P2P investing, also known as peer-to-peer lending, has become an increasingly popular investment option in recent years. With P2P investing, investors can lend money directly to borrowers, cutting out the middleman and potentially earning higher returns. However, as with any investment, it’s important to be cautious and minimize risk.
In my opinion, P2P investing should be only a small part of your overall investment strategy, ideally not more than 10%. I started with P2P investing before the COVID-19 pandemic and while I still like the idea of it, I have become a much more cautious investor since then.
One of the reasons I became more cautious is that I made a mistake and invested in the wrong platform, Grupeer, which turned out to be a scam.
I lost about €900. It didn’t hurt as much because I still earned more on other platforms combined. However, this experience reinforced the importance of diversification and why it is so useful and important. Unfortunately, there are many people who lost their life savings due to investing in similar scams.
(I don’t think I will see this money ever.)
When choosing a P2P lending platform, there are several key factors to consider:
- Research the platform’s regulatory status: It’s important to invest in platforms that are regulated by government authority and have proper safeguards in place to protect investors.
- Look into the company’s management team and background: It’s important to investigate the people behind the company, their experience, and their track record. This will help you understand their level of expertise and credibility.
- Read reviews and testimonials: Look for reviews and testimonials from other investors who have used the platform. This will give you an idea of the platform’s reputation and the experiences of other investors.
- Investigate the platform’s loan portfolio: Look at the types of loans offered on the platform and the creditworthiness of the borrowers. This will give you an idea of the platform’s risk profile and potential returns.
- Check the platform’s fees and charges: Look into the fees and charges associated with the platform, such as origination fees, management fees, and late payment fees. This will give you an idea of the platform’s profitability and how it generates revenue.
- Evaluate the platform’s security measures: Investigate the platform’s security measures, such as encryption and two-factor authentication, to ensure that your personal and financial information is protected.
- Invest time into it: Don’t rush into investing, take your time to research and understand the platform and the risks involved. Ask questions and seek clarification if you’re unsure about anything.
In conclusion, P2P investing can be a great way to earn higher returns than traditional investments, but it’s important to be aware of the risks involved. Diversification, research, and choosing only regulated platforms are key to minimizing risk. While I still love investing, I have become more cautious than before and my message in this article is that you should be careful and do your own research before investing in P2P platforms. Remember, there’s no such thing as a free lunch, higher return always comes with higher risk.
Thank you for reading and good luck with safe investing!
Steve
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