It has been slightly over 6 months, since July 2017, when I invested RM1,000.00 in P2P lending with Funding Societies Malaysia, one of the first P2P lending operator established in Malaysia.
If you have missed the write-up, you could pick it up HERE.
I’m glad to announce that I’ve completed two rounds of successful crowdfunding exercises since July 2017:
- a one month tenure with an interest rate of 10.8%; and
- a six month tenure with an interest rate of 10%.
In other words, I’ve got back my capital and interest as stipulated in the terms of these crowdfunding exercises.
But that is not quite the end. Instead, I’m just slowly churning this compounding interest machine to its fullest. The capital and interest received from crowdfunding exercises are reinvested into other crowdfunding exercises. I have four ongoing crowdfunding exercises at the moment (soon to be five). This is an investment strategy of minimising risks whilst maximising profit. Hence, even though I’ve only invested RM1,000.00 of my own money, I have effectively invested RM2,300.00 (see below picture).
Thanks to the vigorous due diligence conducted by Funding Societies Malaysia, in sieving out viable crowdfunding opportunities, not only did I make a handsome return from P2P lending but I also did not encounter any untoward events such as defaults. According to Funding Societies Malaysia, there hasn’t been any default in Malaysia.
The interest which I’ve received since July 2017 is RM60.68, of which RM12.44 was deducted for service fee (see above picture). This leaves me with a net interest of RM48.24 or 4.8% return from an investment of RM1,000.00. If all things being equal, a return of investment of 9% or more per annum, by July 2018, is looking promising indeed.
However, the beauty of P2P lending is that it is possible to achieve a compounded return of 18% per annum (before adjusting for service fees). The compounding potential can be unlocked if the monthly repayments from a crowdfunding exercise (yielding a 10% interest rate per annum) is reinvested, on a monthly basis, into other crowdfunding exercise (yielding a 10% interest rate per annum). In my experience, I have yet to come across a crowdfunding exercise, on Funding Societies Malaysia, which offers an interest rate of less than 10% per annum.
And if you’re wondering how does an 18% return of investment per annum measure up against other conventional investments? On average, most fixed deposits for a 12-month tenure offer about 3% interest rate or return. On top of such meagre return, your money is locked in for a 12-month period; deprived of any means of compounding. In other words, after 12 months, you will only make a return of 3% on your capital.
A potential compounded return of 18% per annum is also much higher than the return from funds such as Amanah Saham Malaysia which declared a 6 cents dividend for each RM1.00 invested or 6% return per annum for its last financial year.
Similarly, the average return from an investment in Real Estate Investment Trust or REIT is only expected to achieve an average return of 6.3% throughout 2017.
It is clear that a potential return of 18% per annum, from an investment in P2P lending, through Funding Societies Malaysia, would overshadow the returns of other types of conventional investment such as fixed deposit, Amanah Saham Malaysia or REIT, and at least in my case, relatively low risk.
Do you have any reservations about investing in P2P lending? If so, do drop a comment.
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**This article is written in association with Funding Societies Malaysia.**