How to build a loan portfolio?

Building a loan investments portfolio can be overwhelming. We are here to help!

#1 Set goals and understand needs 🚀

Portfolio size - what sum you are willing to invest?

When starting to invest, it is a good idea to think about how much funds you can put aside
for investments in a way that it will not affect your everyday life?

This matters as each investment comes with a maturity and could take time to be repaid.
Investing only side funds will ensure stress-free investing.

Don't worry!
You can start with as little as 50 EUR and build your size up as you go.

Investment horizon - invest for long term or just try out?

Since we are dealing with investments that come with a pre-agreed maturity, it is wise
to understand what are your goals and whether they are short-term OR long-term.
The beauty of loan investments is the fact that you can invest your money in loans that are
as little as 1 month long and there are also loans which can even take more than 5 years
to mature. The longer you are willing to invest, the greater your possibilities!

Generally building wealth takes time and investment focus is usually long-term.

#2 Consider diversification & risk 📣

Diversification - don't put all your eggs in one basket.

Diversification is one of the most researched and well known risk reduction strategies
employed and it makes sense in the context of loan investments as well. The premise
is very simple, if you spread your investments across different assets, company types,
industries and countries you reduce the probability that your whole portfolio will be
affected in case of a bad event.

This does not mean that your investments are 100% protected, there is still some risk,
but it is strongly reduced!

Spread your investments over at least 10 different projects
or lending companies

Sources differ but usually recommendations suggest to diversify with at least 10
different assets. For loans, this would mean spreading your portfolio across at least
10 different lending companies or projects, preferably based on different countries
and loan characteristics.

If you start with a small portfolio, fully diversifying could be impossible, but you can
get there when you manage to increase your size.

Risk & Reward - how much risk are you ready to take?

Each loan comes with a certain degree of risk and return. Usually the relationship
where higher risk also gives higher return holds, but that is not always the case!
Choosing potential risk category and return area is subject to each investors individual
risk tolerance.

Choosing shorter loan term and highest risk ratings (safest loans) could be a good
start to test the waters.

#3 Choose best investments accordingly 🔑

Do the research - due diligence is key to success!

Even though performing investment is not hard per se, doing the groundwork
to get select what is right for you can be time consuming.

Save time! Welfio does the heavy lifting for you.

Easily browse through the available investments across different marketplaces
and find the best scored opportunities to add to your portfolio.

Ready to build your ideal portfolio?

Start making smarter P2P investment decisions

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