German investor: from a bank deposit to 100.000 Eur per P2P platform

I am happy to share an interview with Andreas, an investor from Germany, who has a goal of accumulating a 100.000 Eur portfolio on our platform by September.

Our investors strongly contributed to this interview and asked dozens of questions, from which we selected the most interesting ones. Most of all, our investors wanted to know where Andreas started, what investment strategy he uses and what returns a German investor earns.


Can you tell a little bit more about your shift from Deutsche Bank fixed one-year deposit first investment to P2P Lending? 


In the beginning of my investment journey I invested 19.000 Eur into a fixed deposit investment of 1 year in the “Deutsche Bank” with 4.5% interest rate when I was 21 years old. It was all my savings from my work until then.

Since the interest rates at the banks kept falling, I looked for alternatives where I could get more returns. As I started to invest in P2P Loans in 2011 I started with 4.000 Eur and I was 25 years old at that time. I found the concept of lending money to other private individuals or companies very interesting. I’m my own bank, so to speak, and I decide for myself who I want to give a loan to. 


One of the most popular investment types in Lithuania is deposits, despite the near-zero interest rates, is that the case in Germany too?


Deposits at banks are also very popular in Germany. Even with very low interest rates. In recent months, interest rates at banks have risen slightly due to the higher key interest rate.


How did you build your portfolio? When did you think it was the right time to leave your full-time job?


Before I left the day-time-job I was able to invest over 70% of my income. Now I have about 50% of my income to invest.

My portfolio consists largely of over 50% P2P loans to private individuals and companies. I have spread my P2P portfolio across different platforms, but also not too many platforms. I also make sure that I’m invested in different countries to get better diversification. 

When my income from my P2P portfolio exceeded my monthly expenses, I quit my full-time job to devote more time to my investments. Incidentally, as a blogger, I take the time to write about my experiences in the P2P area. The rest of my portfolio consists of stocks, investments in start-ups. In addition, a bit of precious metal and crypto.

22% net return in 2022

You said that you spend a few hours per day on your investments and last year you managed to get 22% return from P2P investments when most of the world would have been very happy to get a positive return from their portfolio at all. What strategy do you use to achieve such returns?


Yes, in 2022 I was able to achieve the best return from my P2P portfolio since 2011. I haven’t had any major platform failures and have participated in several cashback campaigns. 

After the outbreak of the Ukraine war, many investors invested more cautiously on the platforms. Because of this, many platforms and lenders have been raising rates and offering cashback to raise funds. 

My primary market strategy is to bid manually and with Auto-Invest. Manually is not always possible because at Finbee many loans are fully invested in a short timeframe. 

I’m a rather active investor. That means I’m also active on the secondary markets. Many investors do not want to have defaulted loans in their portfolios and then put such loans up for sale on secondary markets. I evaluate these offers and if the discount offered is high enough, I buy these loans from other investors. Many of the loans that have defaulted take a few years, but can then be partially or fully recovered. In this way, a higher return can be achieved if you are patient and have evaluated the data on the failed loans.

My secondary strategy trading strategy is also to buy late loans at a discount and to sell them at par or at a lower discount after a time period when the borrower paid some payments. For that strategy you have to have patience as it can take months or years to get payments from the borrowers.

Additionally, I like to buy loans with already many payments at par. If several installments have already been paid, the probability of default decreases.

At Finbee there is a very good liquidity of loans as Finbee have a Secondary Market. There are enough buyers and enough sellers. If I may need money I can easily sell high amounts of my current loans without any discount. The good part is that Finbee is one of the few platforms without fees on the secondary market. Even my loans which are late I can sell if I need money with a discount. I don’t like platforms without a secondary market much because I have to wait until maturity and can’t intervene if something bad is happening.


What do you prefer – consumer or SME loans?


In general I prefer consumer loans. As I saw the good results on Finbee that the business loans have a higher rate of installments paid on time then the consumer loans I decided to invest with Finbee in business loans too.


Experience with the failed platforms


You seem to focus your P2P investments on a few platforms. How do you choose the platforms you trust with your money? What is the percentage of the platforms you choose to invest on or the ones you consider to invest in?


Yes, I’m not on very many platforms. I like to test platforms with initially smaller sums. However, several points must apply so that I am willing to invest higher sums. On the one hand, it is important to me that the platform or the lender who provides the loans has been around for a long time and is already profitable. In my experience, older platforms are not as vulnerable to failure as relatively new platforms. On the other hand, I take a close look at the annual reports of the platforms and the lenders and evaluate them in order to better understand the business model and the company.

Other questions I ask myself are: Who is the managing director? What experience does the managing director have and how long has he been working on the platform? When a platform is transparent, it gives me more confidence. Some platforms provide detailed statistics pages. It is even better if the platform makes the complete loan book available. Then I can evaluate all loans myself and thus determine a forecast of default rates and future returns for myself.


Why did you set a 100.000 Eur cap? What are you going to do once you reach the goal?


I set the 100.000 Eur cap for each platform because I want to diversify my investments. If I can get 12% return each year after losses it would be 1.000 Eur each month of income at Finbee. And that’s a round number too. 

When my wealth grows, I may increase the 100.000 Eur limit proportionally in the future

When I reach the 100.000 Eur goal at Finbee I want to withdraw the interest but reinvest the principal repayments. So that my portfolio will be stable at 100.000 Eur.


Do you know what you want to spend your money on coming from the investments? 


I need part of the income from investments to pay for everyday expenses. With the other part I would like to increase my entire P2P portfolio and invest in other asset classes.


Have you ever considered taking out a loan to finance your P2P investments?


Yes. I have thought about it. If I would get a loan with a low interest rate I would do it. But only if I had other assets outside of P2P in the same or higher amount that I can sell in the event that there would be delays in payments in the P2P area.


What is your experience with failed platforms? Were you able to recover any funds? Are there any forms of investments that you would not use?


I had not invested very much (3-digit or 4-digit) in the failed platforms, so I have not had any high losses compared to the income until now. I could only get a little money back from failed platforms. Most cases take a long time to court and whether something can get from failed platforms is hard to say. Only if I become aware of problems before bankruptcy do I try to withdraw money beforehand. Especially at this time I would be reluctant to invest in real estate projects that still have to be built. Increased costs increase the probability that a real estate project can no longer be completed and the financing could fail. If I don’t understand the business model, I won’t invest in an investment. That’s why I try to find out as much as I can about the business model with every investment in order to understand it.


Geography of the investments


How many different countries do you invest in?


I invest in more than 20 countries. But not all countries are distributed equally. 


Lithuania is one of the countries with the highest investment sums. I like investing in Lithuania because the P2P platforms there have been regulated for a very long time. But also because in Lithuania the P2P returns are higher than in other countries in Western Europe, for example. 


Would you consider the Lithuanian stock market as well?


I am currently not considering the Lithuanian stock market. I would only invest if the Lithuanian stock market had fallen very sharply. In general, I also invest in stocks, but since I’m already invested in the Lithuanian market with Finbee, I wouldn’t be diversified if I was also invested in the Lithuanian stock market. I prefer investments with a stable and regular income. And with Finbee and other P2P Platforms I get regular income without fluctuations in value like on the stock market.


How would you expect your investments to perform during a recession? I suppose for you it would be the most active time in secondary market trading? 


In the event of a recession, defaults would increase. Since many investors then try to sell such loans, I would buy these loans in default from other investors with a higher discount. Of course there will also be loans that will actually become a total failure. But in most cases, part or even all of the amount can be recovered through debt collection.

In a recession, many investors could try to reduce the capital on P2P platforms because they need the capital themselves or because they want to invest it elsewhere, for example in cheaper stocks. This would lead to higher discounts on the secondary markets. For active investors like me there would be good investment opportunities for very high returns. I would then be very active and would buy up the offers on the secondary markets. Of course you need patience, but if the payment problems are only temporary, the payments will come with a time delay.


What taxes do German investors pay?


In Germany, investors pay around 26% tax on interest income. Each taxpayer can earn the first 1000€ in interest income per year tax-free. Above that sum we have to pay around 26% tax on interest income. The tax on wages is normally higher. Salaries are taxed at up to 42%. The more income the more is taxed as a percentage.


Future of P2P


How do you see P2P space developing in the next 10 years? How do you see yourself in it?


In the next 10 years, the P2P area will have further established itself as a new asset class. In many countries, the P2P area is already well regulated. In countries where there is no regulation now, regulation will be very advanced. In addition, P2P lending will be much better known in 10 years than it is now. More individuals will invest in P2P lending in their portfolio.

I think I will still invest in P2P loans in 10 years, because good returns will still be possible then. Loan demand is always needed. There are always private individuals who need capital for renovations or debt restructuring. But companies also always need capital in order to grow, and in 10 years P2P platforms will be much more advanced than they are now, with the volume of credit granted increasing significantly. P2P platforms will not replace the banks, but in areas where it is not worthwhile for the banks, P2P platforms can significantly increase the share through cheaper structures and flexible offers.


How do you rate your experience with Finbee?


My experience with Finbee is very good. Finbee is the platform where I have received the most interest from all P2P platforms overall. Since 2015 I have already received over 143.000 Eur in interest. My loans with more than 60 days in arrears are significantly lower at 23.000 Eur. My net return on Finbee is over 20%, even if I count my overdue loans over 60 days at a total loss. So very conservative calculations. 


The collection of late loans works very well, that’s why my defaults are not a permanent loss, because every month I get more payments from the collection. Finbee has been on the market for a long time since 2015 and has been profitable itself for several years. Finbee offers very good transparency with all data for the entire loan book, so I can view the data here at any time and evaluate it myself. Because my experience with Finbee is very good, I would like to increase my portfolio at Finbee to €100.000 this year.


If you were to give advice for a new investor, what would it be?


My advice would be to start very early to invest even with lower sums to get early the first experience. If I didn’t start in 2011 to invest my first 4.000 in P2P maybe I would have never started. I would set a timeframe every week to monitor my investments. Only when I understand the risks of an investment and understand the business model I would invest large sums. And the rule number one is of course: diversify the investment in several assets.

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