What would it be like when financing activities merge with investment portfolios? It would be a win-win situation for both the companies in need of funds and investors looking for new ventures. This is the reality of several digital financing services that have transformed the outlook of traditional credit.
Nowadays, people from all walks of life can broaden their digital financing investment portfolio by participating in peer-to-peer lending (P2P) and equity crowdfunding (ECF). Both share the same principle; collective intelligence provides funds for companies seeking capital, and in turn, they will earn a share in the future value of the companies.
In Malaysia, P2P services are in demand and have experienced steady growth during the 2020 pandemic. According to a report published in Fintech News Malaysia, P2P and ECF have collectively raised more than RM2.7 billion across 4,556 MSMEs. So, how should you start building your very own digital financing investment portfolio? Let’s begin by choosing a suitable platform that meets your investment appetite.
Features of Digital Financing Investment Platform
To help you find the best match, here are several must-have features in a digital financing investment platform.
This feature entails a registration form, a suitability assessment, and fact-finding exercises. The goal is for the platform to get to know you—their new client—better. The process should take less than five minutes. A good platform usually uses user-friendly UX/UI design and gamification.
As humans, we are driven by what we want in life. What brings satisfaction every time you look at your investment portfolio is how close you are to reach your financial goal. This is one aspect that a digital financing investment platform makes use of. The platform allows users to set and track their investment goals. Some even provide an additional feature to help pick suitable assets according to the user’s risk profile and investment goal.
No need to pull off a spreadsheet for tracking stock prices and whatnot. A digital financing investment platform has a built-in forecasting feature, showing easy-to-understand charts and brief explanations for you to digest.
No ATMs nearby? No worries. A reliable platform must cater to its users’ needs whenever and wherever. Using digital payments, you should be able to deposit, exchange, or convert your assets almost instantly.
Analytics & after-sales service
The platform should send monthly, quarterly, or annual reports to every investor they have. This will save you the hassle of going back and forth and monitoring all your assets at once. Beyond that, look for a platform that provides fast-responding customer service to help answer your questions and concerns 24/7.
Tips to building a solid digital financing investment portfolio
Just like any investment, there are certain risks you need to handle when it comes to managing your digital financing investment portfolio. Here is the beginner’s guide to help you take a step forward.
Put your eggs in several baskets. That way, you can mitigate the risk. Split your investment into several assets scattered across different industries. For example, set aside some of your funds for energy companies, and the other portion can go to a tech company. In P2P, there are borrowers (in this case, small to medium companies) with varying risk profiles. So, choose wisely!
Set your investment cap
Steady wins the race. Even the likes of Warren Buffet emphasize the importance of consistency when investing. Do proper budgeting to know how much money you can set aside per month for investment. Make sure not to overspend.
Assess the financing note carefully
The note entails the principal amount loaned, interest payments, tenure, and other critical information. It’s a legal document that binds you and the borrower. Check if there are any discrepancies before fully committing to financing this company.
Determine the best asset allocation for you
It’s not advised to have all your investment in P2P or any assets. Learning from the importance of diversification, it’s best to have several assets under your belt. To choose, you need to assess your risk tolerance and investment goals. How much do you wish to earn from your investment? How much money can you invest in one period? If you have a lower risk tolerance, put most of your funds in low-risk assets like mutual funds. On the contrary, if you’re a risk taker, go for stocks, ETF, P2P, and cryptocurrencies.
Every investor has their strategies. However, these tips will help kickstart your first chapter of building a digital financing investment portfolio. Learning and adopting vital investment strategies can make your portfolio highly profitable.