Fundaztic (Link) is a peer-to-peer financing platform in Malaysia. This platform links borrowers (mainly local small and medium enterprises) and lenders together. Since this platform introduces so many notes per week, how should we choose?
Grade of notes in Fundaztic
Every loan is known as a note on this platform.
The notes are rated according to 10 risk grades, starting with A1 to E10. Each alphabet (A to E) is divided into two grades, thus there are A1 and A2, B3 and B4 and so forth. A1 represents lowest risk while E10 means highest. Each grade is represented by a different colour.
The grades correspond to the credit rating of the borrowers. This risk grade determines the amount of funds that an issuer can raise and the pricing that they must pay.
Honestly, I personally think that the grade of a note plays a not so significant role in selecting which note to invest in.
Probability of default (PD)
This is the one measurement that we need to pay attention to. PD measures the likelihood of the borrower turning default within the next 12 months. In other words, the lower the PD, the lower the risk of default.
Bear in mind that there is still risk of default even though this figure is low.
My criteria
How do I select which note to invest? I look at two criteria.
The first is the interest rate per annum (not the effective rate). This figure is shown under the grade of a note. This is the real interest that we will get annually. Nonetheless, this rate is before the fee charged by the platform. Fundaztic charges a 1% fee on every note. Taking this into account, the minimum interest rate I require is 10%.
The second criterion is the PD. The lower this percentage is, the better it is for us. My personal cut off point is 8%. Thus, I will only invest in notes with PD of less than 8%.
Conclusion
I have described my way of selecting notes to invest in Fundaztic. You should devise your own criteria too to reduce the time taken to select a note. Investing should not be too hard if you have a systematic way. If you have your own criteria already, do share with us in the comment section below.
Referral link
Below are the referral link to Fundaztic. By clicking on this link, I may gain referral rewards from your registration with the platform. If you think I have done a good service in explaining the topic, please click on the link below if you have interest to register. Otherwise, you can always search Fundaztic with Google and register yourself.
Fundaztic: Link here or use the invitation code: Cg6QS1 – If you register and invest through this link, both of us will get RM 50*.
*Terms and conditions apply.
The promotion starts again from 11 November 2018 till 28 February 2019. Use this opportunity to get the bonus!
