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With an unparalleled variety of loan originators, loan types and investment geographies on offer, Mintos is the go-to place for crafting a well-diversified investment portfolio. Now we are taking it to the next level by launching a new Auto Invest diversification feature, which allows you to diversify across loan originators with a single click of your mouse.
How does it work?
You can enable the diversification feature for each of your Auto Invest portfolios. All new Auto Invest portfolios created from today on will have the diversification feature enabled by default.
When enabled, the diversification feature will automatically set an equal investment limit for each loan originator included in the portfolio. For example, if you have an Auto Invest portfolio with ten loan originators selected, the diversification feature will set a 10% limit of the total portfolio for investment in loans by each of the ten loan originators.
If you want to set custom limits, you can go to the “Diversification settings” link and make changes according to your preferences.
The new feature can be activated in existing Auto Invest portfolios, as well. The time needed to achieve your set diversification preferences will depend on the current investment structure of the selected portfolio – the distribution of the outstanding investments across loan originators and the maturity of the underlying loans.
What are the benefits of diversification?
At Mintos, we strongly believe that diversification is the most important component of reaching long-term financial goals while minimising risk. Investors who diversify their portfolio well are more likely to experience solid returns and less volatility than investors with more concentrated holdings. A quick analysis of historical data on the performance of investment portfolios on Mintos supports this point: Investors who have spread their money across many loan originators and loan types incur fewer losses and have a higher average return on their portfolios.
Make use of the new feature by creating new Auto Invest portfolios or activating it for your existing ones!
P.S. Want to become an expert at diversification? Stay tuned for our diversification series to be published on the Mintos blog in December and January!
Questions and Answers
Can I disable the Auto Invest diversification feature once I have enabled it?
Yes, you can turn it on or off at any time.
What will happen if I add or remove loan originators from my Auto Invest portfolio that has the diversification feature enabled?
Each time you will add or remove loan originators from your Auto Invest portfolio, the Auto Invest diversification feature will recalculate the investment limits, so that your investment is spread out evenly among the number of selected loan originators.
For example, if you add another loan originator to a portfolio that had four loan originators in it, the investment limit will decrease from 25% to 20% of the total portfolio for each. If you had set custom limits for any of the loan originators, these will be reset as a result. If all of your portfolio will be invested at the moment of change, you will need to wait until at least part of your investments get repaid, so that the change in the diversification limits can take effect too.
Can I see the current distribution of my outstanding investment across the loan originators?
Not at the moment, but we plan to add this option in the future.
When setting up the diversification feature for an existing Auto Invest portfolio, can I set an investment limit that is lower than the actual outstanding investment share of my portfolio for a particular loan originator?
Yes, you can. However, it may take some time for this investment limit to be reached – you will need to wait until the outstanding investment for this particular loan originator decreases.
How does the maximum Auto Invest portfolio size affect the diversification?
To use the Auto Invest diversification feature to its full potential, we advise setting a maximum portfolio size that is close to the amount you plan to invest. If the maximum portfolio size indicated is much larger, the Auto Invest diversification may not function as intended. For example, if you have indicated the maximum portfolio size of EUR 100 000 and selected ten loan originators, the investment limit for each loan originator will be set to 10% or EUR 10 000. If you will invest only EUR 1 000, depending on the availability of the loans on the Mintos market, the whole sum could be invested in loans by a single loan originator.
What will happen to my Auto Invest diversification settings if I will decrease the maximum portfolio size?
As the investment limits are expressed in percent, they will not change. However, as the portfolio size will decrease, the actual amount of funds that can be invested in each of the loan originator’s loans will decrease as well. As a result, it may take additional time for your portfolio to achieve the diversification set.