Choosing a P2P platform?
2 weeks ago, we discussed on factors which matter to you in deciding to exit a P2P platform, as well as your invesment horizon / exit strategy. Some really good responses within the topic we started, as well as @chictrader's topic!
It is of supreme importance that we make a balanced decision on whether to exit a platform, upon considering a variety of factors.
Keeping these red lights at the back of our mind, we can also take a step back to check if we have picked the platforms which are aligned with our own needs and what's important to us.
One of our community pioneers @antoniomc27 mentioned previously that he personally takes into account factors like: the platform's "management team's competency", "financial stability", "risk/return profile", investment product's fit with his own portfolio, etc. His post here!
How about yourself?
There're many factors which investors are concerned about in varying degrees. Would we all share the same set of priorities? 🤔
Here's a list of all possible factors -- (counting on you guys to add on to the list! ☝ )
- Yield (in the form of absolute returns, annualised returns, or internal rate of return etc.)
- Due diligence conducted by platform
- Competency of management team
- Opportunities to interact with team
- Transparency of platform
- Potential cash drag (& whether this can be mitigated)
- Reviews & experiences of other investors
- Opportunities for & extent of diversification achievable (e.g. minimum investment amount, spread of loans across industries, geographical spread)
- Crisis / default management
- Skin in the game
- Liquidity (e.g. easy withdrawals or deposits from platform account, presence of secondary market)
- Alignment with personal portfolio & your existing diversification strategy
- Buyback guarantee (applies more towards some global P2P platforms)
- Platform's revenue and profit
- Platform's cash on hand
Which would be the 3 most important factors, to you?
Disclaimer: Nothing in this article should be construed as, constitute, or form a recommendation, financial advice, or an offer from CrowdFund Talks. We are not to be held accountable for any losses on any investments made by readers. The content and materials made available are for informational purposes only.
tckw93 last edited by tckw93
I'd go with the following:
I think this much is obvious. Everyone is trying to get the best investment yield for their investment right?
2. Due Diligence
No one wants to see their investment defaults and due diligence plays a vital role in evaluating the ability of lenders to pay back. But then it's part of the risk they're taking when investing in P2P.
Not just ease of withdrawal but also the speed of it. If the system is well designed, funds shown on our profile should be available for immediate withdrawal. And when I say immediate, I mean like Instant Transfer withdrawal. I'm not sure how it works here now but back then when I tried P2P in UK in their early stages, withdrawal is a pain in the ass because they have to go through some authorization process before releasing it. Shouldn't that be done before you show it to me as my available balance?
Cassandra Tho last edited by
Cass here and I’m the community manager from CoAssets.
This is a great topic by the moderator and these are indeed factors investors should consider when deciding on a platform. Great job Crowdfund Talks!! 👍🏻👍🏻👍🏻
Adding to the list, here are some other factors that investors may want to think about when assessing a platform.
The platform’s financial results - how much revenue/profit are the platforms making. A lot has been mentioned about the project’s financial standing, however investors may also want to consider a platform’s financial results (i.e. profit and revenue). While looking at how much loans a platform has made is a useful measure, the more important question is - how much revenue/profit did the platform make as a result of doing these deals. In reality, platforms are also (for-profit) companies, so if they are not able to generate enough income, their long term viability may ultimately be impacted.
How much cash does the platform have? Another measure that investors may want to look at is how much cash does the platform hold. Admittedly, there are many well known companies that are unprofitable, yet able to keep growing, due to strong investor backing. A good example of such a company is Amazon - they made several years of losses even after their IPO, yet they continued growing due to strong investors backing. Thus one other factor investors would want to look at is the platform’s cash position. If they have plenty of cash, spending it wisely and not in the rush to raise more funds - you know that the platform is potentially safer. On the other hand, if the platform is down to their last few months of cash reserve and the need to secure the next round of funding becomes more pressing - then the risks of the platform winding up become higher.
Of course these are not exhaustive and I’m sure there will be other factors that investors need to look into. 😅😅😅
Incidentally, if you are wondering how did CoAssets do in terms of financial results and cash on hand, I have attached a simple infographic for your reference 😊😊😊
Based on the chart, CoAssets revenue for our first 6months was about S$5.9m and net profit was about S$810k. The number will potentially be more for the full year. In terms of total assets, CoAssets has about S$38m and cash on hand (as reported in our half year results) is more than S$6m.
So there you have it! Although this may not be much as compared to the other bigger banks/finance companies (or even compared to some of the well funded platforms), hopefully this will give you a sense of what to look out for in a P2P or online funding platform. Good luck!!! 👍🏻👍🏻👍🏻
Compiling the following table to gather & continue populating everyone's views on factors important to them:
Factors in choosing a P2P platform? Yay-sayers (it's important) Nay-sayers (it's not important) Other sub-factors to think about, relevant quotes from others in the community Yield / Returns @tckw93 What are my absolute returns / annualised portfolio returns / returns after deducting fees and taxes/ internal rate of return / returns after fees and tax have been deducted? @tckw93: "I think this much is obvious. Everyone is trying to get the best investment yield for their investment right?" Opportunities & extent of diversification @webnomad What's the minimum investment required for each loan? Can I successfully spread risk across businesses and industries, vis-a-vis my total portfolio? Liquidity @tckw93 Length of loan tenors, @tckw93: "Not just ease of withdrawal but also the speed of it." Minimum funding amount / barrier to entry / ease in trialing a platform @antoniomc27, @webnomad What's the minimum investment required to start an account? Am I able to test it out with the platform in small amounts before deciding my next steps? Due diligence conducted by platform @antoniomc27, @tckw93 How does the platform assess borrowers? Is the platform registered with and regulated by government bodies (MAS/SC/OJK), along with its process and policies? @tckw93: "No one wants to see their investment defaults and due diligence plays a vital role in evaluating the ability of lenders to pay back. But then it's part of the risk they're taking when investing in P2P." Competency of management team @antoniomc27 @antoniomc27: "(e.g: proven track record, proactive on recovering loans)" Transparency / opportunities to interact with team @antoniomc27 @antoniomc27: "Is the customer support reachable? Do they have a blog/forum, do they publish regular updates of their notes/projects?" Potential cash drag @antoniomc27 Buyback guarantee @antoniomc27 Trust in platform @antoniomc27 @antoniomc27: "E.g: if I have $1000 in a platform with weak track record and which is not financially stable, I am taking an unnecessary risk. If those same $1000 are in a good one, I will not necessarily panic." Platform's revenue & profit @Cassandra-Tho @Cassandra-Tho: "In reality, platforms are also (for-profit) companies, so if they are not able to generate enough income, their long term viability may ultimately be impacted." Platform's cash on hand @Cassandra-Tho What's the platform's cash position like and how are they spending? Are they well-funded / set for more funding? Reviews & experiences of other investors Crisis / default management Skin in the game Liquidity Alignment with personal portfolio & your existing diversification strategies Default rate
Let's crowdsource ideas and expand our understanding together - veterans & beginners alike! 💪
A call out to all P2P investors to suggest more factors we should add to this table, or let us know your top 3 factors so we can add your vote to the table. Pipe your views in too!
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