Lend like a pro #5- Diversify. Diversify. Diversify.
07 Jul 2022
If there is one sure fire way to minimise investment risk, it is diversification.
In simpler words, diversification means introducing a great deal of variety in your investment portfolio. Rather than owning a large portion of a few things, the idea is to have smaller portions of a variety of things. A diversified portfolio is a more stable portfolio and produces more stable returns overall.
As it goes in investment parlance, “Never put all your eggs in one basket”. The same applies to lending on the Fundkiss platform. Over the years, our lenders who have maintained a diversified portfolio tend to be least affected by repayment delays or defaults.
Let us look at the ways you can introduce diversification to your Fundkiss portfolio and minimize the risk that comes from investing.
Diversify – Across Projects
We recommend you spread the total amount you intend to invest on our platform across multiple projects. Remember, a little bit of a variety of things.
For instance, lets say you have MUR 100,000 in total to lend. Rather than invest MUR 50,000 in two projects, we recommend you invest MUR 10,000 in 10 projects.
Or better yet, MUR 5000 across 20 projects.
This way, if a loan does go into default, your damage is compartmentalized.
Diversify – Across Industries
Industries are often affected by domino effects. Macro level changes in an industry impact all players within the industry. For instance, food outlets were affected all across the board during the pandemic.
To safeguard your portfolio from these macro effects, lenders should diversify their investment portfolio into projects from a variety of industries.
Borrowers on the Fundkiss platform come from a variety of industries – retail, F&B, hospitality, retail, construction, professional services and many more!
Diversify – Across Repayment Periods
When you invest in a project, you receive monthly repayments that include a portion of capital and interest.
The repayment periods for borrowers vary anywhere from 6 months to over 2 years.
To maintain a steady cashflow from repayments, lenders should lend to projects with a variety of repayment periods. This way, not all your capital is invested for extended periods of time.
Receiving a portion of your capital and interest income sooner also allows a lender to re-invest into new projects and benefit from compound interest.
So there you have it. When you have a diversified portfolio, in the unlikely event of a loan delay or default, your overall returns remain steady, and the loss is contained. The more diversified your portfolio, the easier you can rest.
Start building your diversified portfolio from as low as MUR 5000, today!