A look at what's driving portfolio investments in the country
Despite the Covid-19 outbreak that has plagued the country, portfolio investments have risen exponentially. Many companies have declared large dividends, and most investors are wondering what the next level will be?
Driven by professionals, portfolio investments are responsible for investments in various asset options for investors who have opted for the service. In the case of Portfolio Management Services (PMS), money is invested directly in shares through customized portfolios. Unlike the mutual fund platform, investors’ funds are not pooled into a giant asteroid fund; instead, each account is managed independently and individually, even though the securities invested in them are identical.
[box type=”info” align=”” class=”” width=””]In 1933, the Securities and Exchange Board of India (SEBI) brought in the guidelines for PMS, giving it a legal status and leading to expansion of services in the capital sector. Since then, the portfolio investment segment has progressed, bringing in transparency and trust factors. The industry saw participants from large institutions providing portfolio investment services to a broad section of consumers.[/box]
The Evolution phase
Similarly, in the past few years, Peer-to-Peer (P2P) Lending has emerged as a financial asset to enable the best potential returns to any investor. A leading P2P lending company, LenDenClub has been operating a portfolio of investors spread across the country. The company has witnessed a spike in the volume of investments from lenders in the past few years. With returns on investments ranging from 10% to 12%, it has gained popularity among the investor community. Investors can mitigate risk by diversifying their lending amount among multiple borrowers. It has helped investors to improve the performance of their P2P investments immensely.
Diversifying portfolio investments as a widely accepted practice to ensure the collective performance of the portfolio sufficiently conceals the losses of individual instruments. For instance, the performance of a P2P lending investment amount of Rs 10 lakhs gets divided among 1000 borrowers bucketed under low risk to high-risk categories. Such optimal diversification ensures high returns.
P2P lending: The alternative lending model
Unlike other traditional investments, P2P lending is the only high return instrument to draw monthly inflow and interest earnings. Additionally, investing is relatively simple. It is considered good practice if one only desires to periodically check their portfolio, as the technology-backed platform takes care of everything – repayment, collection, and borrower sourcing. [box type=”info” align=”” class=”” width=””]Investors get full autonomy in deciding the arrangement of their portfolios. The critical feature of P2P lending is that it is less volatile when equated with equity and mutual funds. Further, reinvestment is also an option that ensures a compounding return on investment, making it a lucrative opportunity for investors. The longer the depositor stays re-invested, the higher is the performance of his investment bucket.[/box]
LenDenClub has recently raised US $10 million in a Series A round from an association of investors. With the new round of funding, LenDenClub is valued at more than US $51 million and now aims to scale up substantially, eyeing a 5X growth in disbursals in the next 18 months. It has already disbursed more than 1500 crore worth of loans in this fiscal alone. The fresh capital will be used in aggressive expansion, taking its loan book growth to $1 billion and upscaling the user-base to 10 million from the current 2.5 million by FY 2022-23. With LenDenClub being the only P2P player in India breaking market milestones constantly, it is now comparable with overseas giants like Zopa and LendingClub in the UK and US respectively, both of which have now transitioned to a well-established digital bank.
[author title=”” image=”http://”]This article is authored by Bhavin Patel, Co-Founder & CEO at LenDenClub. Bhavin Patel Co-Founded LenDenClub in 2016 with the vision to elevate the investment experience and returns to investors. By empowering lenders and borrowers to achieve their financial goals, Bhavin has enabled LenDenClub to emerge as India’s largest Peer-to-Peer(P2P) Lending platform with an investor base of more than 1 million.[/author]
