Equity investing is one of the most popular investment options among investors in India. It has been part of the portfolio of every investor in India. Equity investments are considered to be a more risky option compared other investment options. To mitigate those risks additional low-risk investment options must be part of every serious investor. Peer to peer lending is such one investment which is low risk but a high return investment from a lender’s point of view. Let us look at a comparison between equity investment and P2P lending –
- Risk – Equity investing is a high-risk option. The main risks included in this risk are market risk, operational risk, company specific risk. The stock price of a company depends not only on the day to day performance but are highly dependent on other factors like competition, regulatory framework, pricing etc. Usually, a large variation is observed among return of a high risk company. While P2P lending is considered as a low-risk option.
- Return – An average return of 10% to 11% is usually observed in equities while Peer to peer lending can give a serious investor a return of 18% to 25%.
- Time invested – Equity investment requires a time frame of at least 2-3 years to generate returns that can beat inflation while in Peer to peer lending you can start generating those returns in lesser time.
- Ease of investment – Investing in equity is quite a time-consuming activity. You need to track each and every movement of in the stock prices movement of the company. You also need to be expert in financial knowledge related to stock prices and company performance. It is not easy for a layman to understand these things in a short period of time. Whereas, P2P lending doesn’t require a technical knowledge and is quite easy to invest compared to equity investment.
- Diversification – Peer to peer lending is a low risk and high return investment and it will act as a perfect investment to diversify your portfolio.
- Investing in someone’s future – P2P also gives one a satisfaction of investing in someone’s future which is not present in equity investing. In P2P investing, you can directly track the individual you are investing in, you can monitor his personal net worth has increased with the help of your funding.
- Early mover’s advantage – Peer to peer lending is in the nascent stage in India. You can expect huge returns in coming years by investing in P2P lending.
As we can see from above article it is a perfect time to invest in Peer to peer lending to generate awesome returns. This will generate returns that are higher compared to equity investment with a lower risk.