Online investment platforms are becoming popular due to their adaptability and ease of use. They are fast emerging as an alternative to fixed deposits or money market instruments. Through these platforms, investors have the opportunity to own their mechanics and methods of investment.
Benefits of Online Investments-
While complex technology and mathematics is involved in building the online platforms, the best platform offers investors a simple and elegant user interface to make their investment decisions. Unlike in previous years, when investing was very difficult as investors had to wrestle with steep learning curves, today’s platforms are intuitive and easy to use. And as these platforms offer complete understanding and transparency about their investments, casual investor can also start right away.
A good online investment platform also provides you hints and tips, based on your investing preference and the existing portfolio as well as recommendations to enable better investment decisions. All these factors, coupled with the ease of investing from any place (home/office) at one’s leisure have contributed to the growing popularity of the platforms.
Categories of Online Investment platforms-
There are broadly three categories of online investment platforms
1. Robo- Advisor platforms which offer automated solutions for investments into mutual funds or exchange traded funds as an alternative to building equity portfolio.
2. P2P Lending Platforms which offer investors opportunity to lend online to other people and offer superior returns compared to Fixed deposits or savings accounts
3. FX Platforms- These offer short term investment options in macro-currency plays as an alternative to money market deposits.
Factors leading to P2P Lending popularity-
Of these P2P Lending Platforms have become the most popular in developed countries over the last few years due to the combination of a multitude of factors.
1. Macro Shift away from equity focused instruments as the Central Banks wrestle to revive the underlying economies
2. P2P Lending offers attractive fixed returns compared to historically low savings/money market returns in these countries.
3. Superior risk/reward dynamics compared to any other asset class in the current macro environment.
While P2P Lending platforms have enabled billions of dollars in lending in the US, UK and other developed countries, in India the growth has been slow due to lack of clarity on the regulatory side. However RBI has recently laid draft guidelines for P2P lending in India and is expected to come out with final guidelines in the near future. This would enable the growth of similar investment platforms in India.