P2P Platform Risk Adjusted Return Comparison

Each platform has different types of Loans and different Returns. How do we compare the platform Returns. An easy way is to see for each category how much Return you are making after factoring in the Fees and NPA.

I have two ways of doing it. One is to rely on platform published data and other to extrapolate my returns as assume in future portfolio will deliver similar returns.

I have calculated both numbers and compared them


Let’s the check the Interest Rate published on the platform:

Almost 70% loans are in the range of 18.5%-23% .

Platform NPA status:

If you calculate in terms of Percentage loans delayed beyond 90 Days are around 4.6% .

My actual  portfolio average ROI is 22% and NPA is around 4.5%. Hence Risk adjusted Return = 22%-4.6% =17.4%  .

If i deduct the Fees in the long term I should make around 15-16%  if things remain the same which is approximately equal to what I am already making.(15%).

My portfolio Returns are at par with platform performance


ROI for Rupee Circle:

Average Return is approximately 25%

Platform NPA status:

If you calculate in terms of Percentage loans beyond 90 Days are around 4.2% .

My portfolio average ROI is 25% and NPA is zero at the moment. Hence Risk adjusted Return = 25-0-2.5% =22.5%  .

With time my NPA should increase to platform level and then after fees I should make 25-4-2.5%= 18.5% (as fees in rupee circle is slightly higher than I2I)

Also remember that rupee circle has less number of loans till date and  its NPA may rise . But at the moment I am generating Higher Risk adjusted Return than I2I platform.


Lenden ROI


They have not mentioned but as of now 75% of loans are in unidentified category with average ROI = 48% and others in high and ultrahigh with average Interest = 26% approx

LendenClub NPA:

Interestingly NPA for Instamoney (short term loan) is published separately which is a good thing as it is a different asset class and NPA should be read in a different way. Total NPA published in instamoney =4% approx . A 4% default annualized will be approximately 16% plus annually and after fees you will get 48% -16%-4% =28% .

My portfolio instamoney  NPA is around 7.5% which is  around 30% annually  but this class is pretty volatile. Which makes my return around 48% -30%-3.5%= 14.5% . 

Good part is you get lot of loans and can use auto disbursal also but do expect lot of NPA and volatile returns.

For Non Instamoney Portfolio NPA = 4.11%.

My personal portfolio non Instamoney average return is 26% .My NPA is around 6%. After factoring in Fees I will make= 26%-1.5%-6% =  19%.


Cashkumar has only one fixed interest Rate =41%

Again as loans are short dated (approx 4-5 months) 3.35% NPA will approx equal to 8-9% annually.

My historical NPA has been close to 5% which will be approx 14-15% annually . After Fees I should make close to

41% -15%-1%= 24-26% if the NPA does not go higher.

But in short term loans you need to be wary of any change in NPA as they can impact the ROI fast.


Average ROI in OMLP2P = 23-24%


As of now NPA is extremely low <1%.

With time NPA should go up. I expect NPA to go upto 4% plus and average Risk adjusted Return to be 16-18% after Fees.

As of now my Risk adjusted Return = 20%


Faircent ROI:

Faircent NPA

Faircent consider NPA after 6 EMI delay which is 180 days. For 90 Days delay you can double the delinquency.

My portfolio return after factoring NPA has barely been 4-5% after Fees.

Summary of Performance in table:

My article on Fees comparison:

P2P lending Platform Fees Comparison


  • Your Total returns should fall into 15-25% range if you are sufficiently diversified
  • Platform like I2I funding, RupeeCircle and OMLP2P  have less divergence between platform published numbers and my portfolio returns.
  • Faircent has the lowest risk adjusted return while cashkumar highest.
  • Cashkumar and Lenden have high yield and more volatile returns thus can be used to enhance yield(Like midcaps )
  • I2I ,RupeeCircle and OMLP2P can be used to create  a stable portfolio (Like Large Caps)
  • Short Term loans NPA should be taken with a pinch of salt as portfolio churn is higher and  overall capital loss would be much higher than published numbers.
  • Combination of these platform is sufficient upto 10 Lakh deployment without problem.


I2I Account Referral Link(Use Code I2I50%DISCOUNT while paying to get 50% off,Mail me after registering to get further benefits)

Rupee Circle Referral Code- PIND145
Rupee Circle

LendenClub Referral Code – LDC11989

OMLP2P Referral Link


Mail me to get Cashkumar Referral

Review of OMLP2P

People who have been investing in P2P for a while would agree how difficult it becomes beyond a point to find new borrowers.The only way to tackle is to find more platforms and spread your capital across them.In this process I have recently started investing in OMLP2P . It is too early to comment how my NPA will fare in the long run but I would like to describe my experience in terms of quality of Loans, Fees and where it fits among the other Platforms.


OML P2P  was setup in 2016 and is registered as NBFC-P2P company. The promoters and board of directors have a decent pedigree in the Lending business. Details of the promoters is available


Types of Loans: OML caters to both salaried and business loans and on a given time you can expect to have 6-8 loans to choose from .They publish an appraisal sheet of each borrower in which the key parameters

  • Cibil score
  • Salary
  • Average Daily Balance
  • Write off
  • Bounces
  • Details of Loans.

Minumum Ticket size is 5000 as of now.

Average ROI : The ROI  range is quite high in OML.Ranging from 15-30% . If I compare it with I2I and RupeeCircle the borrowers spread on OML is a combination of the two.

In I2I we have either Business loans or Government employees as occupation for 90% borrowers

RupeeCircle generally  has people with salary less than 25000 or business loans.

In OMLP2P I see either business loans or salaried people which salary mostly >25000.

Therefore  ROI in OML for most salaried loans < RupeeCircle (approx 2-3%) because of  more stable jobs

The ROI is generally higher than I2I . For a P3 category loan you can expect around 24-25% Interest which is generally unavailable in I2I but again it’s not an apple to apple comparison as  I2I you have access to lower risk people at 20%. To sum up the various range available in the platforms are:

  • Not considered ultrashort loans (<4 months)

Some of the loans will fall out these range but they are a minority.

As you can see I dont go for the riskiest in each platform mostly  but target 80 percentile in terms of risk as I find it to be the sweet spot. Offcourse some one with a smaller portfolio should start with lower risk and gradually move on to higher once you have built up capital.

Fees: In terms of fees its exactly like I2I where they charge 1% upfront Fees which makes it a better platform for 18 Months plus loans. I had compared upfront fees with EMI based fees earlier.

You can register free of cost at  OMLP2P.

P2P lending Platform Fees Comparison

NPA : I have details of the historical performance of the platform.The numbers look promising but I can comment on my performance only after 5-6 Months .

The platform has disbursed more than 3 Cr of Loans and at 1.5 Lakh delinquency the NPA is staggeringly low . This number will definitely  go up but at the current NPA it seems like a  steal.I think one reason for this trend is that once platform grows the pressure to find new loans is immense and delinquency increases which is not the case with new platforms.

Conclusion: Based on the various parameters I find it to be a good platform for people who are  already investing in I2I and rupee circle and want to add another platform as off late finding loans has become tough due to increasing number of Investors in various platforms.

Some of the things which can be improved are:

  • Reducing ticket size to 2000
  • Adding names of the borrower which help to track them via social media account.
  • Having an app which will make investment process easier

I will be covering monthly performance of this Platform along with others.


PS:Lender Referral Link for OMLP2P:


List of P2P companies in India which have received the NBFC-P2P registration from RBI .Good starting point for people who want to explore new P2P platforms. I have marked in green the ones which I have tried at some point in time




Portfolio Diversification and Alternate Investment

It is known fact that diversification helps in reduction of total risk . Conventional portfolio use this principle and diversify between bonds and equity etc. This is the foundation of modern portfolio Theory.

Let’s take an example . Mr X is 30 year old. Conventional wisdom say he should invest 70% in equity and 30% in Debt.

Let’s look at the risk and return parameters of this portfolio.

let’s assume Nifty gives annual return of 12% in the long run .Historical volatility of Nifty is around 15% per annum.

let the debt portfolio gives 7.5% with annual volatility of 5%.

so a portfolio with 70% in equity and 30% in debt will give = 70% * 12% + 7.5%*30% =10.8%

Portfolio volatility is calculated as

Image result for variance formula 2 assets

Portfolio Volatility = 10.5% for our portfolio

almost 85% volatility is attributed from the equity portfolio which makes the return quite unstable with frequent drawdown.

In contrast to this another portfolio allocation is in practice where you try to balance the risk(volatility) by leveraging low volatility asset class. It’s called Risk Parity

Risk Parity: Risk Parity is approach where portfolio weights are created according to equal contribution of risk. It implies that you can  take leverage for bonds and lower contribution of equity so that your output in terms of return is such that both  equity  and bonds contribute equal  to  volatility.

There is another approach which can be followed which lies somewhere in between and provides good risk adjusted return.

Instead of 70% Equity and 30% bond you will have 30% equity and 130% bond etc so your return matches equity but volatility is low.Problem is during a equity bull run it will under perform the other portfolio

I try to create a portfolio which lies in between these 2 methods where I can participate in equity and also lower my volatility to certain extent. The idea is to find very low correlated assets.

Let’s compare this portfolio (Portfolio B) with traditional Portfolio(Portfolio A):

Portfolio A: Traditional

70% Equity 30%  Bond

I have considered correlation between bonds and equity as 0.3 based on some market reports. It would vary depending on types of bond and historical period you take. Idea is to show the correlation is low.

Portfolio B: Hybrid


basically I have used futures instead of stocks to take equity exposure( I am able to leverage 10X approx i.e. by putting 7% margin I get exposure to 70% portfolio.

Cost of exposure is the future premium which is around 5%.

Instead of using future I can also use combination of options. You need to be proficient in Option Trading to implement that strategy

My Returns are higher compared to traditional portfolio because I have leverage. Important part is how much is my portfolio volatility.

I have taken correlation from various reports and true numbers can deviate from my numbers. Essence is to show that most of these assets are not strongly correlated as they have different underlying viz equity, credit, Real estate, Retail loans, Bank FD

Correlation for FD portfolio is zero as it wont show any deviation. I have posted article on creating risk free FD portfolio.

Create a Risk Free Fixed Deposit Portfolio


How to calculate Portfolio Variance for multiple assets with correlation?

Here is the formula:

Image result for variance formula multiple assets

Based on this my Portfolio Standard deviation is


My new portfolio has better risk adjusted return i.e for lower volatility I am achieving higher return. Offcourse you need to monitor this portfolio for margin requirement,re balancing etc.

If someone is very conservative they can further increase FD exposure ,reduce equity and portfolio volatility will drop further at the cost of some returns!!


How to buy Corporate Bonds Online?

When it comes to investing in Debt most people look into only 2 options:

  • Fixed Deposit
  • Debt Mutual Funds

Though these have their own advantages which I have covered earlier, one thing which they lack is liquidity . You end up paying either an exit fees or you have to wait till a stipulated period.

Other problem is It’s very hard to take advantage of a view when you are investing through a Debt mutual fund as   you are not aware of the portfolio at any given time.

It makes sense to invest in  Debt Funds to diversify across debts but you can add your own bond portfolio based on your analysis and save some expense ratio.

The rationale is when you are certain about some company why not just buy the bond directly if it is offering decent yield .Gradually you will  understand the mechanics of the market and would be able to take credit and interest rate view.

You can buy bond at a particular yield and if the yield spikes you can average it or book profit if yield softens. Due to the liquidity you wont face problems in entering or exiting.

So how do we buy bonds. We can buy directly buy bonds from the broking platform.

NSE publish details of the available bonds for trading everyday on it’s platform. It is available under live Market section


Various details are available for a bond:

  • Coupon
  • Maturity
  • Volume
  • Yield To Maturity (YTM)

We can check the tentative YTM from this page and select the bond we would like to evaluate. Let’s say we shortlisted Tata Capital 3 year bond.We can then do further drill down:

What all can we see:

  • Coupon = 8.8%
  • Maturity = 27 Sep 2021
  • Category = Sr secondary (It means in case of default we have rights on company access over other lenders)
  • Credit Rating =AAA
  • Coupon Freq = 1 year( You can google the ISIN number to check these details)

Now comes the important part: PRICING.

Bonds are priced by discounting of future cashflow . YTM is the number  if we use to discount we will get  the current price of the bond .

Bonds quoted in the NSE platform with dirty price. What does it mean?

It means that accrued interest from the last coupon date is added to the current price because the buyer will get the coupon not the seller.

Now how to check the current YTM. We also need to check the current yield( which will be higher than YTM if bond is trading at discount.

This is because in maturity bond pays back the principal ,if we buy in discount today we get more than the YTM  but if we buy in premium we get less. So for people who are buying to trade this bond rather than hold it till maturity current yield gives better picture.

To Calculate YTM you can use this link:




Based on the current price, the bond is trading at 9.16% yield which is better than most FD available in the market. People who are interested in buying this bond should do their own due diligence about the company which should include Fundamental analysis ,market news and sentiment analysis of the company.

The bond has 2.5 years of maturity thus will have small exposure to interest rate risk . We will get coupon as dividend which we have to reinvest.

P2P Platform Analysis (April,2019)

This month I have made some significant changes in my portfolio.

  • I will be adding  a new P2P platform from this month called OMLP2P
  • I have decided to stop my “unidentified risk” category investment in Lendenclub

I will cover the rationale in detail .Let me start with the current month allocation and performance stats

Portfolio Composition

March Allocation

April Allocation


Portfolio Changes:

  • I have stopped publishing Faircent performance as I am going to withdraw all my capital from it in the next few months and not going to evaluate it anymore
  • No changes in I2I except the EMI are reinvested
  • Fresh Inflows to Cashkumar and RupeeCircle.
  • Will add OMLP2P in May

 Portfolio Performance:


Performance Analysis:

  • The positive aspect has been that rupee Circle  is the only platform I have  been investing in where till now I have not faced any delinquency.
  • My Lenden performance has been steadily deteriorating . After a bit of evaluation I figured out the major reason for fall in performance was due to my exposure in “Unidentified Risk” Category loans.

On the surface these loans look quite lucrative with 48% return but if you try to do understand the payoff of this product you realize 48% is too low for the risk they expose your portfolio too considering the underwriting I have seen lately of Lenden . A small increase in the NPA can change the ROI.

Let’s say average 6% default rate is for loans with terms up to 90 days. Taking this into account, if a loan originator lends 100000 worth of loans, then after 90 days, it can be assumed that 6000 worth of them will have defaulted. Therefore, a loan originator will need to charge 6% per quarter in interest to make up for this default rate. Without compounding, that makes 24%. So if we combine this with the APR needed to cover Feesl costs, we are close to a 30% APR already. This figure is  covering the default rate of the original amount.

Now if the EMI also have 6% default rate ,in 3 months almost 10% will be the default. which is equivalent to 40% default rate plus the fees

Below is a example at various level of default:

In one scenario we are making money while other losses after Fees

Basically even though your number of defaults are just 6%and 7% but due to the short nature of loans you have to take reinvestment risk of the whole capital . i.e for earning 32% (48% reducing rate) a year you have to invest atleast 4 times if you do not reinvest the capital.

Factoring in the Reinvestment  makes a small default of 7% equivalent to 40% plus.

My portfolio was yielding pretty low for the recent the disbursal in “Unidentified Category”. I Can guess that is because Lendenclub is trying to onboard as many borrowers as possible and in the process underwriting is taking a hit.

I will stick  to the longer term category for a while and see if my portfolio performance improves!.

One problem I will face is to find enough Loans but it’s better than making losses

  • Another problem  which has been plaguing me is the paucity of loans in the platforms. Not having enough loans means Either I wait for too long or end up put money in substandard loan.

To overcome this problem I am planning to invest in OMLP2P . The ROI  range is around 22-30% with medium term tenor 12-36 and overall platform NPA seems quite low. They have disbursed close to 10Cr till now and have an NBFC-P2P license.The promoter is experienced in the lending business which is a positive.

Compared to Monexo and Finzy ROI is higher . Minimum ticket is 5000  which is on a higher side but is manageable for people who wish to create a decent size portfolio.

I can comment on my portfolio performance only after 3-4 months of investment.


I2I Account Referral Link(Use Code I2I50%DISCOUNT while paying to get 50% off,Mail me after registering to get further benefits)

Rupee Circle Referral Code- PIND145
Rupee Circle

LendenClub Referral Code – LDC11989

OMLP2P Referral Link


Mail me to get Cashkumar Referral

How much Diversification is enough in P2P Lending?

A lot has been written about diversification in peer to peer lending, including on this site .It is the most important factor in P2P lending. Beginner investors sometimes pay too much attention to the details of each individual loan, occasionally forgetting to simply diversify their investment across hundreds of loans.

Many get really frustrated after few months,  feel betrayed, turn, and doubt the  entire asset class, are almost always investors who simply failed to diversify their initial deposit in enough loans.

Lot of people see my portfolio of P2P and then start investing in those platforms. An important point which most people overlook is that my portfolio allocation is applicable only for the size of capital I have invested.

To elaborate it let’s assume if somebody has only 50000 to invest and they put their money in Rupeecircle only  how many loans they can invest in? Max 10 Loans. Even if 1 Loan defaults they  have a NPA which is close to 10%. People start panicking and stop the investment in that platform.

The truth is 1-2 loans can default in your portfolio yet the total platform NPA percentage can be very low. How?

If the platform has disbursed loan worth 10 crore and 5% is NPA level which means around 50 Lakhs is delinquent. Your portfolio is 50000 ,it can have 2 loans in default ,somebody else can have a portfolio with 0 default and thus total default is still 5%. Numerous combination are possible.

Its a very challenging question to identify at what level  we can say that our portfolio of p2p loans has become fully diversified. Basically, how many loans  does it take? To explore this concept I studied the performance of the P2P platforms in other countries got the data.

There were 2 factors on which it hinged:

  • Number of Loans obviously
  • Risk Category of Loans.

Below are the Charts which I got from a US P2P lending report.


Total Portfolio: 146 Loans for breakeven


High Grade Loans:60 Loans


Medium Grade Loans: 120 Loans


Low Grade Loans:164 Loans

It is evident that  for diversification we need more low risk loans but obviously our returns are higher for high risk loans. So how do we balance it.

How do we manage this problem? There are 2 ways.

  • We choose platforms which match our investment capacity.
  • We increase our platforms when we increase our portfolio size

A platform which has short dated loans and small ticket size is ideal for small capital as the churn is pretty high and in no time you have diversified into many loans while a higher capital requires a combination of loan tenors so that there is no shortage of loans to invest at any given time

I have created a table which will help to choose platform combination based on your investment capital and rationale. I have recently started investing in a new platform called OMLP2P. When the portfolio size increases it becomes really hard to find good loans and it become necessary to evaluate new platforms. I will cover it’s performance when I publish my portfolio results.

I have marked in green the combination of  platforms which should be chosen based on investment capital amount.

Eg: for someone with 1lakh-2.5 Lakh capital: lenden,cashkumar and XRated loans(1000rs) in I2I

I would suggest not to invest in P2P if you don’t have atleast 40-50k to invest else you run a risk of under diversification.

Lenden has the smallest ticket size(500) and lowest tenor (3 months) hence it is perfect for smaller capital while rupeecircle for people with larger capital

As your portfolio grow you can keep adding new platform and higher risk category. Based on my experience 5Lakh is the amount after which your returns start stabilising .

Once you have started investing you will have another problem,how much amount of good loans can I find on a platform in a month. I have created a table based on my experience, the amount of money which can be deployed in the various platforms in one month.

In Lenden I use auto invest so there is no hassle to evaluate borrowers. Other platform I check the borrowers before investing as ticket size is higher

Platform Referral Links:

I2I Account Referral Link(Use Code I2I50%DISCOUNT while paying to get 50% off,Mail me after registering to get further benefits)

Rupee Circle Referral Code- PIND145
Rupee Circle

LendenClub Referral Code – LDC11989

OMLP2P Referral Link


Mail me to get Cashkumar Referral

Creating Liquidity Using P2P lending

One Important feature of P2P lending is that it pays EMI which is sum of the principal Invested and Interest.

I had covered how it can be used as an emergency fund in one of my earlier article.

Parking Emergency Fund In P2P Platform

Today I will  demonstrate how to get a ball park figure of  your  liquidity and how to optimise it to your advantage.

Tenor of P2P loans are from 3 months to 3 years.  We can clearly demarcate the Platforms as short dated Loan platform and long dated.

Cashkumar and LendenClub are the short dated.

I2I funding , Rupee Circle are Long Dated.

How Does this information help me?

I Can calculate the average maturity of my platform which will give me an idea of my future EMI. I will tell you the shortcut method. To calculate the exact liquidity you need to download the report and then calculate EMI

  • For Lendenclub its very simple,Let’s say you have invested 2 Lakh. 90% is in 3 months loan.Its means around 1.8Lakh is going to be received in the next 3 Months. The amount will be slightly higher due to interest .

If we consider equal instalments I Can assume that around 60K will be received every month.

  • Cashkumar has higher tenor ,approx 4-10 Months. We can take average as 6 months. Let’s say we have 1.5 lakh invested.It means that around 25k per month.
  • For I2I and RupeeCircle average duration is around 24 Months. So we divide by 24.If we have 2.4 Lakh in total. It means  I will get 10k per month.

If I calculate the net available EMI each month then this is what  I will get:

It mean’s I have around 1 Lakh at my disposal in the next 3 months.How can I use this to my advantage:

Let’s compare 2 scenario .

One in which a person keeps 5 Lakh in Liquid Fund for liquidity and Emergency and second scenario where we use P2P lending to create liquidity.

One important factor is zero day Liquidity. You need to have  a portion of your liquid wealth which can be drawn at any time. I recommend having atleast 1-1.5 Lakh for someone who has almost zero liabilities. It can vary depending on the number of dependent and liabilities

The difference in the net return show how much better scenario 2 is . In a period of 15 years this strategy will help you to achieve 50% higher corpus.

If we wish to have more liquidity we can put more money in  Lenden and Cashkumar or if we have sufficient liquidity we can put money in  Long dated platform like I2I and Rupeecircle to lower reinvestment risk due to cash drag.



I2I Account Referral Link(Use Code I2I50%DISCOUNT while paying to get 50% off,Mail me after registering to get further benefits)

Rupee Circle Referral Code- PIND145
Rupee Circle

LendenClub Referral Code – LDC11989

Mail me to get Cashkumar Referral



REIT vs Real Estate

What  is A REIT?

REIT stands for Real Estate Investment Trust

REITs are securities linked to real estate that can be traded on stock exchanges once they get listed. The structure of REITs is similar to that of a mutual fund. Just like mutual funds, there are sponsors, trustees, fund managers and unit holders in REITs. However, unlike mutual funds, where the underlying asset is bonds, stocks and gold, REITs invest in physical real estate. The money collected is deployed in income-generating real estate. This income gets distributed among the unit holders. Besides regular income from rents and leases, gains from capital appreciation of real estate also form an income for the unit holders.

In India People have an affinity to Invest in Real Estate either through buying Plots, Independent houses or Flats.

Uptill now this was the only mode for taking real estate exposure but with the launch of Embassy REIT a new mode is available.

Background of Embassy REIT:

The Embassy Office Parks REIT’s initial public offering (IPO) is India’s first real estate investment trust listing (REIT) and sponsored by American equity investor Blackstone Group and Indian developer Embassy Group. Blackstone and Bengaluru-based Embassy Office Park are looking to raise Rs 4,750 crore from the IPO

When it comes to office and commercial real estate, it can’t get better than what the Blackstone Embassy Office Park REIT offers. Here is a sample: up to 32.7 million square feet of seven global quality office parks in India’s fastest growing cities — Bengaluru, Pune, Mumbai and Noida; 160-plus marquee tenants such as JP Morgan, Google, Microsoft, Accenture, PWC, Rolls Royce.  Almost half of this REIT’s portfolio is rented out of Fortune 500 companies on an average lease life of 7 years.

These are simply the best rent-yielding assets you can get in the country’s commercial real estate, which until this REIT came along, a retail investor couldn’t even dream of owning. What was available for investments in commercial were dodgy “assured” returns schemes from low-on-credibility builders who couldn’t even raise enough money from institutional investors to finish their building and hence took to wooing retail investors with unsustainable returns and often left them stranded with unfinished projects and broken promises. Now, you can dramatically upgrade in terms of quality with the Blackstone-Embassy REIT. Your money is well diversified over 75 grade A assets in prime locations

Returns will be in the form of Rental yield + Capital appreciation

Which will be  around 8% in rental yield and 3-6% Capital appreciation in the long term depending how the real estate market fares



US market REIT vs Equity performance:


In USA REIT have outperformed stocks in the long run. Even if they don’t outperform in India they are good addition to diversify the portfolio

Let’s Compare REIT vs Real Estate.

One caveat I would like to add is that if someone plans to buy house for living then off course  the comparison is futile as it’s a personal choice.

Various Positives of REIT over Real estate are:

  • Minimum amount to invest is 1.2 lakhs as of now which is quite low compared to the cheapest flats.
  • It has decent liquidity and can be bought and sold easily.
  • It is diversified across multiple quality assets unlike a single bet on a flat
  • You dont have to spend on maintenance ,parking, middlemen etc
  • No chances of fraud.
  • You can add this to your equity portfolio and thus diversify your investments.
  • Residential  rental is around 2-3% and retail people generally cant buy commercial property because  of non availability of loans

Positives of Real Estate:

  • You can take leverage through home loan( risky but can give high returns if real estate does well)
  • If you have deep knowledge  about the micro structure then a concentrated bet can be helpful( it’s like buying a single stock which becomes multibagger)
  • You can refurbish flat , use it to generate high yield if you have the right skill and connect.


REIT makes sense for all those people who are bullish on the real estate sector and want to diversify their portfolio.

If  you have  very good knowledge about local real estate market, Decent networth or you getting a  very good deal then go for standalone properties

Is SIP better than Lumpsum Investment?

NO SIP is not beneficial

If you think SIP has the power to allay your loses or protect you from volatility as promised by the mutual fund houses, Investment advisory, then brace yourself for a shock!

We get salary every month so we are forced to invest every month.

If you have 100Rs now its better to put 100 now in equity than divide it into monthly chunks and then put it in equity market

I Can prove it using Monte Carlo Simulation.

it is a tool by which we can simulate real world scenarios ,like how stock market can trend in future.

We will create 100 path and see the end result and check for ourself if SIP is the best choice or not.

We assume annual volatility of 12% ( which is the historical average) and risk free rate of 6.5% for simulation.

These are the various outcome we can have after 5 years.

Now let’s check in how many scenarios my average cost is less than 10000, i.e the cost if invested lumpsum today.

Below is the scatterplot of 100 simulations

Percentage cost less than 10000 = 23%

Min Cost = 7690

Max cost = 17880

Max benefit by averaging is far less while 77% time you are better off lumpsum.

Offcourse this is a simulated world and if we had a scenario where market is in depression for years and then goes up you will make profit but if we have such a pessimistic view of the market then why invest in the first place.

What I have done is a future scenario analysis. Infact we have backtested results of the US market.


Why does SIP lose to lumpsum. The logic is :

  1. By averaging you are betting that the market will drop, saving yourself some pain. For any given year the odds of this happening are less than 30%
  2. So statistically market is more likely to rise, in which case you will miss the upside. With each new invested portion you’ll be paying more for your shares.
  3. With SIP you are insinuating that market is too high to invest all at once thus you are trying to time the market
  4. By doing SIP you are changing the asset allocation as you will have huge cash position
  5. You will miss out on dividends
  6. Your cash will give around 4–5% return while you choose not to stay invested
  7. SIP also has time horizon. Since the market tends to rise over time, if you chose a long horizon (say, over a year) you increase the risk of paying more for your shares while you are investing. If you chose a shorter period of time, you reduce the value of using SIP in the first place.
  8. Finally, once you reach the end of your SIP period and are fully invested, you run the same risk of the market plunging the day after you are done.
  9. Backtesting shows in the long run lumpsum has outperformed SIP

What works for SIP is that it its psychologically easier and does not give you cold feet in a crash . You don’t have to fret over huge market drops , but with time when your investment becomes huge you will again have to deal with it.

So Rule 1) : If you want to put 100 Rs in equity better to put it now. You cant do it with your future cashflow but you can do it with your what you have.

Some people put everything in debt and then start a SIP which is not a good strategy.

Rule 2) If putting a lot in Equity makes you nervous then park money in something which has high yield like equity and less correlation.

Eg: P2P lending ,REIT etc.


Why P2P Lending Allocation in Portfolio makes Sense

Peer to Peer Lending is a relatively new asset class in India but has been an active asset class in UK and US for more than 14 years now.

How does P2P lending fit in an asset allocation and what advantage does it provide compared to an Equity and Bond Portfolio?

Let’s see the performance of various assets in USA from 2007 – 2014 which was a very volatile period.

Two things are apparent from the Chart

  • In the short term each assets had it’s troughs and crest and there was no guaranteed investment
  • Over the long term (and even including 2008) stocks did deliver good returns compared to other asset class in the US market.

The Problem with Stock-Only Investing

The problem is that large and mid cap stocks are highly correlated investments. The same goes for other stocks: small caps, international stocks, and emerging markets . If one goes up, the others typically go up as well. As a result an account only invested in stocks tend to be very volatile in the short term .

All stocks(Mid,Small,large, International) move together which can create huge draw downs and can honestly give even the seasoned professionals cold feet.

Ideally, you would invest in places outside of stocks, like in real estate and bonds. These investments are great because they give us a place to put our cash to work that is far less correlated to stock performance. If stocks tank, bonds and REITs are less likely to be affected.

There can be instances when two different asset classes show high correlation as in 2018 between Real estate and stocks as the cause of the recession was real estate itself

Below is the historical correlation of various asset classes in US .


A correlation value of 1.0 would be a perfect correlation while a value of 0.0 is no correlation at all. So when compared to stocks, peer to peer lending has an average correlation of between 0.13 and 0.19, a very low overall correlation! It should be noted that asset class correlation does change, so it would be great to see how this value changes year by year

For my portfolio P2P is currently yielding 16% and for the last 1 year it has hardly shown any significant correlation with Bonds and Stock market yield.

It has been highly uncorrelated with stocks and bonds. By including peer to peer loans in their overall growth-investments, stock investors are more likely to experience more consistent returns

How did P2P lending perform in 2008 in USA?

We can look at a mature credit industry that did experience this recessions: credit cards. Both P2P loans and credit cards are a similar investment: unsecured lines of consumer credit. And if we take the unemployment rate and stack it against the return that banks earned on credit cards , an informative picture begins to form:

It’s amazing to note that banks still did not lose money on credit cards during the 2008 recession. The stock market fell 57% in six months, yet major banks kept earning and earning.

In short, investors never lost money on credit cards, even during the 2008 recession, the worst economic catastrophe since the Great Depression. But returns did steeply dive by 20-40%, depending on the severity of the unemployment rate.

Thus a portfolio diversified through P2P lending would have performed better than pure equity portfolio

How Much Should You Invest in Peer to Peer Lending?

Minimum Amount:

As P2P lending is based on the principal of diversification I would first put a minimum amount people should invest.

  • If amount to invest is upto 50000 only invest in 500Rs Loan (like Lenden).
  • If 50000 to 150000 , invest in 500 and 1000 loans ,max 2500 (eg lenden, I2I and Cashkumar)
  • if 150000 + then use all platforms with maximum investment no more than 5000.

Ideally 4–5 Lakh is a decent investment size to be diversified across multiple loans and platform.

Allocation Percentage:

P2P lending falls somewhere in between Bonds and Stocks , while they provide stock like returns, the volatility is less like bonds .

P2P lending is high yielding, short duration, uncorrelated investing. Factor which should govern your allocation.

  • How much you have currently allocated to Equity and Bonds .

Most youngsters have high investment in equity and less in bonds as they have a long time horizon.

If someone has 70% Equity and 30% bond they can put 10–15% from Equity to P2P which will make there investment less volatile and also provide some liquidity in short duration.

For People who are in their middle age and have a very conservative portfolio of day 65% bonds and 35% Equity can replace some of the short dated debt funds with P2P lending to increase yield.

There is no sacrosanct number but depends upon your comfort with asset class,how well you monitor portfolio and diversify.