Key takeaways
- 2814 investors participated in the Survey
- With loans included, 77% of investors have also other alternative asset classes in their investment portfolios
- Half of the surveyed investors expect an average return of 9.3% from investing in loans in 2021
- The return rate is the most important factor for investors when they choose a loan to invest in
- 82% of investors say they are aware of all risks related to investing in loans
- For 49% of surveyed investors, the confidence in investing in loans has remained the same as before the pandemic
- 73% of investors expected both gains and losses in their investment portfolios in 2020 and plan to continue investing in various assets in 2021
Assessing and sharing investors’ practical experience contributes to the overall industry know-how and gives a view on investing in loans from the investors’ perspective. To better anticipate expectations and possible developments in the market of investing in loans, we rely also on the sentiment and opinions of our investors.
The Mintos Crowdlending Survey launched in April 2020 helped us understand how big of a market slowdown investors expect in the year of the pandemic, and what steps they plan to take in light of the economic downturn. One year later, we reached out to our investors again to explore how their sentiments, opinions, and expectations about investing in loans have changed.
A total of 2814 investors participated in the survey conducted between 19 and 23 February 2021.
Most surveyed investors are male (91%), and the majority of them (69%) are 25-44 years old.
37% of participants have a Master’s degree, while 23% have a Bachelor’s degree. In total, 6% of investors have a Ph.D. or equivalent title.
Most investors have various alternative asset classes in their portfolios
When it comes to investing in alternative asset classes, 23% of respondents invest exclusively in loans, while 77% have other alternative asset classes in their investment portfolios.
As we found that most investors invest in ETFs and stocks, it’s understandable that loans come as diversification support in a modern investment portfolio of a retail investor. Only 25% of participants don’t invest in ETFs at all, while 75% have experience with this type of investing. These numbers differ when it comes to countries of investors. While 87% of German-speaking investors confirmed their experience with ETFs, this is applicable to 62% of investors from the rest of the Mintos geographies. It’s worth mentioning the first ETFs in Europe were launched in Deutsche Börse in Germany, back in 2000.
This difference is less significant when it comes to investing in stocks. German-speaking and international investors have a similar experience, with 79% of them investing in this asset class. Only 14% of Mintos investors have never invested in stocks, and 7% stopped investing in stocks. The fact that the retail investment market is exponentially growing is seen even when surveying investors on Mintos. 84% of investors who are investing in stocks have increased their investments in this asset class between March 2020 and January 2021. Regardless of the alternative investment asset class that investors use besides loans to diversify their portfolio, their activity doesn’t differ when it comes to the increase of investment in stock, signifying the ubiquitous popularity of investing in the year of the pandemic. Only 15% of those who have increased their stock portfolios decided not to invest in loans in the upcoming period. With the increased volatility of the stock market, long-term investment in loans provides an additional option for diversification, alongside numerous new and emerging alternative investment opportunities.
Investors are confident about the expected returns in 2021
Investing implies portfolio planning, a smart approach to diversification, and evaluation of risk appetite. Ultimately, investing is motivated by expected returns. We asked our investors what returns they expect from their investment portfolios when it comes to loans.
Answers are varied, with half of the surveyed investors expecting returns of 6% – 10%. While only 8% of investors expect returns of 5% or less, 38% of investors expect to earn 11% – 15% on their investment in loans during 2021.
How confident are investors about the returns they expect? Let’s take a look.
Overall, 15% of investors are very confident in their expectations, and 47% of surveyed investors are somewhat confident. 20% of investors are neutral about their expectations, and 18% of investors don’t feel very confident, with 7% of that being not confident at all.
The expected return has little impact on the confidence of investors. We also asked investors how much they plan to invest in loans in 2021. 26% of investors are still undecided about how they want to invest, while 36% of investors plan to invest more than €1500 in loans in 2021. We also took a look into how investors plan to invest depending on the return they expect to receive in 2021. 38% of investors who expect a return of 6-10%, plan to invest more than €1500 in loans, and 33% of those who expect a return 11-15% plan to do the same.
Return rate the most important factor when investing in loans
We asked investors to rank ten factors that might play a role in their decision-making when choosing loans to invest in. The top 3 factors for more than 50% of respondents are related to risk aversion, earning opportunity, and the loan risk evaluation by Mintos:
- Return rate is the most important factor, with 59% of investors ranking it in the top 3,
- Mintos Risk Score of the loan, with 57% of investors ranking it in the top 3,
- The loan has a buyback obligation from the lending company, with 55% of investors ranking it in the top 3 important factors when choosing a loan.
Two factors that are consistently ranked at the end of the list are:
- Comments of opinion leaders (market experts, industry journalists, bloggers, and similar) with 73% of investors assigning it a bottom 3 rank.
- The opinion of my peers who also invest in loans with 71% of investors assigning it a bottom 3 rank.
We also cross-checked the relation between the expected interest rate and how much importance investors assign to the return rate as a factor important when choosing a loan. The result is no surprise – the larger return investors expect to receive in 2021, the more importance they assign return rate. 43% of investors who expect an interest rate of 1% – 5% chose return rate as one of the most important factors, compared to 49% of investors who expect a return of 6% – 10%, and 58% of investors who expect a return of 11% – 15%.
Investors self-assessment confidence on the rise
To understand how investors feel about investing in loans as an alternative asset class after the first year of the pandemic, we asked how do they agree about ten statements in the survey. We found most investors agreed with the following statements:
1. “I am aware of all risks related to investing in loans” – 82% of surveyed investors agree or strongly agree with this statement, showing strong confidence in their knowledge of risks related to investing in loans. 71% of respondents also agree with the statement “I know how investing in loans works and I don’t feel I’m lacking any knowledge”.
2. “I expected both gains and losses in my investment portfolio in 2020, considering the global financial environment, and I will continue to invest in various assets in 2021” – 73% of surveyed investors agree or strongly agree with this statement, showing they expect global events to affect their investment portfolios but still seeing earning opportunities.
3. “I think all platforms for investing in loans were put to the test and had to overcome the first financial crisis for this market” – 71% of surveyed investors agree or strongly agree with this statement, as they believe that pandemic-caused events from the previous year made platforms proof the sustainability of their business models.
In the final question, we asked investors how confident they feel about investing in loans in 2021 compared to previous years. For 49% of surveyed investors, the confidence in investing in loans has remained the same, and for 14% of investors, it has increased. On the other hand, 37% of investors responded that their confidence has decreased. Ultimately, the survey shows that decreased confidence is not a sign of giving up on having investments in loans in a diversified portfolio, as only 12% of all surveyed investors responded that they will not invest in loans in 2021.
2021, a year of opportunities guarded by diversification
2020 was a challenging year for investors and for marketplaces for investing in loans. Both parties were pushed to take risk assessment and risk management to the next level. For investors, this resulted in increased knowledge and confidence when it comes to the risks of investing in loans. It seems that investors understand the significance of diversified investment portfolios more than ever, and how uncorrelated asset classes increase the probability of expected returns on investment. For investment marketplaces, including Mintos, the past year pushed us to further educate investors about the significance of diversification, but also to provide more tools that will help investors assess the risk of loans that they plan to invest in. And while investors are increasingly investing in stocks, the survey shows that they’re keeping a variety of asset classes in their portfolios, and investing in loans is an investment alternative that investors feel confident about in 2021.
We invite you to join a conversation about this topic on the new Mintos Community Forum.
