KLEAR platform allows investors to freely pick their loans and provides all the necessary information that the investor needs to create his own portfolio of loans. On the other hand the platform also provides some simple and fast tools that facilitate investing money immediately – just within three clicks.
Below we are presenting four different methods of investing money with KLEAR. All of them have their pros and cons and are suitable for different kind of investors. They all have however one thing in common: an important rule to follow!
Golden rule of investing
Do not put all eggs in one basket. Whichever method of investing you choose, make sure that you are diversifying your investments enough. Any strategy that leaves you with less than 100 loans in portfolio is moving you further away from average profit and therefore can result with extraordinary return, but also with no or even negative return.
Graph above pictures probability of making losses within 1 year depending on the number of loans held in portfolio, during normal economic conditions (not a beginning of crisis). As soon as investor approaches the 100 loans, the probability to make losses is well below 1/1000 and very close to 0.
With that important note in mind, let’s check which of the four methods is the most appropriate for you.
Method 1 - Equal diversification
Investor within 3 clicks automatically allocates his money in each loan currently available on the market. His money are proportionally distributed to all available loans.
Who should use it:
- Investors that believe that trust fully KLEAR risk assessment and believe they cannot make better risk assessment by themselves
- People that are busy and have limited amount of time, standard investor without any preferences – the usual “joe”
- People that are not interested with platform mechanics, but just want to quickly allocate their savings in all loans available on the market
- Investors with long term focus. For example saving for retirement or for a project that is some years away. Note that the average final term of a loans on the market is 4 years (although some capital comes back to investors every month)
- People who are testing the platform for the first time with small amounts.
Advantages:
- Speed (takes 15 seconds to invest), best diversification of investment
Disadvantages:
- Lack of confidence in the choice, average maturity of all loans on the market may not be suitable for all
Where to click?
- “Invest in all” button
Method 2 - Manual pick
Manual pick means that client picks his loans one by one, looking at general loan parameters available on the main market screen: segment, interest rate, expected profit, maturity, without going into detailed borrower characteristics.
Who should use it:
- Investors reinvesting their proceeds in new loans that show up on the market or additionally investing in certain loans that meet their preferences
- Investors that believe that trust fully KLEAR risk assessment and believe they cannot make better risk assessment by themselves
- People who have spare time and would like to play with the platform a little, so they can fully understand the investment machine he is tinkering with
- People who are testing the platform for the first time with small amounts.
Advantages:
- Freedom of choice, builds trust and understanding on the portfolio constructed, brick by brick confidence in portfolio constructed.
Disadvantages:
- Takes time (as according to KLEAR platform limitations investor needs to pick minimum 50 loans), may not provide the perfect diversification
Where to click?
- “Invest” or “Invest more” button next to loan investor want to invest in.
Method 3 - Using filters
Using filters is similar to manual pick, but removes the time burden of picking loans one by one. Investor applies the filter to choose only loans with parameters he is interested in and then invests the chosen amount of money in that selection. He can use the button “INVEST IN ALL” or still pick manually within the selection.
Who should use it:
- Investors that believe that trust fully KLEAR risk assessment and believe they cannot make better risk assessment by themselves
- Investors that think that investing in loans with certain characteristics they can achieve higher than average returns.
- Investors that are busy and have limited amount of time, but have some preferences towards their selection, mainly in terms of his investment horizon and/or risk he is willing to accept versus expected return.
- Investors that are not interested with platform mechanics, but not need simple and fast tools to invest their savings at a decent rate.
Advantages:
- Freedom of choice and deep understanding on the portfolio characteristics as with manual pick, but with huge saving of time.
Disadvantages:
- Limiting the selection to specific loans may limit the choice of loans available and therefore not provide adequate diversification
Where to click?:
- Click tab “Filters” or “Saved Filter” if you have used it before. Note that you can uncover additional filters by clicking “more filters”.
- Filter out the loans that you are interested in, by using loan parameters of your choice and click “Apply” to see the list of loans you have filtered out
- Use “Invest in all” button to invest in the loans you have filtered out or invest in each of the filtered out loans separately by clicking “Invest” or “Invest more” (for loans that you already own a piece of).
Method 4 - Loan by loan detailed analysis
Loan by Loan analysis means that client picks his loans on by one, looking analyzing in detail parameters of each loan, i.e. checking clients household budget, his social demographics and current and past payment behavior.
Who should use it:
- Investors on secondary market
- Investors that would like to double check, understand or event challenge KLEAR risk assessment and believe they can make better risk assessment by themselves
- People who have spare time and would like to play with the platform a little, so they can fully understand the investment machine he is tinkering with
- People who are testing the platform for the first time with small amounts.
Advantages:
- Helps understand better what client characteristics stands exactly behind profile A or D , builds trust and understanding on the portfolio constructed, brick by brick confidence in risk assessment.
Disadvantages:
- Takes time and may not provide the perfect diversification
Where to click?
- On primary screen, click the loan number in order to go into detailed view. Once inside the detailed view you have analyzed the loan, you can put the amount you wish to invest in the upper right corner of the screen. Then press “Invest” or “Invest more” button below that input box.
Method 5 - Automatic Investing
On the Auto Invest page, the investor can use the available filters to choose the credits from which they would like to buy a share. Once he / she has set his / her preferences, he / she can activate automatic investing which will start investing on his / her behalf. See more in the article Klear launches Automatic Investing.
Who should use it:
- You know the platform well and how it works.
- You believe that it is pointless to check credits one by one and to try to make a better selection.
- You have no spare time and desire to reinvest quickly the money you receive from the repayment of the loans you invested in previously.
Advantages:
- Once configured, automatic investing takes every opportunity to reinvest any available funds.
- With a proper setup, it will maintain the maximum level of diversification.
- It allows you to set up the maximum credit exposure, the end date of investment, and an amount always remaining available on your account.
Disadvantages:
- You cannot undo any investment done by the tool, so you should check twice the parameters you set up before activating the automatic investing.
Where to click?
- The "Auto Invest" page is part of the menu in the Self-Service area of each investor.
Here we are! We have covered above 5 different ways of investing in P2P loans. We hope it will help investors to orientate which method is appropriate for them. Especially to the investors who are just starting their P2P lending adventure. Just remember! Whichever method you use, respect the golden rule - diversification in minimum 150 loans.
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