A recent experience I had on Mintos with two creditors (Lutecredit and Monego) made me decide to write this blog. I would like to start with the events that lead to this blog, so read on. If you just enjoy reading about my mistakes and failures then scroll down a little bit more.
Mintos released a statement last week that Lutecredit and Monego have their licenses revoked in Kosovo. For Monego, having all their business in Kosovo this basically means they will default if they do not manage to fight this decision fast. Lutecredit is active in other countries so it has some bandwidth to honor the loans and the buyback guarantee. It is also much less exposed then Monego.
A few days later news came indeed..
Great!! Lutecredit would honor his commitments and continue to pay back the Kosovo loans. Lutecredit is a bigger creditor with a group guarantee spread over multiple countries. I only had 40 EUR outstanding principal in Lutecredit Kosovo, but still I was very happy to read some news.
The case for Monego is more complex. Monego is a relatively small creditor and based only in Kosovo. If they did not get their license back then the chance they would recover would be very slim.
For Monego we did not receive any news for a few days. Having 220 EUR outstanding principal in Monego or 4% of my Mintos Portfolio you could say I was a little worried. At my current amount this is my monthly investment in peer to peer. I was already mentally preparing to write a loss of 220 EUR in my next portfolio blog leaving Mintos with a negative income
What I did appreciate is that Mintos was very open with what was happening. I had the impression they were sharing news when they got it.
Almost one week after the original news came we saw white smoke!
It turned out to be good news! Also the Monego Kosovo loans would be repaid by Finitera that was taking over Monego! I really felt like I dodged a bullet on this one. To be honest if they did default I would not have stopped investing. 240 EUR would have been less then the income I get every month with peer to peer. But it would have been an unfortunate way to end the year!
I did realize that during the months I had been investing in peer to peer, this and other experiences have thought me a few lessons that I wanted to share with you. I really recommend to read them to avoid the mistakes I made and to make sure you have a safe journey in the peer to peer investing world.
Mistake #1: being to greedy
When I started off I basically always went for the higher interests. I told myself it was okay to go for the higher risk, and you always think defaulting will not happen to you. Do not get me wrong, I did start off well prepared. I read a multitude of blogs of bloggers writing about peer to peer. I loved the tables some bloggers showed of sites offering high interest rates. The sites I signed up with first were then also the ones giving the highest interest rates.
Within those sites I also went for the higher rates. I didn’t care of how many loans I had of one creditor as long as they gave the highest interest rate I was fine with that.
Some sites just give very high interest rates, especially those relatively new, but its important to also look at if those rates can be somewhat guaranteed. If there is a creditor behind it that is offering a guarantee and is able to meet this guarantee. Is this creditor or site making profit for example? There is a lot of peer to peer sites, although I am sure the group of profitable peer to peer sites is much smaller. I plan to dig deeper into the sites that I use, as in the creditors on this site, to find out how guaranteed the buy back they offer really is.
Mistake #2 Not thinking about diversification
Lets take one of the nine sites I invest in as an example. When you look at my portfolio on Mintos now you will see a much larger diversification. I did had to lower my interest rate to 10% in the auto-invest settings, but the more spread out risk make it worth it. I do still have a very high exposure to a few creditors, such as Capital Service. Actually 1/3 of the loans of Capital Service I own are currently late. In a way I do not mind, they will be bought back and I will be able to diversify more.
I have not selected to buy more of Capital Service for the time being. I am thinking to sell off some of the loans here also to increase the diversification.
Mistake #3 not looking at how creditors were doing
The second mistake I made was not paying any attention to what creditors were doing well. Mintos has even a few creditors with status D and C, these usually make a loss and while they give a slightly higher interest they are also a higher risk. That shows in the most recent defaults that Mintos had such as Rapido it shows that even a B- rating is no guarantee for making profit. In just one week Rapido went from B- to D rating. For Euroclear, the first creditor that went bankrupt, borrowers are still waiting to find out if they will receive any money.
That’s why now I am very picky when it comes to creditors. On Grupeer I selected only creditors with B and A rating. On Mintos right now only creditors with B+ and A rating are selected now in my autoinvest strategy. Altough these are the ratings from the site. I noticed that in the case of Rapido the rating was more reactive then what it actually should have been. So it helps to check out other sources as well. Something I plan to dig into in a next blog.
Mistake #4 Not starting sooner!
After all the negative commotion I made here you might think I have had it and want to move out of peer to peer investing. Nothing is less true. My biggest regret is not starting to invest sooner. The only certainty I had with the money in my account was that it was dropping in value. Even with the defaults that threatened this weak for Monero and Lutecredit I never doubted to stop investing. I count my profits and I am confident it will increase further rather then decrease.
I invest 1875 EUR every month into peer to peer sites right now (with automatic transfers) and do not plan to stop any time soon. I look forward to the day when I have 100k invested in peer to peer and a nice passive income of 1000 EUR / month, a future that is not so far off, I hope to be there in just 3-4 years.
Mistake #5 Not using referral links when signing up on a peer to peer lending site
While a lot of blogs (including most links on my portfolio and review blogs) give a bonus when you get referred I was being a smartass and just signed up by googling the site and going there. Now I realized that its much better to use referral links you find on websites.
For example this month I am starting investments in a new peer to peer site: Iuvo Group (contact me for a referral link) and if I invest 1000 EUR I will get 30 EUR bonus. If I invest another 1500 EUR the first 60 days after sign up I will get another 60 EUR. This is a welcome bonus and when you calculate it, this means 3,6% extra return, that’s quite a nice extra bonus!
Referral bonuses from sites I use and recommend
Bellow are a few sites I can recommend and as you can see in my portfolio updates I also use them myself so that’s why I can recommend them:
- If you sign up with this link on Monera you will get 5 EUR sign up bonus and 0.5% Cash back when you invest
- If you sign up on Crowdesector using my link you will get a 1% bonus for the first 90 days
- If you sign up on Envestio using this link you will get 5 EUR and a 2,5% bonus during the first 270 days
- Contact me for referal links on Mintos for a 1% bonus the first 30 days
One final note: in case you are wondering, yes I still invest in Lutecredit in my autoinvest rule in Mintos. Lutecredit is profitable and quite large. On top of that they continue to pay my Kosovo loans so why would I stop investing there. Monero will cease to exist so obviously I am not investing in Monero loans right now. I can see I am alone in this way of thinking, the secondary marketplace is crawling with Lutecredit loans, as is the primary market. But I am sure as Lutecredit keeps paying confidence will grow and this problem will solve itself.
In a future blog I plan to start listing the sites and creditors more in detail. I will be looking if sites and creditors have enough profit and if they can really guarantee and deliver what they promise.
Keep an eye on this blog and stay safe and decrease your risk when investing in peer to peer!