Why Investors are diversifying into P2P Investments from Mutual Funds?

Sep 5
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Why Investors are diversifying into P2P Investments from Mutual Funds?

Today, there are many financial products in the market for the investment purpose. Each of the products has its pros and cons. An investor needs to learn about the financial product in detail before making any kind of the investment. A hasty or wrong decision can result in great disappointment.

Every single investor is required to go through the terms and conditions applicable to each product in the financial market. The percentage of risk and gain involved should be evaluated well in advance before signing or buying any financial instrument from an investment company or other sources.

Some of the most common investment avenues are mutual funds, P2P investments, and life insurance.

Let us Learn More About P2P Lending

  • P2P lending is profitable in general. Although it carries higher credit risk, the rate of interest is way higher in comparison to the other investment instruments in the market.
  • P2P lending is not related to market risks and so you will receive the agreed rate of interest irrespective of market condition.
  • The P2P platforms help you connect with P2P borrowers for the informed speedy lending.
  • It offers more returns compared to fixed deposits and other investment instruments.
  • P2P is a digital platform to connect P2P lender and P2P borrowers for  direct lending.

You can have a look on the few highly considerable factors that will help you decide if P2P is a better investment option over Mutual Funds:

  1. Returns on investment

P2P: P2P investments do not carry market risk. It gives you a fixed return as interest charged from the P2P borrowers. Hence, it provides you assured returns. P2P investments carry credit risk and an investor has the option to decide his own risk return metrics and use portfolio diversification strategies.

Mutual Funds: are subject to market risks. It is directly related with the risks involved in the financial market. Moreover, the returns in mutual funds are fluctuating. Some time it can be more and at other time less. Returns in mutual fund are uncertain. The investor entrusts his money with the fund manager of the asset management company and with no further control over his investments can only hopes for correct decisions by the fund manager. Investors have been disillusioned after recent bond defaults have impaired few debt mutual fund schemes of renowned financial houses.

  1. Ease of investment

 P2P: P2P lending is a simple and high return avenue, and best option for diversified investment portfolio. Potential P2P borrowers can be found easily using certain trusted platforms, check their credit history, rating, profile to make the right decision of lending.

Mutual Funds: The fund performance can be evaluated on the report and prevailing net asset value (NAV) of the underlying deployments. An asset management company and fund manager is hired who carries out assessment and selection of investment from the fund and the portfolio of securities. Thus, investors have less control on his investment.

  1. Ease process of exit

 P2P: The liquidity in the peer to peer lending is less. It is difficult to withdraw money before the fixed tenure. Repayment is received in the form of EMI.  However, the investor has the option to decide on the tenor of individual loans extended by him and thereby have a control over the tenor and maturity profile of the loan portfolio. Thus, a portfolio of short term P2P loans would result in easily withdrawable P2P investments.

Mutual Funds: Mutual Funds have more flexibility. The investment amount can be withdrawn anytime from Open ended funds. An investor can withdraw money when the value increases. If you withdraw your money when NAVs is low, you may result in loss of gains.

Conclusion:

Only less than 1.5% people in the country make investment in mutual funds. On the other hand, P2P lending is constantly growing. The trusted platforms like AntworksP2P.com have made it easier for P2P investors to find the right P2P borrowers. It helps you check borrower profile and decide return on investment.

In comparison to mutual funds, P2P (peer to peer lending) has the great potentials of higher returns on investment within evaluated risk return metrics. The returns are high and fixed and easy to invest.

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Disclaimer: Reserve Bank of India does not accept any responsibility for the correctness of any of the statements or representations made or opinions expressed by Antworks P2P Financing Private Limited, and does not provide any assurance for repayment of the loans lent on it. Antworks P2P Financing Private Limited is having a valid certificate of registration dated April 01, 2019 issued by the Reserve Bank of India under Section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or the opinions expressed by the company and for repayment of deposits / discharge of liabilities by the company.

The information contained herein is only to enable the Lender to make a considered decision. Any decision taken by the Lender on the basis of this information is the sole responsibility of the Lender and Antworks P2P Financing is not liable. This information does not include any sensitive personal data or information of the Borrower. Antworks P2P Financing only facilitates a virtual meeting place between the Borrowers and the Lenders on its online platform. The decision to lend is entirely at the discretion of the Lender and Antworks P2P Financing does not guarantee that the Borrowers will receive any loans from the Lenders. Antworks P2P Financing merely aids and assist the Lenders and the Borrowers listed on its website to make and receive loans and charges a service fee from the Lenders and the Borrowers for such assistance. Antworks P2P Fianncing is only an ‘Intermediary’ under the provisions of the Information Technology Act, 1999.

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