Category: Blog

How do we assess credit risk?

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We at iuvo care about our investors and the self-esteem they enjoy while using our platform. We are aware that one of the biggest concerns about our service is the risk that a loan will fall into arrears and will not be repaid. In order to be as useful as possible, we have created the iuvo credit rating system for credit risk assessment.

According to this system, the probability of delay is divided into six different classes – from A to HR. According to them, the probability of the borrower falling into arrears that would trigger the buy-back guarantee is between 0 and 100% (the highest risk class is 35-100%). By providing this data, we give you direct assistance in credit risk assessment and you don’t have to search for additional information on the platform.

To maintain a reasonable level of risk in your investment portfolio, always keep in mind both the expected return on the credit and the likelihood of it falling into arrears and activating the buy-back guarantee – try to find your ideal balance between the two. You can learn more about the breakdown of percentages between risk classes, as well as return rates by classes, in our article on credit risk assessment here.

As we have already mentioned before, if you prefer to invest manually, one of the most direct ways to predict whether the borrower will make a payment on his loan is to get to know his profile. After logging in, go to the Primary Market and click on the ID of any loan – this action will open a screen with the characteristics of the loan. See the Borrower and Collateral section. You can see detailed information about the profile of the user who received the loan. All data in the table is provided by the originator and is not edited by us.

It is the data analysis that provides you with the combination of a credit rating and a borrower’s profile that will help you predict credit risk. By looking at the details of different users and paying attention to the credit ratings of their loans, you can set your own criteria and target a particular borrower’s profile on the platform. This analysis is also the basis for defining your personal investment strategy.

Of course, if you do not have the time to invest manually, you can achieve results that are just as good if you diversify your auto portfolio strategy. Diversifying your portfolio alone reduces your risk level – it will help you experiment with different borrower profiles and different credit ratings, and sense for yourself what level of risk you feel most comfortable with. In other words, there is no universal golden mean. There is a golden opportunity for anyone who knows how to find the balance between the different parameters that the platform provides.

3 Tips for Saving

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If you are financially literate, you should know that you don’t have to own a business to manage a budget. The organization of the resources you spend and receive should be a guiding principle in your everyday life to ensure that things are going in the right direction. Ideally, at the end of the month, you have made ends meet with dignity and have successfully planned the next one. Your private organisational system should also cover your long-term needs – yet no one can guarantee that in a year the size of your income will be as you have predicted. That is where saving techniques come into play – each of them should ensure that after a while your efforts will be rewarded and you can benefit from the fruits of your labor as you think best. Here are three time tested ways to save:

Create a budget

The first thing you need to know is where your money goes every month. Write down all your expenses – contributions to home loans, leases, household bills, clothes, food, coffee, car fuel … Use the receipts received over the past four weeks to help with the overall calculation. When you have the numbers, it’s time to sort them by category and create a budget. This will allow you to compare your revenue with your expenses, plan the latter, and restrict your overheads. Keep in mind that some costs are regular but do not occur every month, such as car maintenance. Review your budget and check your progress every month. Not only will this help you stick to your savings plan, but it will enable you to quickly identify and fix the problems.

Pay yourself first

What does this mean? Open a savings account and transfer between 10% and 15% of your salary there each month. If your costs are so high that you can not afford to put 10-15% of your income aside, it’s time to think about reducing them. To do this, find things you can spare for the time being – like eating out, new clothes, or fun with friends. Try to look at the money you save, as you look at the cost of food and water – it is mandatory. If necessary, set automatic transfers into the savings account and do not think about it anymore. Or just set a saving goal – a wedding, a vacation, a new home, a car, your children’s education, retirement or an emergency fund in case of sickness or unemployment. In this case, it is useful to predict exactly how much money you will need and how much time you will need to save it – that will help you determine your savings plan.

Invest your savings to increase them

You may prefer to make a bank deposit instead of a savings plan – so you stash your money away in a bank for a certain period of time and you benefit from the interest. However, if you prefer a higher yield, one of the most up-to-date tools to achieve it is P2P investing. The method connects investors and borrowers, and offers many more benefits than conventional banking, as everything happens entirely online. This allows for transparent and controllable investments. In the worst scenario, your savings will remain intact due to the existing buy-back guarantee provided by the originator, and at best – you will earn much more than by just depositing your money in a bank. The average annual return of iuvo investors for 2018, for example, was 9.2%. However, with proper capital structure and management, return on investment through iuvo may reach 15% on an annual basis. Get to know the platform, create an account, and then an investment strategy and finally move to diversifying your portfolio. And how would you know if your portfolio is balanced? Do not be afraid to seek help from us here.

What to invest in during a crisis

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Due to the slowdown in global economic growth, analysts of J.P. Morgan Chase predict that another economic crisis is emerging. Despite the expectation that this will not happen before 2020, it is good to prepare in time and focus our investments on sectors that remain steady and stable, even in times of particularly severe financial crises. If the previous financial apocalypse has left something positive, it is first and foremost the knowledge and experience of investors around the world who have learned their lessons and made their conclusions, and know which are the wise investment in times of crisis. Here are 5 of them:

Invest in gold

No, no one expects you to start tracking global gold mining and to understand how the gold industry and the trade with gold jewellery and precious stones work. You just have to bet on one of the few things whose price did not fall during the collapse of US stock markets last year and point your portfolio to it. However, it is good to have knowledge of this type of investment (as well as any other), to keep track of the market price and to manage your money. Whether you will win or lose depends on this.

Invest in real estate

This does not mean counting your available funds and moving sharply towards the idea of purchasing real estate. Fortunately, there are many ways to invest in real estate without having to own it. One of the possibilities is an investment in real estate owned by other people. In other words, someone else is committed to buying and managing a group of properties, and investors like you are directing their money to this particular project, for which they receive an appropriate interest without being the owners or landlords. Of course, if you do not trust the model described above, you can do the most trivial thing – buy a property, rent it (see the next paragraph) until the market stabilizes and then, according to its estimation, decide whether to sell it.

Invest in rentals

During an economic crisis, many people prefer not to invest in their own home but to rent. This is particularly true for the millennials who choose to co-rent with their partners, their families and their friends as a basic philosophy of life. In many countries, young people decide not to settle in a permanent home and instead change their place of residence depending on where their work is. With more and more people leaving their permanent addresses to live on rent, the opportunities for platforms that offer rental investment increase, hence another opportunity for you to redirect your funds.

Invest in credits

At a time of crisis, P2P platforms – a bridge between non-bank credit institutions and investors – remain a popular model of investment. On such platforms, creditors, also known as originators, can publish part of each loan they offer in order to receive funding for it. In return, investors earn profit from the interest as well as from the fees collected. As an investor in a P2P platform, you are actually investing in other people and their goals by getting a decent return of 6% or more depending on the risk. In iuvo, for example, the average annual return is now 9.2%. These platforms are always convenient – from registration to accountability, you do not lose anything because of the existing Buy-back guarantees provided by the originators and, most importantly, no big amounts are required to get started.

Invest in yourself

The rule of caring for ourselves is always up to date and applies to all situations, whether we are in a crisis or not. Yet, when everything around you breaks down, it’s good to know that the investment in your personal health, education, creativity and self-confidence is the one that will pay back the best at the end of the journey. Invest in qualifications and courses, especially such that will apply your talent to uncharted territories. Travel and explore the world – you will hardly find cheaper tickets later. Read books. Don’t save money on good food and sports activities, as their return cannot compare to the levels of any interest, and will add a few more active years to your life.

Top 3 investments of the future

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The investment options today are numerous and each one requires a different level of knowledge. Their variety is also related to the degree of profitability they carry. Some of the sectors are steady – like gold, real estate, and credit. Others enjoy momentary interest. Others are in the process of being developed and will become reality very soon. The future is happening at a rapid pace, and it is time to think about how to invest our funds in a way that is useful to ourselves as well as to the next generations.

Here are some suitable areas for you to focus your attention on in the coming years:

Biotechnology

Or as they call it – the business of the future. Biotechnology is the foundation of the philosophy for the development of the modern world. We are witnessing seismic changes in science and medicine. The human genome can now be read and analyzed for a price lower than that of your next smartphone, which is a significant downward change in the value of the service in less than five years. In a few years we will be able to correct most DNA abnormalities that affect us and eradicate most of the inherited diseases for which treatment is not yet available. Add to this the ambitious plans of many corporations around the world related to cloning people, 3D printing of artificial organs and other parts of the human body, bio-implants and biosensors, and you get the full picture of real investment opportunities that are just a step away.

Care for the elderly

With new biotechnology and the development of the pharmaceutical industry, the world’s population will not only increase, but logically also age. In the years to come, the number of people over 60 will grow and become more active – by the year 2050, they will be two billion or one third of the world. Nowadays, the elderly care industry is still shy, as the prejudice that they can not afford and do not wish for many things continues to dominate. But this development will take a sharp turn in just a few years along with the growing number of this segment of the population and, naturally, with the expansion of the spectrum of their social and health needs. So, if you are wondering what to do with your money, ask your parents or their parents what they need and try to invest in their dreams.

Cities of the future

Whether they are erected in the midst of the desert, such as the NEOM project in Saudi Arabia, or they float freely in open waters, powered by solar energy, the cities of the future will unite most of the above-mentioned things. In them, everything – biotechnology, health, education, infrastructure and public transport – will be tailored and will work for the people and their harmonious presence in the surrounding natural environment. Smart robots will offer services such as logistics, supplies, childcare and safety. The well-known traffic on highways and boulevards will be replaced by nature-friendly bike lanes, eco-paths and water canals on which silent vehicles will travel without any harmful emissions. This is happening everywhere in the world where progressive leaders come up with step-by-step inspirational plans for systemic change, and you, in your role as an investor, can also be a part of that.