My 6 month P2P loan portfolio

I know I have written extensively on my stock portfolio and stocks which might interest me.
However, I have seldom talked about my P2P loans / Invoice financing portfolio. In fact, I am still analyzing my P2P loans / Invoice financing portfolio.

I know there are numerous articles written on Debt & Equity Crowdfunding recently. Some more negatives than others.

Yes, there are indeed a lot of risks involved.

For some financial bloggers, they write extensively on crowdfunding and aims to provide useful resources for crowdfunding / P2P investors in Singapore (Jun from Let’s Crowd Smarter comes to mind).

While others view it as gambling (Wilfred Ling from The IFA on Duty – read here) or not worth the risk (Lim Der Shing from http://limdershing.blogspot.sg/ – read here).

Personally, I tend to look at both sides. I do not encourage or discourage people from investing in P2P loans or Invoice financing. I believe these platforms serve a need, but it ultimately depends on one’s risk tolerance. In addition, one should do his or her own due diligence before investing and know that there is a real possibility of losing all of one’s investment.
Lastly, it should just form a small part of your overall investment portfolio (if you choose to invest).

In Singapore, the concept of debt & equity crowdfunding is still relatively new. And currently, it appears to in a state of ‘gold rush’ eg. more investors chasing after a limited number of loans.

Crowdfunding craze: Gold rush all over again? (read here)

As stated in the article above: “In April, a $150,000 campaign for a lift installation and maintenance company on MoolahSense was fully funded in just two minutes, while firms on Funding Societies have managed to raise smaller sums like $20,000 within a mere 30 seconds.”

In fact, only a few days ago, MAS announced that it will ease the rules to improve access to debt and equity crowdfunding to startups and SMEs. While at the same time, all debt and equity crowdfunding platforms will be required to get proper licenses.

On a side note, I don’t understand the rationale for this ‘rush’. A ‘rush’ is fully justified if there is really a pot of gold at the end of the rainbow. However, before we rush into anything… question if it is really gold (or Fool’s gold).

Having said that, we can theorize the pros and cons of debt & equity crowdfunding for all we want. We can hate it or love it, but if we do not try it, do we know how is it like actually? For instance, we can write articles and articles debating the merits and flaws of a Tesla Model 3 but if we haven’t been in the driver seat and driven one before, would we ever know how it feels like to drive one?

Yes, we have read about defaults, risks, small time SMEs desperate for cash flow (often one step away from bankruptcy) while at the same time we read about the high-interest rates and easy source for passive incomes… so are these all true?

I am glad that Jun from Let’s Crowd Smarter regularly post his P2P loan portfolio for all to see.
Personally, for me, I started investing in P2P loans at the beginning of this year. As much as I would like to boast that I have made XXX% over the 6 months’ period so far… I don’t think this is true and I don’t think that this is the purpose of this post.

Please see below for my P2P loans / Invoice financing portfolio. I modeled it after Jun’s format in his blog (read here). However, I did not include the amount I have invested and the amount of interest I have received so far (not needed for the purpose of this post anyway).

Back to my statement above. Like I say, I can’t boast. The reality is that I have a number of loans whereby the borrowers have only made partial payments or have missed their payments (Item 1 in the Funding Societies list). In another case (Item 12 in the Funding Societies list), the construction firm has decided to miss its very first monthly repayment… wondered what happened? First month? Are you kidding me? Wonder did they even try repaying.

In addition, personally, I would like to avoid lending to companies in the Construction or Marine Construction & Offshore Equipment industry. This I have failed to achieve.

1) Well, I reckon with the recent ‘gold rush’ for loans, it has become harder to fund these loans and less time for us investors to read the fact sheets properly before investing. In one rare occasion, I forgot that the company I am investing in is from the Marine Construction & Offshore Equipment industry :p Guess I was busy with my work at that time.

2) For the others, I have looked through their past financial performance and the financial standings of the directors and felt that they are able to pay back the loans (despite being in the construction industry).

I note that the blogger from Mr Money Mustache has also invested in P2P loans. In one of his posts, he mentioned that he has lost approx. $8000 due to defaults (if I remember correctly), however, the interests he received, more than made up for the loss.

While in another of his post about his experience with Lending Club, he highlighted that: “After about two years, the return seems to have stabilized. After accounting for all defaults so far, the annualized return of 11.25% is right around the forecast…
The next test will be to see how this account survives a stock market crash and a recession …
More conservatively, if you just look at more recent returns, my passively ignored account has grown from about $34,000 to $40,900 over the last two years – a compound annual growth rate of 9.1%.”

Below charts show the value of my Stock and P2P loans / Invoice Financing portfolios as well as the respective cumulative stock dividend income and cumulative P2P loans / Invoice Financing interest income. Again the actual values are not shown.

However, please note that the value of the P2P loans / Invoice Financing portfolio has yet to reflect those loans whereby the repayments are missed. Technically these cases are not closed yet. The platform has been contacting the borrowers regularly or has engaged money collectors (to chase the borrowers who have missed repayments – Item 1 in the Funding Societies list).

However, if I fail to receive the remaining repayments from the company in the Wholesale & Retail Trade (Commodities) industry eg. Item 1 in the Funding Societies list despite the best efforts of the platform or money collectors, the value of the P2P Loan / Invoice Portfolio Cumulative Interest Income will turn negative (see below).

Well, perhaps in the coming months it might again turn positive. However, a big chunk of the P2P Loan / Invoice Portfolio Cumulative Interest Income will be gone.

Lastly, I do not think P2P loans / Invoice financing is easy. The risk is extremely high. The possibilities of late payments and defaults are very real.

For the coming months, I shall be just reinvesting the interests from the P2P loans (in new loans). I won’t be actively building up my P2P loans / Invoice financing portfolio. I also won’t be dipping into stocks anytime soon (haven’t bought one for months).
I shall be focusing more on building up my War-chest. Good old cash….