December 21, 2018

Benefits of using Auto-Invest feature on P2P platforms

After 2008 financial crisis interest rates remain very low in most of the Western world. Keeping money in a bank will actually cause you to lose money as inflation is higher than the returns on most savings accounts in Europe. No wonder, market analysts and seasoned investors have been repeating the old cliché “The best way to defend against inflation is to invest”. The cliché is a proven fact. The statistics show that an average annual interest rate one will get by keeping money in a bank in EU is 0.37%. At the same time, inflation is currently around 2.2% in the Eurozone.

It is obvious that investors started to seek for alternative ways to invest. They turned to alternative lending p2p platforms that offer projected annual returns from 4% to 15% (Funding Circle, Zopa, Mintos, Ratesetter, Assetz Capital, Twino or our own Debitum Network). As the returns far surpass most of the traditional investment options, p2p lending market has been growing exponentially: from a few platforms with minor volumes in 2011, to $26.16 billion volume in 2015 and is expected to reach 460 billion $ in by 2022.

What is auto-invest feature?

As the market of p2p platforms is growing, these alternative lending marketplaces are searching for new ways to offer better services for investors and attract them to the platforms. We have already discussed one of the best features: buyback guarantee. Another one, which most of the alternative lending platforms have implemented (and recently our own Debitum Network has also added on the platform), is an auto-invest feature.

Auto-invest feature is a program of a set of ‘buy’ orders implemented on a platform, which enables investors to automatically purchase loans at pre-set parameters at a date in the future. An investor is in full control of what loan parameters he wants to choose in order for a loan to be purchased. Any time investor has cash available in his account, the auto-invest feature will automatically purchase loans. This saves time for the investor and makes sure that cash is reinvested quickly, which helps to maximize interest earned. What are the other benefits of using the auto-invest feature?

One of the best sources of steady income

One of the best benefits of auto-invest is that it can help an investor to grow income gradually more than any other investment. The feature allows investors to increase their returns exponentially over the years. We have already discussed a compound interest investing strategy. Most of the loans on Debitum Network are short term. So, if you put 1,000 Euros into 10 loans that have maturity of 2 months each, you can reinvest the principal 1,000 Euros and 11.90 Euros of interest after 2 months into other 10 or 11 loans for the similar term (1-2 months). If you have parameters set for auto-invest, you will not have to do any manual work regarding your investing, auto-invest program will do everything on your behalf and all of your balance may be employed at all times. Even if some of the loans are late or default (very rarely) most of the loans on our platform have a buyback guarantee – if the borrower is late with the repayment by a specific number of days (usually 90 days, but it depends on individual loan originator), the broker will be obligated to buy back the loan and pay both outstanding principal and outstanding interest on that specific loan. Thus, delayed or defaulted loans will not have big impact on your returns.

Your balance does not go down

However, even if you do not contribute any extra money, just your initial capital (let’s say 1,000 Euros), your principal investment will keep growing. As auto-invest feature will keep choosing and investing in various assets over time, the growth will happen naturally due to interest aggregated on each loan. In a stock market, an investor who contributes money and buys shares at lower prices each month actually loses money from re-investments as the value of his portfolio decreases, despite the fact that the average price of shares bought becomes lower. On the other hand, short-term loans backed by guarantees and driven by auto-invest feature keep on aggregating profits month by month.

You can invest in small increments

In the stock market, you may need 150 $ (Apple) or 1,000 $ (Google), or even 315,000 $ (Berkshire Hathaway) to buy a single share of a given company, while on p2p platforms such as Debitum Network, you can invest as little as 10 Euros in a single loan. So, you can distribute your 1000 Euros into a lot of loans of your choice and earn interest on each one of them under the protection of a buyback guarantee. No need to leverage your amount in order to get an investment share in a specific loan due to the large amount of it! It does not matter, whether loan size is 1,200 Euros or 50,000 Euros, you can still invest 10 Euros in a single loan.

Lendy, Mintos and Debitum Network compared

Not all peer-to-peer platforms have auto-invest feature, in the same fashion as not all of them have a buyback guarantee. We decided to look at a set of data, which is closely linked to auto-invest feature and whether it enables investors to gain maximum profits or make their investments safer. The three platforms of our choice are: Lendy, Mintos and our own Debitum Network.

Auto-invest feature is a great advantage when you have investments backed by a buyback guarantee or real assets. It is also a great advantage, when one invests in business loans. Personal loans that dominate Mintos market unfortunately have a greater chance of default. Examples speak for themselves: the loan originator Eurocent went broke and Mogo loans (that did not have buyback guarantees) went into default in Baltic countries. Meanwhile, business loans, such as the ones that are placed on Debitum Network platform, perform much better – there haven’t been any defaults on our platform. Lendy p2p platform probably does not have an auto-invest function for the better as according to investors and reviews a lot of loans for property and bridging default. Thus, loans placed on their platform need very careful analysis before investing in them manually.

Loans for businesses may have somewhat smaller interest rates than personal or property loans, but they are much safer and this is the reason why we, at Debitum Network, decided to focus on those. We believe that will help our investors to maximize their profits and keep their funds protected under additional guarantees such as a buyback guarantee or collateral from a business. There are enough loans on our platform for investors to choose from, whether one has a conservative investing style, a moderate one or likes to be more aggressive.

How to set up auto-invest on Debitum Network platform

Setting up an auto-invest feature with Debitum Network is quite easy. Having pressed Auto-invest icon an investor needs to set parameters to make an investment plan to be used for purchasing loans in the future. The first option is to choose a credit score of a loan (available options are from A+ to F). Then, choose the limit plan, how many Euros you want to invest in maximum in loans, you can also choose a percentage of your total balance. After that, set the range of interest rates: from 6% (minimum) to 10.85% (maximum) (these are live smallest and largest interest rates). Next, define the minimum and maximum amounts you want to allocate per one asset. The last square that will have to be filled in will include plan name and maximum assets term in days. Afterwards you will have to make a choice whether you wish to invest only in assets that have buyback guarantee or in all of the assets available. Having accepted generic terms of Assignment Agreements and pressed the button ‘Create Plan & Activate’ you are all set. The rest is done by the auto-invest program.

Ready to try auto-invest on Debitum Network?

Auto-invest function is available for all investors on Debitum Network to use. Investors can invest their balance and reinvest their earned returns automatically according to pre-set parameters. It saves their time, as it makes the investments automatically without supervision needed. Investors get opportunity to invest in new assets before anyone else does because of the algorithmic structure of the auto invest feature. Amounts are flexible and you may leave any time you want.


Disclaimer: Investments in financial products are subject to market risk and any investment should only be done with risk capital. The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.

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