What do aluminium production, food transportation, consumer loans and camels have in common?

The answer of course is: I've invested in all of them quite recently. Even though the month is only half way through. it has been quite an active for me. I've finally taken the steps to put my cash into use, leaving only a 2 month buffer on my bank account.

Marketplace Change Current principal
Bondora 30 250 €
Mintos 22 195 €
Grupeer + 1 000 € 1 000 €
Swaper + 25 000 € 30 005 €
Robocash + 9 000 € 10 000 €
Envestio + 10 000 10 000 €
Agrikaab + 1 375 € 1 375 €
Lainaaja − 1 500 € 99 428 €
Fellowfinance 847 €
Vauraus 203 €
Real estate 92 700 €
Stocks 104 710 €
Total + 44 875 € 402 713 €

The total 403k€ is excluding things from my net worth such as cash, forest, car etc.

Despite being most excited about buying a camel πŸ« on Agrikaab - or perhaps because of it - I'll leave it last. πŸ˜

Investing is not just stocks, diversifying comes first

For a long time I've taken investing as a synonym for buying stocks. When talking about diversification, I thought about stock volatility and picking the kind of stocks that have very little correlation with each other. What changed was the impossibly long bull market. The longer it went on, the more it bugged me that a big down swing on the stock market could wipe out a significant slice from my wealth.

Of course in investing one carries risk. If this feels uncomfortable, then investing is probably not for you. πŸ˜Š However, diversifying your portfolio to multiple different kinds of investments is an increasingly important topic as your wealth increases. The objective is to optimize returns in relation to risk - not to take too much risk if it doesn't come with a worthy return. And even with worthy returns you need to avoid catastrophes, like losing all of your capital.

All this means is that even if you find the one thing that has the optimal return-to-risk ratio, going all in with all of your portfolio makes zero sense. Diversifying comes first, even if it means having to choose less than highest returns.

Overweight in loans

From having all of my wealth practically in stocks, my diversification has got a lot better. It's not great, but it's definitely less risky than what it used to be. Here's how my wealth is currently distributed:
Loans are half of my portfolio

So as you can see, loans are half of my portfolio, which is definitely over doing it it. Consumer loans are definitely a risky asset. They aren't well tested in a downturn and buy-back guarantees don't work when the one issuing them runs out of cash.

To lessen the risk, I will diversify the loan portfolio on a number of different platforms. This increases the likelihood of platform risk materializing, but it decreases the impact of such an event. The eggs are no longer all in one basket! Below are the most important situations and changes.

RoboCash: short term consumer loans

In a nutshell RoboCash promises 12% returns on short term consumer loans with buy-back guarantees.  The service is interesting in that they let investors invest up to 10 000 € only. Such a decision ensures RoboCash can manage cash drag exceptionally well. While 10 000 € is a little low for me, to me it signals that RoboCash has more demand than what they can cater for, but also that they are looking to build their service for the masses and micro investors rather than institutions.

Early March, I put 10 000 € in RoboCash, and I'm now maxed out on their site.

The only thing that troubles me with RoboCash is the same thing that always troubles me with unregulated, downturn-untested investing businesses that boast 10+% returns with some guarantees. We'll get to this point in a different blog post.

Swaper: short term consumer loans

Swaper is very similar to RoboCash in its offering: around 12% variable annual interest on short-term consumer loans with buy-back guarantees. There is a bit of cash drag. In a couple of weeks, about 20 000 € has already been invested with 10 000 € remaining, totalling 30 000 €. This was with max 15 € per loan. I've upped this now to 100 € per loan, which still means one loan is about 1/300. This is plenty from a diversification perspective.

Swaper has a 2% loyalty program interest bonus for those who have at least 5 000 € invested for 3 months or more. While this sounds great from the investors point of view, you have got to think: "Why would they want to do that?" Instead of guessing, I'm going to send them an email and find out. I'll tell you on my next update.

The same concerns me with Swaper as with RoboCash: how tight are their own margins and how can they survive bad times.

Envestio: corporate loans

As I mentioned earlier, I opened an account to Envestio. Taken the advice of JΓΈrgen from financiallyfree.eu, I decided to immediately transfer the 10 000 € into the account, despite no projects being available at that point. When an aluminium production project became available, I immediately put 5 000 € in as I wasn't sure how long I'd have to wait for the next projects to arrive. The next two projects I missed, as I didn't act quickly enough, but I got in on the fruits wholesale project with 2 500 €. I am planning to put 1 500 € to the next one and start putting 1 000 € max to the next ones.

The surprising thing I like about Envestio is that they do not guarantee the loan principal completely. This helps Envestio handle their own risk better in case of multiple defaults. The platform risk is the most crucial component in P2P investing and I like when a platform shields itself from risk. The returns of 17+% on the platform definitely make up for this.

Mintos: consumer loans

The main reason I have not invested more on Mintos (which is the favorite of so many investors) is that I have not had the highest confidence in the liquidity of Mintos loans, until I saw the article by Sterling over at P2P millionaire on how he liquidated a million euros in a bat of an eye. Apparently, Mintos loans are exceptionally liquid on the secondary market, which increases my confidence on the platform. I will very likely increase my portfolio on Mintos further.

I currently have 22 000 € on Mintos after the 5 000 € added in February. There's a little cash drag, even though I am willing to accept loans with 10% interest rates.

Bondora: consumer loans

Bondora is actually one of the most interesting platforms to me. Not the one I would definitely recommend for everybody, but one that I learn a lot about the consumer loan market from. My portfolio on Bondora is now a little over 30 000 € and I've decided to wait before adding more.

Understanding the lifetime value of unsecured consumer loans that have no buyback guarantees or collateral takes a long time, years. It all comes down to three things: what percentage of loans get delayed, how large share of them can be recovered and how quickly. I am extremely curious to see after another 4 years what the actual IRR will have been on Bondora, but for now, I will wait for a while.

Lainaaja: consumer loans

As I've mentioned, I'm divesting my Lainaaja portfolio. I'm still hoping the internal rate of return to climb above 10% in the long term, but there are much more interesting options available elsewhere. 

Stocks: technology and hazardous waste

Picking stocks has always been difficult for me, so I trust investors that do it better. This month I put 2 x 2 000 € on both a hazardous waste treatment company and information management company. For years now I've followed the advise of Olivier Dambrine from Valuesignals.com, as he picks stocks he usually invests in himself as well. I do recommend checking out their historical performance as it is quite impressive. These additions bring my stock portfolio to about 105 000 €.

The Valuesignals newsletter portfolio had beaten the STOXX600 for 7 years in a row, but 2018 was very different. However, a longer-term comparison on the STOXX600 index very clearly explains why I like the service. They're not cheap, but I want to diversify in stocks and they have a great record.

As always, you invest with your own risk jada jada. I'm not expecting 2019 to be great for stocks. On the contrary. Yet, I want my portfolio to be diversified. Besides, I am already heavily overweight in loans.

Real estate: home and rent

While a significant part of my wealth already is tied to my home, as a diversification strategy it stinks. over 90 000 € does not give any return on investment. On the contrary: having a roof over your head is always a huge cost, but, we have to live somewhere. I much prefer it to living on the street (which luckily I have not had to try).

In addition to our home, we have drafted a contract to buy an apartment to rent. The seller is willing to also fund the transaction, which in practice means we will get a loan from the seller for the whole price, which we will then pay back over time. Therefore for now, this means no change in capital nor passive income, but come back next month!

Agrikaab: food production

I bought a camel after all! You can read how this works on Agrikaab's website, but in short you buy a camel, you get a share of the milk it produces for one year and then the camel is sold onward, releasing the capital. This sounds really weird (how come the price of the camel doesn't change, although its capability to produce income does?). Anyway, I will see how it goes for a year.

What I like about Agrikaab is that they are really improving life in Somalia, Africa, in a way that is beneficial to all parties involved. I am only 1 375 € in for now and I am expecting as high as 32% return on investment! Yes, I'll believe it when I see it. If you're interested in my experiences with this, subscribe πŸ‘‡πŸ» and I'll keep you updated every quarter.

Blogger collaboration

So I started a collaboration with other passive income bloggers. There's already 7 bloggers in addition to me whose monthly passive income I'm tracking. I'll include a section in my monthly update, but if you're interested, there's a page about it here.

Hope you enjoyed this update

That was a mid-month update since so much has been happening lately. I hope you liked it!

If you want to keep in the loop about what happens to my camel 🐫, or how my passive income will take a HUGE LEAP after all this new cash πŸ’΅, drop your email below πŸ‘‡πŸ» and I'll keep you posted!
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