We can view our portfolio in many different ways. Some people like to track the overall stock prices or value of their properties and calculate their net worth. While others think about generating passive cash flows.
Nevertheless, both Capital gains (or rather net worth) and Cash flow are part of the sum of our Wealth.
Wealth = Capital Gain + Cash Flow
Cash Flow vs. Capital Gains Investing: The Two Investing Paths (read here)
For me, in my portfolio, are two vehicles (among others): Stocks and P2P Loans / Invoice Financing. I tend to treat the latter as a kind of bond – One of a lower grade than retail bonds or junk bonds, but these do pay a higher interest.
As I have said in my earlier post, I have been focusing on building up the P2P loans and Invoice Financing portfolio. It can be quite difficult at times due to the following reasons:
- With the rising popularity of these loans, the take up rate of the loans or invoice financing is very fast in the platforms I utilize. In many cases, within the same day or within the hour which the loans are open to the public, they become fully funded. For a person like me who is working full time, I often do not have the time to quickly go into the platform and participate in the loans.
- I realise that some of these platforms are not readily accessible via the mobile phone. As I am sometimes not at my workstation (in meetings or travelling), I would need to log into my mobile phone to participate in these loans. Most of these platforms also do not have mobile Apps platforms.
- Even if I manage to participate in the loans, occasionally I was informed that the SMEs have backed out of the loans / invoice financing even though their loans are fully funded. This could be because they have been ‘poached’ by other platforms or have found better terms in other platforms. Hence, in recent times, these P2P lending platforms have been withholding the identity of the SME / Sellers until the last minute (which unfortunately, give investors less time or less information to evaluate the risks). In some cases, by the time I fully evaluate the risks and digest the data, the loan is already fully funded.
- On a minor note… these platforms don’t do weekends. And they don’t normally issue out the loans well after office hours when I am more free (and I don’t normally knock off from 5.30 pm to 6.30pm) .
As of now, I have not fully deployed the funds I have in these platforms. It ultimately forms part of my war chest.
In view of the volatility of the stock market in recent times, my stock portfolio has not been performing well. Nevertheless, the month of May is like a welcome relief when it comes to dividends – like the short rain showers during the hot day. I get the bumper crop of my stock dividends during this period.
I don’t particularly invest in high yielding stocks, but most of them do give dividends. Three years back, I hardly noticed the dividends I get (and don’t even track them).
This year I have been investing less to build up my stock portfolio. I don’t usually trade stocks and find selling harder than buying.
There are stocks in my portfolio (eg. Sun Hung Kai Properties) that routinely allow shareholders to participate in Scrip Dividend Scheme – either opt for cash dividend or automatically reinvest dividends and capital gains distributions, thereby accumulating more stock without paying brokerage commissions. I typically choose to reinvest the dividends.
I have created the following charts below to track the Capital Gain/Loss and Cash Flow (Dividend from stocks or Interest from P2P loans / Invoice Financing) for the year so far. Shall keep the actual value of my portfolio / dividend / interest secret for now.
For the top two charts: The chart on the left shows the total value of my stock portfolio in each month. The chart on the right shows the cumulative amount of dividend I received over the past few months this year.
For the bottom two charts: The chart on the left shows the total value of my P2P loan / Invoice Financing portfolio in each month. This should be increasing as I have been putting money into these platforms and reinvesting the interest received. The chart on the right shows the cumulative amount of interests I received from these loans over the past few months this year.
As you can see, my stock portfolio value is fluctuating up and down. Of course, some of this volatility could be due to trading on my part (typically buying more stocks), but mostly due to stock price volatility. For months, I do not get any dividends, until only recently. The next round, other than month of May, would be the month of August.
In the case of my P2P loan / Invoice Financing portfolio, the value is been a simple up-trending line.
Yes, I do have loan whereby the SME has had late partial repayment last month and undue payment this month. However, it is not a closed case, and I was informed by the platform representative that the company (SME) is in the final phases of documentation for the auction of a ship that belongs to their cilents. Once completed, they will make the repayments. The platform is currently in daily talks with the borrower.
In times of market volatility, dividends and interest payments do provide a steady stream of income (on top of my full time job income). It helps to even out the fluctuations and allow you to shift the focus on short term volatility to long term wealth accumulation. It makes you think about the most important thing, which is the ability of the company in question to generate and maintain a huge cash reserve, and keep generating profits.
I think it is a good time to be building up a war chest now when it comes to stock… stocks are trending lower but not low enough – I am cheap (like that).
We are not at the half way mark of the year yet and I do not know how my portfolio will turn out at the end of the year…
In the meantime, shall stick to my plan I had so far.
A Pen Quotes 
Hi Apq,
Hope u r good. I had the luxury of having the overview of a business for awhile.
Invoice financing can be easily frauded just using simple tricks in business as long as they have a business partner that collaborates.
For eg A company have a project with a client B who colluded with them. A invoice B $100 although A in desperate need of money agree to only sell B for $80, but use invoice financing to borrow $100. What happens later is B will later use excuses due to non performance of project to ask for credit note of $20. Then A will repay B $20, which means effectively selling at $80 but borrowing $100.
Another method is co A can find co C who colluded as A’s supplier! Invoice financing can also be from supllier rather than client. Normally borrower need Delivery order value from Co A. Co A will inflate buy price of a goods they buy from Co C. So in one way C can earn more, and with the excess money, private money can be passed back to A personally. Hence cheating borrowers money in both cases.
So it pays to be extremely careful when going for P2P or invoice financing from SME.
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Thanks for the cautionary note.
Despite the assurance that if the invoice does not perform or if there is a default on the invoice payment, the platform has recourse to the invoice seller (invoice seller to buy back the invoice) and personal guarantee of the director…These are after all low grade ‘loans’ / agreement to buy back invoices- both P2P loans & invoice financing are risky, and shouldn’t take up a big proportion of one’s portfolio.
I have been observing the various platforms performance and the forum at http://letscrowdsmarter.com/ is a good place to find out the various issues. P2P loans got its own issues like borrowers taking up multiple loans (after getting funding from one platform).. so the risk factor increases exponentially.
Although the platforms are all relatively new … I do take note of the SMEs which I have loan money to before, and which have dutifully repaid. As a lender, I would tend to like borrowers with previous good records.
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