Peer-to-peer lending can offer a type of investment which is perceived as risky, but it is safer than other investment options.
Retirement is synonymous to the end of earning period. Making the best use of retirement corpus which would help one in reducing tax liability is important for retirees. The decreasing return on investments may be distressing for many retired people. Though most people plan their retirement and receive a fixed pension, investment of accumulated funds has become a big issue.
A retirement portfolio with a mix of fixed income and market-linked investments remains a big challenge. It is generally suggested to invest a big portion, approximately 60% to 70%, of the money in fixed deposit plans. However, with low interest rates and high costs of living, fixed deposits have less to offer.
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On the other hand, peer-to-peer lending can offer a type of investment which is perceived as risky, but it is safer than other investment options. It can offer a good option as a part of retirement portfolio.
Below are four reasons why peer to peer lending should be an integral part of retirement portfolio:
1. Diversified Portfolio
Retired people should always have a backup option if in case one of the investment plans fails and someone suffers a loss. With P2P lending, retired people can increase the portfolio mix. One can divide the retirement money and invest it in fixed deposits, stocks and bonds, and P2P lending. Investment can thus be done according to the risk involved; they can receive regular returns, and still have some money if any of the investment plans doesn’t work.
2. Low Risk Investment
While it is a common belief that P2P lending carries higher risk, the reality is different. Unlike most other investment markets, P2P lending returns are not dependent on market fluctuations. Investing in stocks and bonds keeps one on the toes to check if the market has changed, but P2P lending eliminates these risks.
3. Compounding Benefits
Since one receives a part of interest and principal amount back every month, the retired person can reinvest this amount and earn interests on the whole amount. The invested money will multiply and offer you compounding returns. Even if you withdraw some money, you will have better retirement funds than you originally had.
4. Is It Safe To Invest Retirement Money In P2P Lending?
Since P2P lending removes the intermediary and is a relatively new concept, many people are sceptical about this investment option. However, if you look at it, then P2P lending involves lower risk than most other investment plans. By choosing the right P2P platform, one can further reduce the risks involved.
(By Raghavendra Pratap Singh, Co-Founder, i2iFunding)