My risk management strategy in p2p lending is to invest only money that, if lost, will at max cause me a shrug. To keep the compounding going and diversify risk, I use part of the gains from one platform to try another one; for this reason, in the last quarter I opened an account with Iuvo. This post is not going to be a review, since it is clearly too early to form a proper opinion, but an excuse to comment a couple of articles I read on their blog.
In iuvo, the risk of full loss of an investment under normal conditions is zero.
This is what happens when the marketing team and the legal team try to agree on something. The legal team knows that they cannot promise the client zero losses but the marketing team is conscious that if you do not sell the product as super safe no one will invest in the first place. Under normal market conditions can mean 99% of time (for the optimistic investor) as much as 51% of the time (for the legal team); they also mention full loss, which for a debt product is indeed quite rare: once the borrower defaults, there is often something left for creditors. The problem is that the investor that lost only 70% of his/her money will be disappointed as the one that lost 100%.
This is an issue as old as the financial industry. Investors want to believe that the high return/zero risk strategy is out there for them to grab and an honest marketing pitch will make a company bankrupt from the start (we can say that this is common to every industry): personally I blame investors over Iuvo here, even considering that, as said, what they wrote is misleading but not false.
Investors in P2P loans most often look for a quick and maximum profit
These are the same guys that buy books like this one:
The standard return on low-risk investments ranges from 5 to 7%.
Am I back to 2000 and young again?? Yes, there was a time when for a low risk investment, let’s say a 5 years-duration bond fund, you could get you that type of return, but it was decades ago. For a EUR investment right now, a low-risk return sets you between “great, I got my principal back” and “I am the 1% (return on investment)”. There are EUR junk bonds that pay negative yields ffs.
This is a good and known marketing exploit. It is not by chance that the platform with the best marketing department, Bondora, is doing this type of blog posts since years. One thing is to write here and there that your product is great, another is to show a face of someone that could be you having a great experience and earning passive income. You feel reassured now, do not you?
Many of our investors have their active accounts since the launch of the platform in 2016.
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I began investing in P2P around March / April 2019 and IUVO was the company I started with.
If you have investors that are with you since 3 years, why you choose to interview a complete newbie? Already 3 years is a period not long enough to judge if a strategy/product works as advertised, I struggled to understand why you decide to promote the opinion of someone who has even less general investing experience.
The more I dig in Iuvo blog, the more my palm rest on my face. These interviews make me crazy, like the one I was talking in my previous post and published by that German blogger. There is zero informative value, no hindsight: if you remove the first question, you can publish the entire text on your local butcher website (changing Iuvo with their name) as one of their employees interview and no one would raise an eyebrow. Why you do that?
Conclusion
/sarcasm off/
I hope that these represent only growing pains for Iuvo and that on risk management – credit selection, aspects that really matter here, they already have their shit together. What is your experience with Iuvo?
What I am reading now:
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