Beat inflation
Team Lendermarket

How to beat inflation? P2P experts share their valuable tips!

We’ve discussed the current high inflation environment in a few of our recent blog posts, and the situation still prevails. So, we thought, why not ask other experts in the P2P investing niche how they handle inflation and what tips they can give to other investors. 

Read further for insightful answers on how to beat inflation and not worry too much about your current portfolio!

Question #1 – What to do and not to do in the presence of inflation?

The question we asked was: “What strategies are you following in order to overcome inflation these days and what not to do in the presence of inflation?”

We chose this phrasing because we noticed that many investors are unsure about what action to take in the current situation. Should they sell their assets, should they continue business as usual? Here are some answers:

  • Jakub from p2pempire: I invest in assets where I can evaluate the risk and return. I sold some of my low-interest loans and moved those funds into higher-yielding loans in emerging markets, where I am familiar with the risk management procedures of individual lenders.
  • Sal from Revenueland: Personally, I find it fascinating to have to manage my investment portfolio during an inflationary flare-up. I had only seen real inflation by travelling to some exotic countries and in the stories of those who experienced it in 1980s Europe.

    My anti-inflation strategy is based on common sense and what epic investors like Charlie Munger have taught us. The danger is that in order to run away from inflation we go and get into worse trouble. In fact, I am significantly increasing my exposure to global REITs and US TIPS. Real estate has always been a good hedge against inflation, but doing so with physical real estate is a slow process that often requires working with debt. I don’t think it is a good time to take on debt to invest.

    TIPS, on the other hand, are US Treasury bonds indexed to inflation. I have some in my portfolio and am also benefiting heavily from the recent appreciation of the dollar. At the moment I would never invest in commodities and precious metals.
  • Lars from passives-einkommen-mit-p2p: At the moment, I mainly focus on productive assets in the stock market with sustainable payout rates. This means that I select companies that can pass on the price increases to consumers (McDonald’s, 3M, Coca-Cola, etc.). In this way, I also profit as a shareholder. This strategy has worked excellently so far this year and fits my own path as an income investor.

    I would currently keep my hands off any centralised crypto investments (such as Celsius). This year has shown once again that you can’t rely on them at all. If you really want to invest in cryptos, then simply invest in large established coins (BTC and ETH) under your own custody.
  • Philipp from Investdiv Many would say “Do not hold too much cash” (due to inflation). But for me, it’s essential to have flexibility if I see chances and can take them fast. So I don’t care too much about inflation. You can always find investments to avoid inflation but then you have to take the additional risk as well. Anyway, investing in short-term P2P loans, e.g. TIPS (inflation-linked bonds) or preferred shares for a part of the free liquidity could make sense for investors in times of high inflation.

As you can see, they all take a somewhat similar strategy, but execute it differently. Simply following the advice of “Cobbler, stick to your trade.”, they invest into assets where they are knowledgeable and can gauge risk and return, where for some this plays out as REITs and TIPS, and other stocks.

Question #2 – Is now a good time to invest in P2P?

“Do you think now is a good time to invest in P2P?” was the second question we asked. A similar question we answered in one of our recent articles: “Is now a good time to invest?”. Tying in with question #1, the investment sentiment in the current high inflation environment with wars, supply shortages etc. is not as greedy as in bull markets. So, it’s natural to wonder whether to invest now or rather wait. 

  • Jesús from Todo Crowdlending: P2P is one of the few assets that is still beating inflation (well, sort of, depending on the specific platform), so yes, nowadays I still see P2P as a must-have complement to my core portfolio.

    Although, in this context, perhaps more than ever, it is critical to choose your partners (platforms, originators etc.) wisely and diversify at all levels, including geo diversification and correct asset allocation.
  • Thomas from P2PGame: In fact, I think this is a rather special time for P2P loans. On the one hand, there is the chance to collect loans with high-interest rates from good lenders now. On the other hand, high inflation is driving up the cost of materials and the cost of living.

    This, of course, causes problems for real estate developers and private individuals, especially if inflation remains high in the future. These concerns can then generate higher default rates and could bring weakly positioned lenders into difficulties.
  • Sal from Revenueland: When the perceived risk in the markets increases, it is easy to want to pull away and stop all investments for fear of losing money. We are human, so we are naturally prone to making investment mistakes!

    Investing right now in P2P lending is a good idea because P2P lending offers returns that can easily counter current inflation. What needs to be done today is to keep a closer eye than before on the quality of the loans and the soundness of the lenders. It is better not to invest in loans in exotic currencies and then also not to invest too much of one’s total portfolio in P2P lending because the risks remain high.
  • Philipp from Investdiv: From the reward side, I would say yes. The interest rates are high and attractive, many platforms are regulated now or on the path to becoming a regulated platforms. Anyway, in Europe for sure there’s a big recession, which in the end could lead to increasing defaults. One has to know about that and be prepared.

The verdict in their eyes is clear: It’s a good time to invest into P2P as it is one of the rare asset classes that can beat inflation. However, you shouldn’t invest blindly. More than ever it’s important to pick your platforms, loan originators and loans wisely, because as Sal said, high inflation could lead to higher default rates. So, you want to pick loan originators that have strong buffers, to handle payouts even if default rates rise.

Question #3 – Do you have any helpful movies/books/resources to offer?

Our last question we asked was: “Would you like to share any movies, books, podcasts or life lessons/tips that helped you understand the current situation better? Do you offer any type of self-education source on your blog?”

We live in the information age, where mankind has good access to information (at least in most parts of the world). As these P2P experts have been investing for some time, we wanted them to share what they think are valuable resources.

  • Philipp from Investdiv: The newsletter from “The Macro Compass” is very interesting if you want to know more about macro developments in the economy. Besides that two of the best books I’ve read so far are “Mastering the market cycle” (Howard Marks) and “Margin of safety” (Seth Klarman).
  • Claus from P2P Kredite: There are a lot of articles on my blogs about the experiences I made in p2p lending. Also on the German site, there is a forum, where over 3500 p2p investors discuss current developments. This discusses in depth what strategies the different investors currently use.
  • Lars from passives-einkommen-mit p2p: What helps me personally this year is my own track record as an investor and the knowledge that, once again, all will be well in the end. Difficult times always bring opportunities and I focus on taking advantage of them.
  • Jakub from p2pempire: Our academy section on P2P Empire offers several articles that help to better understand high-yielding strategies in P2P lending as well as the potential risks that can eventually materialize. 

A lot of resources are available on everyone’s websites, blog and social media channels. We highly encourage you to check them out and soak up the wisdom and knowledge they contain.

Final thoughts

We’d like to close this article with a quote from Sal:

“What helps me personally this year is […] that, once again, all will be well in the end. […]”

If we look at history we can see that there have been many instances of high inflation, stock prices dropping, and general fear in the market. Some of these phases were shorter, whereas others lasted a couple of years.

However, in the end after enough time, things turned around, markets were rising, inflation decreased and there was an upward movement. So while the current situation might seem hopeless, we want to encourage you to stick through it, as well as gather information on how to handle the inflation and beat it.

As you know now, P2P investments can be one pillar in your portfolio to counter the impact of inflation.

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