Portfolio Manager is a semi-automated service you can use to invest in peer-to-peer loans with Bondora.
You don’t need any financial knowledge or other previous experience since it does everything for you. It's a service which manages everything to do with your investments, which makes it perfect for people who are new to investing in P2P, who are unsure of how to get started, who want to spend as little time as possible managing it and who want to have everything set up quickly.
To get started, choose one of the risk strategies that range from "Ultra-Conservative" to "Opportunistic", deposit money, and off you go. From the moment you click "Start", Portfolio Manager buys P2P loans with different credit ratings and amounts in your portfolio that match your chosen risk-return strategy.
How quickly your deposited amount is invested significantly depends on the current availability in the market. Only when borrowers apply for loans, and we confirm them, Portfolio Manager can make investments for you since you are funding a part of these loans (You become the bank!). However, due to having a large number of investors and borrowers on our platform there is usually a steady flow of availability. Even so, it may take a few days if you want to invest large amounts of money all at once.
In the next section, we'll explain the heart of Portfolio Manager, the risk-return slider, which you should adjust to your needs before clicking "Start".
The risk-return slider: Choose a risk strategy
The risk-return slider is the heart of Portfolio Manager. First, you’ll need to select which risk-return plan best suits your goals. Drag and drop the slider to one of the options, ranging from “Ultra Conservative” to “Opportunistic”. If you are unsure, choose a "Balanced" portfolio first, it’s the most popular setting with our investors. Since Portfolio Manager offers comparatively few settings options, your decision is of paramount importance here.
The position of the slider determines which loan ratings will be represented at what frequency and with what amounts in your portfolio. Therefore, decide with care. If you are risk-averse at all and are satisfied with lower returns, adjust the risk-return slider further to the left in the direction of the conservative choices. If you’re not afraid of more volatility and want to take the chance of higher return opportunities, you're more likely to place the slider on the right (the opportunistic side).
As you move the slider and change your starting capital, monthly payments or investment period, the values which give you a preview of the expected distribution of the loans are also adjusted. This preview can be displayed by rating or country. Try out the different settings until you find the ideal risk-return strategy for you.
In the next section, we’ll tell you what else Portfolio Manager can offer.
Portfolio Manager Settings
To fully benefit from Portfolio Manager, you should also know about the other settings.
In addition to the risk strategy, you can also determine the maximum bid size and the maximum investment per loan. If you want to keep it simple, you can have them calculated automatically by clicking "Calculate automatically". Depending on the available capital, the "Suggested investment size" indicator shows the amount Portfolio Manager recommends per investment. You can quickly change this amount to a higher or lower figure. If you choose a higher amount, keep in mind that your portfolio could be less diversified and the risk increases due to a smaller spread of your capital.
Buying loans on the Secondary Market
In the settings option, you can choose whether Portfolio Manager will buy loans from other investors on the Secondary Market in addition to newly issued ones. If you activate this, only current loans will be purchased at the time of the transaction (in other words, it will not buy loans that are overdue or have defaulted). Portfolio Manager never acquires loans at a premium – only those at par or a discounted value.
The bid size allows you to set the maximum size of a position in your portfolio. The smallest bid amount you can set in Portfolio Manager is €5. Even so, it is often the case that Portfolio Manager's bid is lower than that (e.g., €1) when the demand for a loan is high. This happens when more investors are bidding on the same loan than a distribution of €5 per investor could be achieved.
Since we want you to realize a portfolio according to your chosen risk-return strategy and not to compete with other investors through limited access to specific loans, bids from €1 are being implemented automatically by Portfolio Manager. No additional intervention is needed from you.
Max investment per loan
If you set the "Max investment per loan" higher than the "Bid size", it may happen that the Portfolio Manager bids on the same loan multiple times. Your investment in one loan is then divided into several parts. In other words, auctions receive more than one offer from you. This approach can certainly be beneficial. For example, it is possible to sell single parts on the Secondary Market later, rather than the whole loan. On the other hand, you could argue this gives you less diversification overall.
What is the spare cash balance?
The amount you set as spare cash will not be invested. It will always remain on your Bondora account and is at your disposal. You can use this reserve as collateral to withdraw to your bank account at any time, or you can use it to buy loans yourself on the Secondary Market. If your Bondora account contains less cash than your chosen spare cash balance, Portfolio Manager will not reinvest in any more loans until the desired reserve is exceeded. As a result, any amount in your Bondora account that exceeds the set reserve will be reinvested.
Portfolio Manager not only buys new loans for you, but it can also take care of selling them again automatically when you need cash or when you want to stop investing with Bondora. Just scroll down to the bottom of the Portfolio Manager page and expand the "Sell loans" section. Here, you enter the amount of cash you want to liquidate in your portfolio.
How long the selling process takes will depend on the market demand and the status of your loans. It’s important to remember that you will miss out on profits by selling loans, as with this approach you can only expect the loan's current principal amount and not any future interest. Furthermore, you should be aware that current loans are sold much faster than those that are defaulted (due to investor demand).
It’s likely that a higher number of overdue loans will remain in your portfolio which cannot be sold as fast and therefore may potentially generate losses until recoveries generate a cash flow back into your portfolio.
If you decide to liquidate your investments on Bondora, the most profitable way to do this (other than waiting until the loans reach maturity) is to stop any reinvestments and withdraw interest and principal repayments on a regular basis to your bank account.