Studies of Life

Learning by doing.

Increasing Bondora Returns Using Loan Flipping

17 August 2014 by Jim

For many months I’ve been stuck at 19% annual return with my Bondora portfolio. Now, if you don’t know Bondora, 19% per year is still huge, but it could be even better, knowing that interest rates on P2P loans there are around 30%. So why the difference? And how come the 20-25% ROI category seems to be where most of all investors are, but not me?


Somehow, the other investors have to be building their portfolios differently, I thought. And I may be right – I spent very little time managing my loan portfolio and rely mostly on the automatic portfolio managers, which invest in loans from B800 to A1000, 50€ per loan, without further action from my side. Because I invested 60.000€ in Bondora, I could not possibly manually invest 50€ per loan. If I had done that, I would have had to manually read through 1200 loans to get my full capital invested. But I’m looking for passive income here, not a second day job. So I chose the automatic route.* I may also have fallen victim to the what we could call the ‘Berkshire Heathaway effect’: Because my portfolio size (60.000€) is supposedly markedly bigger than that of many other investors, it’s more difficult to optimise it for higher returns.

But back to the annual return. Reading the Wiseclerk blog, who also regularly posts updates on his Bondora portfolio management, I learned that some people actually buy multiple loan parts in A1000 loans, just to resell them immediately at a 5% premium, thereby making a small gain everytime.
Imitating this technique, I was able to push my own annual return from 19% to 21%. It may not be a huge improvement but it got me in the 20-25% category. The relatively large size of my portfolio however limits the usefulness of this technique to 2 or 3 percentage points only. If I only had 2000€ to invest, flipping 50€ loan parts at a 5% premium would of course make my ROI skyrocket. But getting a small increase on my previously 19% ROI is quite good already. Don’t get too greedy.
* Due to a recent design change it is now possible to do bulk manual investing as well, so relying on portfolio managers exclusively may not be necessary anymore, even if you have relatively large amounts of capital to invest. You can now, in the MARKET tab, filter the currently open loan applications by the criteria you want, and then bulk-invest a given sum in every loan that passed this filter. Here’s a screenshot:
Bondora's new Bulk Investing feature
For another way to increase your overall return by reducing the number of defaulting loans, check out this post.

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