I am in the process of exiting Twino

While Twino has served my portfolio well, then the time has come to stop investing there for me. Overall I have no issues with the portal or how it’s run, there are just a few reasons why it’s no longer compatible with my portfolio and there’s no reason to keep it.

Lack of short term loan volume

That isn’t to say that there aren’t short term loans, there are just too many investors who want to have those short term loans, meaning the level of cash drag you experience when waiting for your spot in the queue is a bit too much. There is also an actual lack of loan volume, mostly due to the lack Georgian loans.

BBG vs PG loans

Ever since PG (payment guarantee) loans were introduced I’ve struggled to get any BBG (buyback) loans. I’m not fundamentally against PG loans, however they do lock you in for a LONG time. The default rate at least in my portfolio was pretty big, meaning that quite a bit of my money is locked in for a fair bit longer than I’d want. The original reason why I added Twino to my portfolio was the liquidity of the loans, that is something that is no longer true.

Big changes in the business

Seems like Twino is going through some turbulent times. The Georgian changes, different countries they’re pushing into, structural reorganisation. All of those are understandable, however their communication seems to have fallen off a cliff somewhat. I’ve been waiting to read their 2016 financial report, and as of now it’s still not available.

Where is the money going?

Well, a part of the money is going into the down payment fund of my new home, but most of the money will be transferred to Mintos. There’s enough selection of long and short term loans for me to choose from and enough originators to manage portfolio risk.

How quickly will I exit?

Well, I got the money I added + a bit on top within the first week. After a withdrawal request it takes about two days for the deposit to appear in your bank account. So far I’ve managed to get about half the earning, and due to defaulted PG loans I’ll actually manage a full exit by April 2018… Which is a bit annoying, but I’ll live.

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Overall Twino has served me well, with perfectly OK returns. Just since I stopped adding money almost a year ago now due to lack of accessible loans to my taste, there isn’t much point in keeping it about. I’ll see how they are doing and how the loan balances improve and may consider a return at some point.

Estateguru portfolio status, 3 months

A while back I wrote that I took a look into Estateguru as an investment opportunity due to wanting to both diversify and perhaps move a part of my lending portfolio into real estate backed loans. Since then they’ve slowly gotten their pipeline going and there is new projects happening every now and then.

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What do I like about Estateguru so far?

  • While the interface and web page could be smoother, all numbers and transactions are clearly visible and I’ve had no issues so far trying to find information and failing to. (Looking at you here, Bondora!)
  • There’s a reasonable amount of data on each investment and there’s enough projects moving currently to have hope of not much cash drag happening.
  • The loan terms are short, meaning that the lack of a secondary market at the moment isn’t as big of an issue as it would be if the investments were 3+ years.
  • I don’t need to log on often to keep track of what’s happening – in that sense it’s way more passive than some other investments I have. (I trust they won’t make any big changes without previous info.)

Portfolio plans?

I’m currently a bit torn when it comes to my plans for Estateguru. Due to the short term of the projects, it doesn’t take long to create a kind of a cycle of investments. (It’s shorter than with Crowdestate for example). This means that in theory out of all my investments Estateguru is closest to a classical CD ladder (A strategy in which an investor divides the amount of money to be invested into equal amounts to certificates of deposit (CDs) with different maturity dates.), with markedly higher interest though!

This means that I’d have the option to keep investing 50€ per project (the minimum), until the year comes full cycle (next July) and then re-evaluate whether I want to increase the sums that I invest or keep them at the same level and lessen contributions. (Since you get interest paid, then for every next 50€ investment you need to add in less of your own money, and just reinvest the returns).

My current plan is to keep to the minimum to slowly diversify my portfolio and then re-evaluate after like half a year. There is always the question of what happens if a project defaults and issues arise or how many projects they’re capable of bringing out to keep cash drag to a minimum. Definitely they seem to have hit the ground running and are doing well enough that I’d dare to give them more importance in my P2P portfolio.

*’If you feel like starting to invest with them, then using the promotion code EGU05422 will cash back 0,5% of your invested amount to both yourself and me as the person who referred you for the first year of investing.

Building a portfolio strategy

When you’re just getting started with investing, then your portfolio strategy is pretty much aggressive growth all the way. After a while though the issue of balance starts coming to play, which is what I’m starting to struggle with right now.

How much of what should you have in your portfolio?

There are about as many rules as you can imagine about this. One thing that people generally agree on is that your portfolio should have more than one asset class included. For me, I have three – social lending/crowdfunding, stocks and real estate. Beyond that though things get complicated – how much of what should you have? When to rebalance? How to rebalance before a crisis? How to take into account cash flow vs capital growth?

correctportfolioIf I visualize the more actively managed part of my portfolio this is the result. The equity I own in the Sõle apartment is worth just about as much as most of my other investments combined. This sets my portfolio to something like 50% real estate equity/20% stock market/30% social lending.

Is that a good or a bad balance? On paper it seems fine since no asset class is above others, and real estate is a capital heavy type of investments. However, if I purchased another apartment then real estate equity would take up almost 70% of the whole portfolio balance – not a good way to go in my opinion. Also, whole social lending grows organically quite quickly due to money being reinvested then with stocks you need to contribute actively, especially for Baltic stock.

So, in a way I’m currently trying to figure out a strategy for how to balance my portfolio better. I’m fine with taking larger risks since I’m still young, which would mean contributing more to social lending. However in terms of a potential crisis real estate might be better in terms of steady cash flow, even if it does eclipse other types of investments in terms of capital value. I’m leaning towards not letting any asset class climb above 50% of portfolio value but that might be a tricky balancing act if I want to get further into real estate. What’s your strategy on this?