P2P lending

I was planning to write a blog but didn”t manage to find time especially in the context of P2P lending.

There are lots of site available in europe for P2P lending and some of them turned out to be outright scam. I have personally invested small amounts in some of them.

Envestio and Keutzal turned out to be scam and i lost my investments. This was lesson learened that can not only loose your investment because of lender defaults but also the operator might disappear which happened in case of Keutzal and Envestio.

Looking back there were few red flags and we need be do our own due diligence.

Stay away from platforms:

  1. Not doing or minimal KYC
  2. Platform changes bank account
  3. Offers unusually high interest rates eg Envestio and Keutzal were offering 20%
  4. Interface looks very similar to other platforms. Chances are both are scams example Envestio and Keutzal

In the next blog, I will share my experience with other P2P lending platforms

Are there any options for fixed deposit ? Zinspilot review

As you might know that the interest rates in fixed deposit (FD) account are either negative or very low (at least in Germany). I still wanted to look for platforms which provides inflation beating interest rates or guaranteed returns. The best platform i could find is Zinspilot as it aggregates FD options from different banks in the EU. You can easily sort based on interest rates, duration of FD, banks and the country in which bank is based.

Account opening: You need to go through the postident process to open and verify your account. Once your account is verified you can use Zinspilot to open FD with tons of bank in the EU. A The website and customer support is available in German only. All the accounts are protected by EU-wide harmonized statutory deposit insurance for amounts upto 100,000 Euros per investor. Currently, the interest rate ranges from 0.15% pa to 1.85% pa, depending on the duration of FD.

If you have flatex account you can directly accees Zinspilot i.e. no need to create separate account for zinspilot.

Fees: There are no account opening, transaction or maintenance fees.

Best of Zinspilot: Rietumu Banka from Latvia is currently offering 1.85% pa for 5 years FD. A 20% tax will be withheld on income from the interest as per Latvian tax laws. If you provide tax residence certificate from Germany the tax will be reduced to 10%.

Do i recommend it. Heck no!!! first of all, the best interest rates don’t beat inflation and second you need to pay withholding tax plus all the paper work.

What if you still want to go for FD: I’d recommend to pick the FD from banks which are based in countries which don’t withhold taxes. for eg APS bank, Malta (1.5% pa for 5 year FD) don’t withhold any taxes but all the taxes are deducted by Zinspilot as per German laws. In this way, you can self-declare in Germany and hence avoid double tax and unnecessary paper work. There are ways to avoid double taxation but in my opinion it’s not worth the time because of meager returns!!

Skin in the game: I went for APS bank FD to try it out for an year even though i know returns don’t beat inflation but are guaranteed and better than the checking account (0%)!!!

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Are ETFs Robo advisors worth ? Quinrion review

ETFmatic is based in the UK so i was looking for robo-advisors based in Germany without fees. There are tons of robo-advisors based in Germany but almost all of them charges flat fees or based on performance. You can quickly check which Robo-advisor platform is available in your country and associated fees. I decided to take a dig into Quinrion.

Account opening: You must go through the postident process to get your account verified. The website is available in German but google translate works quite well, if you don’t know German. Based on your risk profile, the platform will suggest different combination of stocks, commodities, bonds just like any other robo-advisors.

Fees: They have 2 different types of accounts basic vs comfort. The later comes with services of personal adviser for a fee. In my opinion it’s not worth to go with comfort pack.

There are no costs till transactions worth 10,000 Euros but the minimum amount to open an account is 5000 Euros. Once you have deposited 5000 euros you can start savings plan as low as 1 euros per day.

Please note that the minimum amount required open an account changes from time to time (quite frequent). So you can keep checking and open an account once a deal is available which fits your needs. They also offer starting bonus of 25 Euros for new account for a limited time. You can check prices, offers in the cost section.

Advantages: (i) Savings plan and ease of diversification (ii) Bonds ETFs with different grades and duration from all over the world. (iii) Equity ETF from emerging to developed markets.

Below are the ETFs in my profile:

Bonds ETFs: LU0690964092, LU1109939865, IE00BDBRDM35, IE00BC7GZW19, LU1650487413, IE00B4L60045.

Equity ETFs: FR0010315770, IE00B95PGT31, IE00BCBJG560, IE00BYYR0B57, LU0908500753, LU1681045370, IE00BL25JM42, IE00B42THM37, IE00BYML9W36.

Disadvantages: Other than fees, the website is quite clunky and no apps available.

Skin in the game: I have opened an account even though the minimum to start is quite high and fees after investment of 10,000 Euros. I plan to see for the next year or so how the portfolio performs. Given the diversity in portfolio am confident that i can get 5-6% (conservative) per annum if i continue to hold. I might stop once my portfolio is close to 10,000 which might take few years and hence no fees:) 

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Would you buy ETFs using savings plan from Flatex ?

There are no options for savings plan in Degiro where as ETFmatic won’t allow you to pick your own ETF. Therefore, I was looking for a platform where I can buy ETFs or funds with an option of savings plan.  The only platform which seemed reasonable to me at that time was flatex.

Account opening: Opening of an account is straightforward. You just have to fill in your personal info and get the account verified. After that you are all set to trade stocks, ETFs, funds, CFDs, & forex.  The landing and pricing pages are in English but all other pages are in German so either you must know German or use chrome browser with google translate.

Fees: Fees vary from what you want to trade and how often. They have different plans and the details are explained in the price section. You need to be careful as not to keep cash in the account as they charge negative interest rate.!!!! So if you transfer money from your checking account to flatex account and don’t use that money to buy or trade you’ll loose money from that account due to negative interest rate of 0.4%. This is a big drawback!!!!

They have some ETFs for which they don’t charge any brokerage fees except Additional Trading Costs (ATC) but for all others you must pay 1.5 euros plus ATC per transaction. The ATC can vary depending on how much you are investing per month in savings plan.

As an example let’s look at the cost associated with buying 100 Euro worth of iShares Core MSCI World UCITS ETF USD (Acc) per month as a part of savings plan. Recall you must pay TER for ETFs no matter where you buy them.

Fees (euros)DegiroFlatex
ATC01.5 Euros
Brokerage Fees01.5 Euros
Per month03.0 Euros
Per year0 3*12 =36 euros Euros
For 10 years036*10=360 Euros

Assuming that the average return rate is 8% per year with flatex you are only getting 5% whereas with Degiro you’d get 8%. This also means that you must make at least 3% per year with flatex savings plan in order to be break even. I let you decide if it’s worth to pay fees when you can buy it somewhere else without fees :

Verdict: I did open an account with flatex but after looking at the fee structure i decided not to use savings plan option but rather keep buying manually with Degiro . 

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Yield curve inversion 101: Is recession looming ?

You must have heard lately in the news that the yield curve has inverted but were wondering what the heck is that!!! and what does it mean for my investments. In this blog i’ll try to explain inverted yield curve in simple language and it’s possible implications.

The image above shows (i) Normal yield curve (ii) Flattening of the yield curve & (iii) inverted yield curve

The horizontal axis in these curves represents maturity in years and vertical axis represents yields aka interest rates of bonds issued by US treasury. In normal case, short term interest rates are lower than long term interest rates which is natural but as the curve flattens short term interest rates are closer to the long term and eventually the long term rates become lower than short term and this phenomenon is known as yield curve inversion. Yield curve inversion is considered as a predictor for recession and it was fairly accurate in the past. The onset of recession is ~ 20 months after the curve inversion so recession might start some time in 2021. However, there has been lot of quantitative easing or economic stimulus in the recent past and i wonder if that might confound the predictive power of curve inversion. Only time will tell!!!

My plan: Start loading up whatever extra cash i can so once the recession hits i can buy Stocks, ETFs at a hugely discounted price. Keep doing dollar cost averaging aka Systematic investment plan and don’t sell stash early even if the prices goes to rock bottom. I know one might say that’s bad risk management but am thinking of long term. I’m certain there is serious money to be made if one buys during recession and hold for long enough provided recession doesn’t long this life time 🙂 

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Degiro

Robo advisors won’t let you pick your own stocks, bonds or ETFs and hence i was looking for a platform where i can buy the same without fees or marginal fees. After combing through the web i ended up with Degiro. It was a good call!!!

Account opening: You can open an account in https://www.degiro.ie/ rather than https://www.degiro.de/, if you want English website, customer support and no postident process. If you open an account through .de domain you have to go through verification via postident. Once your account is verified you are ready to buy stocks, ETFs, commodities, bonds, futures, funds, CFDs and leveraged products.

Fees: In just a few clicks you can buy wide variety of financial instruments from European or American stock exchange. Fees depends on what you are buying and the exchange you select. Make sure you check different exchanges before you buy as exchange fees are different.

You can buy commission free ETfs (one trade per ETF per calendar month) in Degiro. You’d have to pay fees if do more than one trade per ETF per calendar month unless the trade is for more than 1000 Euros in same direction i.e buy/sell. Needless to say you have to pay Total Expense Ratio (TER) for any ETFs you buy.

Tax implications:  Degiro don’t deduct taxes atleast “.ie domain” so you must do self declaration.

Advantages: Stocks, ETFs, commodities, bonds, futures, funds, REIT ETF, CFDs and leveraged products are available under one roof and can be bought in couple of clicks.

Disadvantages: There are no savings plans for ETFs and funds so you have to buy manually every month.

My ETF pick: I was looking for ETFs that tracks the performance of an index composed of companies from developed countries and  iShares Core MSCI World UCITS ETF USD (Acc) ETF is a perfect match .The fund has quite decent return i.e. 41% cumulative in the past 5 years moreover it’s also available as commission free ETfs.

Recommendation:  Definitely worth a shot if you are looking to buy wide range of financial instruments without digging a hole in your pocket. 

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ETFmatic

The first robo advisor ETF platform that i explored in 2018 was ETFmatic. The reasons to choose ETFmatic were (i) website and customer support in English & (ii) No need for postident process (big plus at that time!!!). The issues with postident and how to overcome it will be discussed in a separate post.

Account opening: The account opening process is quite straightforward, you need to enter your personal information and upload identity documents i.e. copy of passport. You also need to answer series of questions to create your risk profile. Once your risk profile is created the system will suggest combination of equity and bonds ETF for your portfolio. for example 70% equity and 30% bonds. Don’t worry you can change the percentage if you wish but you can’t pick ETFs.

ETFs available: Below is an example of equity and bonds ETFs assigned to my portfolio. I don’t think these will change from one person to another but as you can see it covers ETFs world wide and are quite decent.

  • Bonds ETFs: Euro government (VETY), & Euro government inflation linked (IBCI)

If you notice most of the above ETFs are distributing . This means you will get dividends in your account which will be automatically invested by the system so you are basically on an auto pilot and watch your money grow (hopefully) without any intervention.

Fees: There are no account opening, deposit, withdrawal, trading or exit fees. However, they charge 0.48% Assets under Management fees plus the ETF issuer costs also known as Total Expense Ratio (TER). The average TER of ETFs in ETFmatic Portfolios is 0.12%.

The asset under management fees is waived for minors account. So if you don’t want to pay 0.48% fees just open your kids account and you only have to pay TER which must be paid no matter where you open your account.

Tax implications: ETFmatic don’t deduct taxes so must do self declaration in your own country. I see this as a big plus as it avoids all the unnecessary paper work of double taxation.

Advantages: Simple and easy to use

Disadvantages: The only disadvantage i see is you can’t choose which ETFs to invest as it is automatically done by the system. But given that it is a robo advisor one can’t really say that it’s a disadvantage !!! Last point to consider is that the company is based in the UK so one doesn’t know what happens after Brexit.

Recommendation: Definitely worth a shot if you are into passive investing!!

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Why create another blog on investments ?

You have most likely ended up on this blog while searching on how to invest in financial instruments as a non-EU citizen living in Germany but don’t speak German or limited German. My journey started 2 years ago when i was looking around on how to invest small amounts of money in stocks, ETFs Mutual funds, REITs, P2P etc but couldn’t find any products which were simple to use, not charge exorbitant fees and are available in English. My motto was and is simple i.e. I don’t want to pay any fees for fund management but want decent return on investment. If you are like me it’s your luck day and have landed at the right blog.

In this blog, I will share my experiences in opening and managing account from different service providers ranging from stock trading to P2P. I will most likely start chronologically from where i started and where i am today to give you complete picture of different products and hopefully you can directly use this knowledge to decide what suits you.

PS: I’m also in crypto so will share that too if you want to take a dip into shitcoins or wannna be a bitcoin maximalist 🙂

Disclaimer: I have shared personal experience in this blog and is not meant to be investment advise. Please invest at your own risk and don’t be a cry baby if you loose money 🙂

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