E, M, G, W... At the time I was blind. But looking back with the reality-check that now results from my mistakes all red flags were there to see. The lack of transparency and experience from the team with young and inexperienced CEOs and a hidden shareholder structure. A confusion of companies with no relevant capital behind them with multiple cross-relations among shareholders… office addresses registered in residential areas. Jesus! The simple analysis of the maturity and technical quality of the platforms would be for me now a red flag. The constant changes in bank accounts... everything was there for those willing to see. It was not my case.

Lessons learned?

Yes, in more than one way. To start I stopped publishing for months trying to understand how I could be more professional and responsible in my blog posts. I would like to keep testing, reviewing, and investing in P2P platforms, but I also wanted to apologize for the manner my blog contributed to promoting scams. I changed the blog entirely to address the identified problems... still much to do, but with the limited time I have, there is still a lot of work to do. Regarding investments, first I reduced my position. The reality is that I can only work with the decisions I do now, not the ones I did one year ago. Now I'm more focused on tracking loan originators and their financial reportings than P2P platforms and their buyback guarantees. Basically I'm changing my investment choices from platforms to the loan originators I want to work with.


X, X Everywhere Meme |  BUYBACK GUARANTEES; EVERYWHERE! | image tagged in memes,x x everywhere | made w/ Imgflip meme maker

Investissements Faciles:

Expected return?

I was expecting to get 10 to 12% in crowdfunding. Excluding grupeer scam, my result is around 11 %. I'm at -5% with grupeer (I invest only since 2020).

Red flags?

About Grupeer, no, I was just a beginner. But today, I have doubt about Crowdestor. Some flags: shareholders change, conflict of interest (with new share holders), more than 1 000 000 € of project only about crowdestor financing. But the question is, are those flags red or yellow? I had doubt on Fast Invest and left.

Lessons learned?

DO NOT TRUST BLOGGERS. When I chose Grupeer, it was because there were only good reviews on blogs. Now I'm a blogger too, I can access affiliate program and I understand why most bloggers promote always the same P2P platform, they have interest on it. Make your opinion by yourself and always look for a contradictory opinion. In a financial industry that is not fully regulated, bloggers should be more transparent. Don't make people invest their money, if you can't be transparent on a grey market (not fully regulated).

After last year events I changed a bit my allocation, I reduced the riskiest P2P lending platforms. I increased my real estate crowdfunding portfolio (with estateguru, immocratie, raizers).


Steps to Financial Freedom:

Expected return?

I expected returns of 10-20%, as that was the norm. It was a novel investment market, and seemed really great (of course now we see that sometimes as 'too good to be true').  Including losses (Envestio, Kuetzal) I am now at a +2.6% return for crowdlending, When I do not take those into account it is around 10-12%, but of course that is unfair. When I also include crowdfunding and the stockmarket, my returns over the last years average 8.3%. Still really something to be thankful for. 

Red flags?

Envestio and Kuetzal were really small teams in small offices, and they promised high 15-24% interest rates without faltering (up until the end). But I must admit that is in hindsight. 

Lessons learned?

I now consider interest rates of 15% and up way to risky. It is better to be happy with 7-12% interest with a much higher chance of keeping your portfolio. Shady platforms will try to lure as much investors in a short time as possible, and for that they will offer the highest interest rates in the market. Real estate platforms may offer lower interest rates, but the physical collateral seems a lot better compared to company guarantees that do not mean a lot when that company goes under.


RahaFoorum:

Expected return?

I started in 2010, so don't really remember. Probably the expectation was 15%+. At the end of August 2020, after deducting potential losses and without accounting for any bonuses received, my annualized return for the entire P2P portfolio was 14.3%.

If looking at only today, it's lower, but there's no real point at looking returns in a small timeframe. In future I also expect it to be lower overall.

Red flags?

If by shady platforms you mean the ones that stopped paying out withdrawals, then no, I didn't invest there. Most of them were big red flags. I do have some investments with shady loan originators from Mintos who decided to screw investors over though.

Lessons learned?

While I previously thought that crises will offer P2P investors opportunity to earn considerably higher returns, I'm more skeptical about this now. Especially for platforms with buyback like Mintos. You can take more risk by investing with higher rates, but the LOs will simply buy those loans back once things stabilize. You get the risk, but not the return. You can still earn at the expense of other investors who panic sell, but that's about it.


Invertir mis ahorros:

Expected return?

I expected to get a 10% annual return. as of July I was at a 7.7% annually after 3.5 years (already considering that real estate and P2B loans delayed for more than a year as a loss) due to some bad investments and that I started investing in lower return platforms.

Red flags?

As for the moment, I haven't invested in any scam platforms. I started investing in crowdlending platforms in Jan'17, so when this platforms appeared I already had a bit of experience and was quite skeptical about them and didn't consider to invest into them because of low-volumes and lack of experience. My bad investments were because the portfolio didn't match the risk definition and results were poor.

Lessons learned?

Yes, I focus more now on asset allocation than on operating in platforms. I've limited the weight of a single LO to a maximum of 1% of my net worth, also controlling overall country exposure. I've also established some criteria to decide if a LO or a platform is investable or not.


P2P Investing IT:

Expected return?

I started in February 2019. I was expecting a gross return of 8/9% per year. The result right now is slightly above the expectation, but considering that I fell into few shady platforms, I lost all my interested earned. I just recovered my losses during this summer.

Red flags?

Can’t say no. I search every time for projects, with google and in the registries. It happens that I spot no historical, no information, company with 2.500€ of capital, formed only few weeks earlier. But many Startup are born this way and if the project didn’t convince me, I didn’t invest in it. I could imagine some bullshit projects, but I never thought about a whole platform as a ponzi, as a scam.

Lessons learned?

Of course. The world is full of opportunities and we have to be more selective about our investments. We need to be more bulletproof with our Due Diligence, we must be cold, rational. If we find red flags, let’s look elsewhere! We can find better. My strategy changed a bit, but I really like Crowdfunding and Crowdlending concepts. Of course I speculated a lot with stocks, during Covid drawdown (also now, but less). I started to empty the less transparent platforms, opening few new Italians (where I can do better due diligence and have better taxation) and I rebalance my entire wallet. From the beginning my hard core was in stocks and ETF, but Crowdlending was almost 35% of my portfolio… now is between 20 and 25%.


Bernhard Hummel:

Expected return?

As some of the community might know, I started many years ago with the very first Baltic P2P platforms. I expected 12% return p.a. The result is slightly below, because of Grupeer (not sure about the outcome yet) and mainly because of my huge exit at Mintos, where I sold loans with about 10% discount in March. But lately this was a good decision, because I needed the money for opportunities and massive purchases on the stock markets. Which turned out to be not the worst decision.

Red flags?

Luckily I didn't invest in the "shady" platforms. Only Grupeer might be seen as open end story at the moment. As people know I was very critical on them, why I started with a small amount to do more research for my further decisions.

Lessons learned?

Reduced P2P in the general asset allocation and increased on the stock market in the month March and April.


P.S. Join “High-risk investments“ Telegram group for an informal discussion.