In December 2023, we informed investors about the delay in the disbursement of funds due to non-compliance with the buyback guarantee by the loan provider Right Choice Finance. We are currently taking legal steps to collect all investors’ claims. As a result, we recommend our investors to check their investment portfolio settings. 

In order to eliminate the financial impact of possible non-compliance with the buyback guarantee or default of the provider, it is important to pay particular attention to proper diversification of investments. To maintain attractive returns in the long term with the lowest possible risk, it is important to allocate the money in the BONDSTER investor account into different types of loans from a bigger number of providers. 

What to look at when choosing loan investments:

• Loan collateral
• Guarantees from the provider 
• Loan provider assessment
• Loan default rate

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If a provider defaults on its obligations to investors, for example, due to its difficult economic situation, or national or international sanctions preventing cross-border transfers of funds (e.g. from the Russian Federation), proper diversification can ensure that the impact on the overall performance of the portfolio will be minimal. 

The following comparison shows the difference in the expected return of a diversified and non-diversified portfolio.

You can manage the expected return and risk by setting your own investment strategy. You can easily decide which loans and providers you want to invest in. Setting up your own strategy is described in detail on our blog HERE. 

There are several thousand loans available on the platform BONDSTER. Among the safest are investments in loans that are secured by real estate, a car or other property. In case of non-payment of the loan by the borrower, the collateral is monetized, and the funds obtained are used to satisfy investors’ claims. 

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The BONDSTER analyst team sets a credit risk assessment for each provider, after evaluating a number of financial and non-financial indicators. The assessment of individual providers is published and regularly updated in the Provider assessment section.

Author of the article: Roman Muller

On the platform BONDSTER, investments in loans from over three dozen verified providers from across the world are available. The range of investment opportunities is wide and individual loans differ not only in the amount of the fixed return but also, for example, in the maturity period or the method of collateral.

There are three ways how you can select loans for your investment portfolio: manually, automatically through a preset strategy or by using a custom investment strategy. The last option offers the greatest flexibility, as you can determine yourself which loans to invest in. This strategy can be 100% tailored to your investment profile and goals.

Creating a custom strategy

We will take you step by step. First, log in to your investor account and click on the “STRATEGY” tab at the top menu of the page. 

You will see a page with a list of available strategies for investing in Czech crowns and euros. In our guide, we will focus on investing in euros, so select the EUR option. Next, you will see four strategies: the first three are preset and the last one is custom. 

You can choose a custom investment strategy by clicking the yellow “SELECT” button. Now you can start setting specific parameters of your own strategy. 

Setting up a custom strategy

The online form for setting up your own strategy contains a number of parameters. It is a good idea to fill in the “Strategy name” field on the left in the header of the strategy settings. If you have multiple strategies, the names will help you navigate through them better. 

Next, you need to fill in the target amount, which is the maximum amount you plan to invest within the strategy. You also need to choose the maximum investment in one loan. On the platform BONDSTER, one can start investing with as little as 100 Czech crowns or 5 euros. Thanks to the low minimum investment, it is possible to diversify the portfolio very thoroughly, both at the level of individual loans and providers. 

For a custom strategy, you will also need to choose whether you would like to invest in loans on the Primary or Secondary Market, which providers you are interested in and what interest rate or loan maturity you require. 

Loans can also be chosen by how they are secured (e.g. real estate, cryptocurrency, car, etc.). Loan providers may also offer the so-called buyback guarantee or allow early withdrawal from an investment. 

Don’t forget about reinvesting the principal and interest payments received

In the strategy settings, ticking the box to “Reinvest principal and interest” is very important. Once you check this option, the money credited to you is quickly reinvested, earning you additional interest on the interest earned and thus maximizing your interest income. 

The possibility of automatically diversifying the portfolio by providers is also useful. You decide for yourself what percentage of your total free funds available for investment you want to invest in loans from individual providers. 

inally, you need to save and run the created custom strategy. You can modify the set strategies at any time by pressing the “EDIT” button. 

It is also possible to create multiple strategies. Just remember that the order of the strategy in the strategy overview is very important as it determines the priority of selection (strategies are executed from top to bottom). 

Creating a model custom strategy

Now, we will show you a possible setting of a custom investment strategy. The model strategy presented here only serves as an example. In total, we will create four custom strategies.

Imagine a situation where you have three favourite loan providers. In our model case, these will be ITF Group JSC and Lendo. We will set up a separate strategy for each of them. The last, third strategy named Own Strategy is for the case when none of the above-mentioned providers have free loans to invest in.

The order of individual strategies determines their priority. In our case, loans from the provider ITF Group JSC are selected first, then loans from Lendo and only then loans that match Own Strategy are chosen.

Now, we will show you how one could set up a strategy for the provider ITF Group JSC.

Strategy for the provider ITF Group JSC

In the name of the strategy, we simply indicate the provider’s name, ITF. We set the target amount to EUR 5 000 and the maximum investment in one loan to EUR 10, for example.

From the loans issued by ITF, we select, for example, loans with an interest rate of 12 to 14 per cent, and a maximum of 36 months remaining until maturity. 

We check ITF in the list of providers. Since we are setting a strategy for selecting loans from one provider, diversification by providers does not make sense and therefore we check the NO option. 

We would like the credited principal and interest to be reinvested as soon as possible, so for “Reinvest principal and interest”, we check the YES option. 

Finally, we save the settings with the “SAVE” button. 

Similarly, we have set up strategies for the providers Alende and Lendo.

Strategies for selecting loans from multiple providers

The third strategy, which we will name Own Strategy, contains providers whose loans should be chosen automatically if there are no loans from the providers ITF and Lendo available. 

We have added four more providers to the strategy. The interest rate of loans is set up to 17%, the maturity period is a maximum of 24 months, and the provider is required to offer a loan buyback guarantee. 

Benefits of using a custom investment strategy

By setting up your own investment strategy, you can save a lot of time. Compared to manual investing, you do not have to constantly monitor the offer of loans and choose the most suitable ones for you, and if necessary, you can modify or cancel the settings of individual custom strategies at any time.  

Autor of the article: Roman Muller

Marco Schwartz, a French blogger and Youtuber specializing in P2P investing, recorded an interview with Bondster’s risk analyst, Vladimir Vala, about investing on Bondster.

In the interview you can learn how the process of onboarding new loan originators to the platform works and also more about the internal scoring system Bondster uses to rate them.

Last but not least, Vladimir Vala shared with Marco Schwartz which loan providers Bondster plans to add to the platform, what he thinks about the future of P2P investing as a whole, and what advice he would give to someone who is about to start investing on the Bondster platform.

You can watch the full interview (in English) on Marco Schwartz’s YouTube channel.

Author: Markéta Mazanová

German blogger and influencer Dennis Ulicza, who stands behind the website and podcast Capital Insider, gave a presentation on P2P investing and the benefits associated with investing on the Bondster platform at the Bondster booth during the INVEST STUTTGART conference.

In the presentation, Dennis focuses on explaining P2P investing and then introducing the Bondster platform itself, its functionality and attributes. He shares with the audience his experience with investing on the platform, illustrating how to invest in the loans on offer and the returns that can be achieved. You can also learn what strategies Dennis uses to invest on Bondster and a detailed description of each one of them.

You can listen to the podcast (in German) here, the YouTube video can be viewed here.

Autor: Markéta Mazanová

You can also learn more about the ITF in the article “How ITF works” or in the Providers section.

Authors: Markéta Mazanová, Svetoslav Angelov ITF

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How the preset investment strategies work

When using automated investing, you can choose from three strategies for the euro market and two strategies for the Czech crown market. We recommend starting with strategies for the euro market and choosing the one that best suits your investment profile and horizon. Strategies vary according to your preferred risk and return, with all three strategies applying the principle of thorough diversification. Especially novice investors may not be fully aware of the benefits these strategies offer, such as that they save a lot of time and help create a broadly diversified portfolio.

The invested funds are divided into many loans, with a maximum of 15% invested per provider. A maximum of 20% is invested in one loan. The strategies also observe the rule of not investing more than 15% of funds with one provider. Therefore, if you invest €100 using one of the strategies, a maximum of €20 will be invested in one loan. In all strategies, the returns are automatically reinvested. Each strategy also includes a assessment in letters that tells investors how financially strong each provider is. Read more about the assessment and how it is assigned.

High-yield strategy

This strategy aims for building a portfolio with the highest return by investing in loans with the highest interest rates which are usually secured by a buyback guarantee, but not always. Loans across the whole euro market are used. To rate providers, a letter grading scale is used that ranges from C to A+. The strategy automatically reinvests returns which reach about 13.6% per year.

Conservative strategy

Invests in loans from the most reliable providers with a assessment between B and A+. Eligible loans always include a buyback guarantee, and their returns are automatically reinvested. The average annual return on this strategy can reach 11.76%.

Diversified strategy

This strategy offers the best diversification possible and uses all loans offered on Bondster Marketplace. It invests in loans with and without a buyback guarantee and reinvests the principal received including interest. The assessment of providers for this strategy ranges from C and A+.

Try out the Diversified strategy or other Bondster strategies that will save your time, diversify properly and generates high returns.

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Autoinvest can help with diversification (Custom strategy)

In addition to the preset strategies, you can also use Autoinvest to help you diversify your portfolio. We have incorporated a number of settings into the Autoinvest tool so that you could tailor your portfolio to your liking. You can invest in loans in crowns from CZK 100 and in loans in euros from €5. There are currently thousands of loans on Bondster’s Primary and Secondary Markets. New loans are regularly added to the platform.

A wide range of loans and a very low minimum investment make it possible to significantly spread the risk. Even with a small portfolio of 1,000 euros, you can buy up to 200 loans with different maturities and from different providers. A good thing to know is that you can invest in these 200 loans automatically by using Autoinvest. In general, the more instruments your portfolio includes, the lower its fluctuations are. However, the biggest benefit of diversification is when the portfolio is divided into approximately 50 investments. With each subsequent investment, the diversification benefit grows more slowly.

Investors also need to think about the loans they invest in. It is crucial to ensure that funds are allocated among loans from different providers. If you use Autoinvest, do not forget to update it regularly so that it also includes loans from new providers. On Bondster Marketplace, you can find loan providers from different regions, with different client approaches and loan parameters.

Another rule of investing is to diversify in time, i.e. to buy loans with various maturities. This will make the flow of income to your account more stable. Even if a single loan repayment is delayed, the flow of money will be partially offset by other repayments arriving in the account. Where can you find Autoinvest? Click the Strategy tab in your investor’s account and you will find it in the last column titled Custom. Click the Select button at the bottom and proceed to set up your investment preferences.

You can also find the Autoinvest tool under the Investments Offer tab. Click the Detailed Filters tab which allows you to set your investment criteria. Once this is done, click the Create Autoinvest button below. A window will appear where you can check your settings, name your new Autoinvest, set the target amount and confirm your choices.

Diversification by liquidity

Your liquidity preference constitutes another important criterion when choosing loans to match your investment profile. In other words, what is the latest time you are comfortable turning your investments into cash if necessary. Bondster offers a range of loans with various maturities, so there is a lot to choose from.

Moreover, Bondster offers a unique possibility to withdraw from an investment before its maturity for a fee ranging from 0% to 2%. Investments can usually be terminated on a monthly, quarterly, semi-annual and annual basis or even at the discretion of the investor. Therefore, if you suspect you might need to withdraw your invested funds in the future unexpectedly, we recommend choosing especially the loans that come with the immediate liquidity guarantee feature. If you have a longer-term horizon, you can choose your investments from the entire investment offer.

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Diversification by providers

There is a certain amount of risk associated not only with individual loans but also with providers, some of whom might fail to meet their obligations. From an investor’s point of view, this scenario may include situations when the company goes bankrupt, does not make buybacks as obliged or fails to allow investors to withdraw from an investment. We have rated all providers to help our investors make informed decisions about which providers to invest in.

The assessment assigns providers a letter on a scale from A+ to D, where A+ indicates the lowest level of risk with the highest ability of a provider to meet its obligations. On the contrary, a low assessment of a C- is assigned to providers that have a very high probability of failing to meet their obligations or there is a high risk of other interruptions in their operation. The letter D is intended for providers who have already experienced a more significant delay in fulfilling their obligations. Our Risk Department prepares a thorough analysis of each provider and performs quarterly monitoring of all providers. Find out how the assessment is assigned.

Several criteria are looked into when assessing a provider. The better the company’s financial results, the lower the risk of its bankruptcy, as it has been probably able to create more reserves for hard times and cover non-performing loans. Investors, however, do not have to worry too much about the bleakest scenario in which the provider goes bankrupt. Should this happen, their share of the loan and all its essentials remain the same while Bondster undertakes the role of the provider itself. However, this process can take up to several years to settle. In reality, this means that Bondster continues to manage or recover the loan while everything stays the same for investors. All companies that are currently offering loans on Bondster are scrutinized by the Risk Department, which rates them according to the information available. Investors can then use the assessment to understand the risk associated with every particular investment.

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Authors: Petra Halíková, Vladimír Vála