The Italian Leather Sofa

In my researches about p2p lending and investments in general I stumble sometimes on articles about passive income. But what is passive income? Literally should mean a way to earn an income without making an active effort; this is the first misconception: to find and put in place the conditions to have a future stream of funds, coming from an investment or an entrepreneurial activity, needs a substantial effort of research (or an initial investment in that newsletter/YouTube channel guru -.-), for example, so what seems passive is simply a disconnection between the moment the effort is made and the payback. This is because we are influenced by the dynamics of the most common jobs: you work and at the end of the day/month you receive a salary for the work done. Reading a book about security analysis will not earn you any money at that of the day, but you will use the knowledge acquired to research this stock and that stock, today and tomorrow, so the payback of reading can be distrib...

Linked Finance is an Irish P2P platform that started in 2013 and specialises in Euro-denominated business loans, up to EUR 300.000, for small and medium-sized enterprises. So far, the platform originated c2100 loans for EUR 92m, with volumes growing steadily each year. Interest rates are between 6% and 17.5%, depending on loan rating and duration: Their reported default rate to date is 1.05%, quite low; it is important to know that these p2b platform performance should be judged after a full economic cycle: Linked Finance opened its book right after the last recession in Ireland and their default rate will most likely increase once the next recession hit the country. LF has a nice interface which makes investing easy to understand and quite fun: it’s interesting to read about the projects on offer and decide where to invest; investors can start with as little as €50. I started to invest in 2017 and the sing-up/identity verification was quick and easy…as far as I recall....

When I received the invite from Bondora to join the new product Go&Grow, my first reaction was: why should I be interested in such a low yield? Personally, I did not see any appeal in it but then I saw, from Bondora reports, that it was having a huge traction among other investors and I wanted to understand why. The user interface, as expected from Bondora, is really well done: the possibility to choose explicit saving goals is smart, you can visualise how your gains will compound over time and even maintain different portfolios under the same user profile. The problems start when you look what’s behind the curtain. I decided to invest in p2p loans because of the high yield and diversification from other asset classes; Go&Grow definitely do not offer any upside on this front. The current shown yield, 6.75%, is also capped on the upside but is not guaranteed, meaning there is a chance you will get even a lower return. On the other side, not only I do not need d...