Mistake #1: Under-estimating the Risks in P2P Investments
Like any other type of investments, P2P loan investing comes with risks also. The biggest concern here is default risk of a investment note. If banks also has non-performing loan category, why not for P2P lending? It's basically the same kind of underlying, which is a loan. Moreover, don't forget the liquidity risk also because investors can't simply withdraw money out once it was being lend out. You have to wait until the maturity date of that particular note.
Mistake #2: Only look at Return (Interest) of a Note
Yup. High return/interest being published is attractive for all of us, especially for P2P investors. This is one of the main reason why we invested in P2P loans in the first place. Right? However, only looking at return and neglecting the risk grading of an investment note would increase your chances of facing default risk.
Mistake #3: Lack of Diversification of Notes
So, investors must diversify and spreading their money into different kind of notes, comprising return and risk grade. This is very crucial whether you can succeed in P2P investments. Just like unit trust funds, we invest in it because of the beauty of diversification. It's advisable to invest for example RM100 in each note for diversification purpose. The process is difficult and slow? Well, we would rather slow than risky. Furthermore, platforms such as Funding Societies and Fundaztic have auto-invest function (click here) which makes diversification process simpler.
Mistake #4: Too Concentrate and Only Use a Single Platform
Each platform has their own set of risk profiling / risk assessment for each note. By diversifying on the investment notes only was not enough to lower down your risk. Why not diversifying across different P2P platforms as well? Click here to find out all the 6 approved P2P operators (at the time of writing). Different P2P operators has their own type of preferred borrowers and criteria as well. Click here to find out the differences between two of the most popular P2P platform operators.
Mistake #5: Don't have a P2P account still @@
If you're reading until now, and still not yet open a P2P account, then this would be one of the biggest mistakes in your life. Hahaha. This new type of investment is simple and quite attractive and it's definitely a good diversification instrument for your whole investment portfolio. Other than stocks (which is more risky), unit trust, property... why not add one more called P2P investment?
If you still haven't open any P2P account, you may do so here:
Still don't know what is P2P investment?
Good Luck !!!
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