Diversify your investment portfolio on Mintos – Step 2

01.03.2018

mintosblog

About this series

This seven-part article series details the ways in which you can diversify your investment portfolio on Mintos. The first article showcased how you can diversify your loan portfolio by investing in different types of loans. You can read the previous article here.


At Mintos, we believe creating and maintaining a well-diversified portfolio is one of the best ways to achieve long-term investment success. On our marketplace, not only can you diversify your loan portfolio by investing in different types of loans but also in loans with different maturities. This adds yet another layer of risk mitigation to your portfolio and is the second way you can diversify it on Mintos.

If you are to truly get the most diverse portfolio and therefore the best opportunities, it is not only the number of assets that matters but also how different they are. The less correlation between the performance of the assets, the better. A simple way to achieve this is by investing in loans with different maturities.

Investing in loans with different maturities

Investing in loans with a wide range of repayment terms allows you to have access to different loan types and therefore varying borrower classes. For example, unsecured short-term consumer loans are usually scheduled to be repaid within a month, while mortgages can take up to 20 years to be repaid. To diversify your investment portfolio and invest in both, you need to invest in loans with both short and long maturities. Investing in different borrower classes has numerous benefits which were outlined in our previous article of this series.

The Mintos marketplace is a great place to achieve diversification across loan maturities. Loans with initial repayment periods ranging from 30 days to 20 years are available on the Mintos marketplace:

 

Loan type

Repayment period (in months)

Agriculture loans

1 to 20

Business loans

1 to 96

Car loans

1 to 72

Invoice financing

1 to 4

Mortgage loans

6 to 240

Pawnbroking loans

1 to 24

Short-term loans

Up to 1

Personal loans

2 to 60

 

Why invest long-term?

Adding long term-loans to your investment portfolio offers many benefits. First, loans with a longer maturity on average have higher interest rates, which would positively impact the overall return of your investment portfolio.

Secondly, investing long-term allows you to lock in those returns for longer periods of time. When your money is invested throughout the whole term, you don’t have to bother with reinvesting. This is important as the effect of uninvested funds, i.e. cash drag can be significant when considering total returns.

Worried that investing in long-term loans means less liquidity? Mintos offers a great solution for that. If for any reason you need immediate liquidity, you can sell your investments to other investors on the Mintos Secondary market. Selling the loans is completely free, there are no fees or commission.

How to diversify across loans with different maturities on Mintos?

If you invest on Mintos manually, you can select the maturity at the top right-hand side of the Primary and Secondary market pages by moving the sliders underneath “Term”.

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The default setting for the sliders is to include loans with all maturities available for investment on the marketplace. However, you can move each of the two sliders for a more narrow selection.

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If you use Auto Invest, the process is very much the same. You can adjust the maturity of loans which appear in your portfolio by moving the sliders along the scale where it says “Remaining Loan Terms (months)”:

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Give your portfolio the best protection from risk by diversifying across different loan maturities and different loan types on the Mintos marketplace. However, there are still five more ways to add layers of risk mitigation to your portfolio. So stay tuned for the next article in this series

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