Last night the Women’s Investment club met again and this time our topic was social lending. Since most of the people who came to the even didn’t have much (or any) experience with social lending, I had to really go back to the basics when preparing for the meetup.
How to start?
This was one of the most popular questions – how to get started in the technical sense (as in, how to make an account, how to make portfolio managers) but more so, how to start with the actual investing – which loans to pick and how.
1. I wish I had known to worry a lot less about credit groups and returs and other numbers back when I didn’t really understand how they worked. It’s super easy to get caught up in all sorts of Excel tables and graphs and analyzing your return numbers, but it’s just not all that useful when you lack fundamental knowledge about how the sector works.
2. I wish I had started both earlier and with bigger amounts of money. Even if I had made the same mistakes or more mistakes at start, I would still be enjoying far bigger compounded returns at this point. I spent way too much time paying attention to how my very small portfolio was doing as opposed to focusing on how to increase it.
3. I wish I had found people who shared similar interests way back when I was starting. It’s been pure chance that I stumbled onto other people who shared an interest in social lending, and I think we have all learned a lot from each other’s ideas and thoughts. In that sense all the women in our investment club are super lucky – there is a lot of knowledge on offer if you just ask.
What to do if you’re just now starting?
1. Make your first 1-5 small investments into Estonian loans and just follow their progress and assess your risk tolerance based on how nervous you get and how often you log on to check on your loans. (Spending time on reading up on theory will not give you any extra magical returns on these first investments.)
2. Focus on increasing your savings or your income to be able to invest more money monthly. With social lending every 5 euros saved will help! Once you have some money in your emergency fund then start planning for how much money you want to invest into social lending each month.
3. Read up on some of the wealth of knowledge that has been written about social lending in the past few years. Look at blogs that show real numbers so you can estimate what your portfolio will look like in the future. Don’t get too carried away with this – it isn’t worth reading 5 hours if you’re investing 100 euros.
4. Find an investing buddy! This is super important because having a friend with similar interests will both motivate you to keep going, you can share interesting bits of info and learn from each other’s mistakes. Going to different meetups to hear other people helps you keep track of what’s happening as well.
5. Focus on slowly increasing your portfolio while keeping in mind that your first priority is to diversify your portfolio to at least a few hundred loans. Get a feel how different risk levels work for you – it’s ok to make small investments into riskier loans if you want to try them out. Just keep in mind – the closer you keep to “boring” investment strategies, the more stable your returns.