Category: Money | Page 25

Profitus Review 2024 – How to Invest in Lithuanian Real Esate Projects

Last updated: February 14, 20244 Comments

Profitus is a Lithuanian real estate crowdfunding and investments platform. It acts as an intermediary between investors, who are looking to employ their free money and those who want to receive funding for business ideas and real estate projects.

When I asked them what their main goal is, they said:

Our main goal is to make investment available to everyone. Even those who doesn’t know a lot about investing.

That’s a typical story with such platforms, nothing new here.

How does Profitus work?

So let’s take a deeper dive.

Investments start at 100 euros. Investments are secured by pledging real estate, as well as by other collaterals (e.g., indemnity or warranty). Different projects have different security tools that users can access in self-service for each project.

Profitus opened for business on the 8th of August 2018, so it’s already been in operation for a few years now, and any platform that survives 5 years plus typically is getting things right.

The platform has funded more than €100 million and helped raise money for 805 real estate projects. There are more than 29,000 investors registered as of March 2023.

Some stats from Profitus:

Investors earned an average annual interest of 10.65%.
All investments in the Profitus platform are secured by pledging a first-rank mortgage.
Average investment at Profitus platform is 10,371 €
477 projects have already successfully repaid their investments and earned interest from investors.
Maximum platform LTV (loan-to-value) 70%.
Average LTV in 2023 – 56%
Average loan term (month) – 11,34 months
Profitus platform is regulated and supervised by the Bank of Lithuania.
Profits accepts investors from all EU.

Note that LTV stands for loan-to-value ratio. It shows the percentage of loan in the pledged property. So if the borrower seeks to raise EUR 70,000, its pledged real estate to investors must be at least EUR 100,000, in which case LTV will be 70%.

The lower the LTV percentage, the better, as it means more real estate is pledged to investors. However, it should be borne in mind that the mortgaged property is a primary mortgage.

What Opportunities Are Available?

By investing through Profitus, individuals can gain exposure to different types of real estate investments, which can be broadly categorized as follows:

Residential property investments: Investors can invest in residential properties such as apartments, houses, and townhouses. These investments can generate income through rental payments from tenants or potential capital gains when the property’s value increases over time. Residential projects listed on Profitus may include new constructions, renovations, or refinancing of existing properties.
Commercial property investments: Profitus provides opportunities to invest in commercial real estate, including office buildings, retail spaces, warehouses, and other business-related properties. Investors can earn income from these investments through rental payments from businesses occupying the properties or potential capital gains if the property value appreciates.
Property development investments: Investors can participate in funding property development projects, such as new construction, renovations, or expansions of existing properties. These investments typically involve providing loans to property developers, which are then repaid with interest once the project is completed and sold, or refinanced through traditional financing methods.
Real estate-backed loans: On Profitus, investors can also invest in loans secured by real estate assets. These loans are typically provided to property developers or borrowers who require funds for various property-related projects. The loans are backed by collateral, usually in the form of real estate, which provides a level of security for investors. Investors can earn returns on these investments through interest payments made by the borrowers.

The vast majority of projects are based in Lithuania, which is great if you want exposure to the economy of this country.

How to Borrow Money Through Profitus

The website also details the process that property developers go through when applying for loans.

They previously promised a reply in 2 days, which is on the optimistic side and could suggest a lack of serious due diligence. This is no longer promised on the site, but I still have some concerns about their due diligence procedures given how many projects they published on the platform since their inception.

If we take the optimistic stance, they might just have a great team that is very efficient at processing applications and doing due diligence, and also a great pipeline for new projects.

Team Behind Profitus

The founder of Profitus is Viktorija Cijunskyte. Viktorija is also a co-founder of asset management company Victory Funds and real estate development company CITUS.

The about page on the Profitus website shows a good-sized team with a short description about each person and a link to their Linkedin profile.

They seem to be a young team, with limited experience being the number one factor that I would think about when I look at their profiles. But that alone is not enough reason not to trust the platform.

How does Profitus handle risk?

RE evaluation and business analytics experts on the team evaluate each funded project individually to set a risk rating ranging from A+ to F.

Profitus have also developed a unique risk assessment algorithm to determine the rating of the project. This algorithm consists of a wide range of individual indicators and evaluations which focus on funding requirements and an appraisal of the property by an independent appraiser, the project owner, and the final beneficiary, their financial indicators, credit rating, experience, and reputation. Profitus also evaluate the project, its potential and concept, business plans presented by the project owner, and the pessimistic scenario plans, which incorporate possible market developments and the risks that could affect the project.

How does the project vetting process work?

I’ve asked Profitus for more details about their project vetting process. Here’s what I learned:

In the first stage, the application is evaluated by the Project Manager, who, after asking questions and collecting the necessary documents for the inspection (Financial statements, business plan, company composition and JA register data, valuation of the mortgaged property from a third party) – decides whether the project is suitable and has the potential for financing.
Then the project manager forms a financing protocol. The protocol data is collected from local registers: the company’s credit history and shareholders with a larger than 20% package, property registration, and existing property restrictions and pledges are checked. The completed report is submitted to the credit committee for evaluation.
The credit committee’s business, real estate, and financial analysts evaluate all project information using a unique risk assessment algorithm that determines the risk rating and offers a financing price. In addition, real estate analysts perform a cross-check to determine the property’s value using a comparative method with similar transactions that took place on the market and previous transactions for the purchase and sale of the mortgaged property.
The credit committee makes the decision to finance or not by presenting the terms of the proposal.

Withholding taxes

Profitus practices a 15% tax retention that is deducted from investors’ profits, which is a deal-breaker for me. The vast majority of other platforms don’t take this cut, so it’s an unnecessary reduction of profits that doesn’t make sense given how many alternatives to Profitus there are.

I asked Profitus to explain why they withold taxes on profits and here’s what they had to say:

According to Income Tax Law of the Republic of Lithuania, Profitus is responsible for the collection and payment of income tax for non-residents. The income tax rate is 15 percent and it is deducted from earned interest. The platform automatically deducts it every time when loan installment is received.

If you are a non-resident of Lithuania and you are living in a country which has valid Double Taxation Avoidance Treaty with Lithuania, you can apply for the reduced personal income tax rate.

After application for withholding tax deduction, Profitus will apply a reduced PIT rate to the investor, with a deduction of 10%, or in case of Latvia or the United Arab Emirates – 0%.

I understand that this is one reason why other platforms opted to base their company in Estonia, and I believe Profitus should do the same if they want to compete on a level playing field with other platforms.

Moreover, this fact is not clearly mentioned on the website, and I know that several investors have been very disappointed to learn about the fact only when they went to withdraw their earnings.

Alternatives to Profitus

There are several alternative platforms to Profitus that cater to investors interested in real estate crowdfunding.

One notable example is EstateGuru, which operates across multiple European countries and offers short-term, property-backed loans to borrowers.

Similarly, CrowdProperty focuses on the UK market, specializing in financing small-to-medium-sized property development projects.

These platforms, like Profitus, offer an opportunity for investors to diversify their portfolios, access various real estate markets, and potentially earn passive income through interest payments or rental income.

My Opinion on Profitus

The best thing about Profitus is that it allows us to invest in Lithuanian real estate. I’m very bullish on Lithuania as a country and have several friends there who report about things improving very rapidly in the economy, the startup culture and real estate.

I definitely consider Profitus to be a good option for Lithuanian-based investors since they will not be hit by the tax retentions, and they can read the website in Lithuanian as well as communicate with the team in their native language. It’s also a good option for UAE residents since they pay no withholding tax due to the DTA treaty between Lithuania and the UAE.

For the rest of us, I think suffering a withholding tax cut of 15% is a significant disincentive to invest on this platform. Structuring your investments in an intelligent way tax-wise is one of the most important pillars of investing.

However, if you want to invest in Lithuanian real estate specifically, then Profitus is one of the best options around.

Check out Profitus

Have you invested in Profitus? What are your thoughts and experiences?

🏠 EstateGuru Review 2025 – Caution Advised

Last updated: November 28, 20247 Comments

EstateGuru, once a leading European peer-to-peer (P2P) platform for short-term, property-backed loans, has faced significant challenges in recent years, leading to a decline in performance and investor confidence. This review will delve deeper into EstateGuru’s current difficulties, exploring the reasons behind its challenges, the impact on investors, and the overall outlook for the platform.

Background on EstateGuru

Founded in 2014, EstateGuru aimed to provide an accessible platform for small investors to participate in property-backed loans, primarily across Europe. The platform quickly gained popularity due to its transparency, low minimum investment threshold, and seemingly attractive yields. Over the years, EstateGuru expanded into several new markets, including Germany, Finland, and the Baltic states, rapidly increasing its loan book.

Historically, EstateGuru focused on providing short-term financing to property developers and small businesses, typically for bridge financing, development projects, or refinancing purposes. Investors were attracted by the relatively high interest rates offered—often ranging from 9% to 12%—and the security provided by property-backed loans. Additionally, the platform’s user-friendly interface, transparency, and low barriers to entry made it appealing to retail investors seeking exposure to real estate.

However, as EstateGuru aggressively pursued expansion, it began to face significant challenges. The rapid scaling of operations and entry into new markets exposed weaknesses in their risk management and underwriting practices. What was once a platform known for its transparency and reliable returns has struggled to maintain these standards in light of increased defaults and operational pressures.

Escalating Default Rates

The platform’s aggressive expansion strategy, particularly into markets like Germany and Finland, has resulted in a substantial increase in loan defaults. As of November 2024, over 50% of EstateGuru’s outstanding loans are in default, raising serious concerns about the platform’s risk assessment and management practices (p2pempire.com). The rapid scaling of loan volume appears to have strained EstateGuru’s ability to adequately vet borrowers, leading to an increase in poor-quality loans.

Defaults are especially prevalent in newer markets, where EstateGuru’s local knowledge and borrower relationships are less robust compared to its initial markets in Estonia and Latvia. Investors are now experiencing prolonged recovery times, which negatively affects liquidity and undermines the confidence that was previously associated with the platform’s secured loan structure. It highlights a failure to adapt underwriting standards effectively to different regulatory environments and borrower profiles.

Financial Instability

EstateGuru’s financial health has also deteriorated, with the company reporting a loss of €5.88 million in its latest annual report. Despite an 11% increase in revenue to €8 million, operating costs and employee expenses surged, contributing to the substantial loss. The increased operational expenses are attributed in part to the establishment of new offices, expansion of the workforce, and higher costs associated with managing the growing volume of non-performing loans.

The challenges have been compounded by rising interest rates and changes in investor sentiment. Many retail investors are re-evaluating their risk tolerance, particularly given broader economic uncertainties across Europe. The decline in investor appetite for higher-risk loans has led to reduced funding availability on EstateGuru’s platform, causing delays in financing for new projects and in turn reducing EstateGuru’s commission income.

Investor Returns Under Pressure

High default rates have directly impacted investor returns. While EstateGuru previously offered attractive yields, the current performance indicates that the advertised returns are not attainable for broadly diversified portfolios. Many investors are now receiving little to no interest due to prolonged default recovery processes, and some have even faced principal losses.

Investors who joined EstateGuru during its earlier years might still remember the platform as a reliable source of passive income, but the recent trends have significantly altered this perception. EstateGuru’s communication regarding loan recovery processes has also been criticized for lacking transparency. Many investors are frustrated by the vague updates provided on defaulted projects, making it challenging to assess the likelihood of recovering their funds.

Moreover, EstateGuru’s secondary market, which once offered a potential exit route for investors, has also seen a decline in liquidity. The introduction of new fees has discouraged many users from actively trading loans on the platform, further reducing opportunities for investors to exit underperforming investments.

Management and Strategic Challenges

The company’s rapid expansion into new markets has led to operational difficulties. Management is now focusing on resolving legacy portfolio issues in these regions to maximize returns for investors. EstateGuru has admitted that its underwriting processes did not sufficiently account for the unique risks presented in each new market, leading to inconsistencies in loan performance.

To address these issues, EstateGuru has stated that they are enhancing their due diligence procedures, implementing stricter borrower vetting, and restructuring their debt recovery team. However, these efforts are yet to produce tangible improvements in default rates or recovery timelines. Investors are understandably cautious, as the platform attempts to navigate these operational changes while managing an increasingly skeptical user base.

EstateGuru’s leadership has also faced scrutiny, with critics pointing to a lack of proactive measures during the early signs of loan defaults. Instead of curbing expansion and focusing on improving the quality of the existing loan book, EstateGuru pursued growth, which now appears to have been an unsustainable strategy. Additionally, their focus on scaling into new jurisdictions without fully understanding the local real estate markets has been a critical misstep.

Increased Investor Fees

In response to financial strains, EstateGuru has introduced additional fees for investors, including a 3% secondary market transaction fee, a €3 withdrawal fee, and a €10 monthly inactivity fee for accounts without investments in the past 12 months. These fee increases have been poorly received by the investor community, who feel penalized at a time when they are already grappling with high default rates and diminished returns.

The introduction of these fees appears to be an attempt to stabilize EstateGuru’s financial position by generating additional income from the existing investor base. However, such measures could further alienate current investors and discourage new ones from joining. The secondary market fee, in particular, has reduced the attractiveness of using the platform’s secondary market to exit investments, resulting in lower liquidity and more difficulties for investors looking to sell off troubled loans.

Impact on Investor Sentiment

The combination of escalating default rates, increased fees, and financial instability has taken a significant toll on investor sentiment. Investors who once praised EstateGuru for its simplicity, transparency, and strong returns are now voicing their dissatisfaction across various investment forums and social media. Complaints often center around poor communication, the lack of transparency in loan updates, and the inability to exit investments without incurring heavy losses.

The drop in sentiment has also led to a reduction in new capital flowing onto the platform. EstateGuru previously relied heavily on reinvestment from satisfied investors, but with the current climate, many investors are opting to withdraw funds rather than reinvest. This has created a funding gap that EstateGuru is struggling to fill, further exacerbating the issues faced by borrowers who rely on the platform for financing.

Salvaging Positive Aspects

Despite recent challenges, EstateGuru has historically provided opportunities for investors to participate in real estate projects with a low minimum investment threshold. The platform’s focus on property-backed loans offered a level of collateral security, and its user-friendly interface and auto-invest features were well received by investors. In its earlier years, EstateGuru successfully funded numerous projects and provided steady returns to its investors.

The diversification opportunities offered by EstateGuru—across geographies and types of real estate projects—remain appealing in theory. For those willing to accept higher risks, EstateGuru could still offer potentially lucrative opportunities if the company manages to turn its operations around. The fact that all loans are secured by real estate means there is still some hope for recovery, even if the timeline is uncertain and often delayed.

⚙️ How does EstateGuru Work?

EstateGuru requires a minimum of €50 to start investing in real estate projects operating in 6 countries: Estonia, Latvia, Lithuania, Spain, Finland, and Portugal. This minimum amount is significantly higher than other crowdlending platforms such as Mintos.

The platform obliges builders, developers or owners to present a business plan and an exit strategy which is reviewed in detail. Once this is approved by EstateGuru’s risk experts, the project is released on the platform and made available to its investors.

Once the loan is fully funded, the contracts are signed and the funds are released to the borrower. Each loan is secured with a mortgage, usually a first rank one (93%).

The upside for borrowers is that through EstateGuru, they get access to funds up to 5 times faster than through traditional banking procedures and at better rates than those provided by standard non-bank lenders.

Should the syndication period, the length of time that a loan can be open to investors on the platform, expire before it reaches its target loan, all funds are returned to the investors’ virtual accounts.

EstateGuru’s business model is to finance projects which have solid collateral, using first-rank mortgages, which is the most straightforward and secure type of funding in real estate lending.

Real estate is currently regarded as the best kind of collateral since it is something utterly physical and visible. EstateGuru also uses residential real estate as collateral. The rationale here is that people will always need a home and place to live, so the demand for real estate is not going to suddenly disappear. The value might fluctuate, but long-term it’s always going to be there. On the other hand, for example, a company can go bankrupt and thus its value will go down to zero with no chances of ever recovering. Hence it is a much weaker form of collateral.

✍🏻 Registering to EstateGuru

EstateGuru’s website is clean, user-friendly and well-designed. It comes in 5 different languages: English, Estonian, Latvian, German and Russian, with an online chat system available in which team members typically reply within 20 minutes.

Signing up is fast and requires 5 simple steps to get in and start investing.

The platform allows users to register through email, Facebook or Gmail. I always suggest setting up a specific password for each platform for added security.

Upon verifying the email, simply enter the investor or company representative information. EstateGuru also presents you with the option of 2-step authentication.

Next, you can either upload your passport, ID card or driving license manually or by using Veriff, an online identity verification system which uses your phone camera or webcam to confirm your identity.

The final step in the registering process is the KYC section. This step is required to be compliant with anti-money laundering laws.

Once your registration is complete, head over to your dashboard for an overview of your portfolio. Here you can submit your first deposit, which must be done via a regular European bank payment transfer (SEPA).

Following your first deposit, EstateGuru allows for transfers via LHV Bank Link, as well as third-party service providers such as Trustly, TransferWise, Revolut, N26, Lemonway, and Paysera.

🏘️ What Can You Invest In?

One of the benefits of investing your money in a crowdlending platform such as EstateGuru is that you get to choose which projects you wish to invest in.

You will notice that certain projects are split up into stages. Since the platform only lends against the current value of the collateral and not the future value, EstateGuru makes use of the stage financing method. By scheduling the project in stages, the borrower can increase the collateral value of the property by developing it further with the acquired funds. In this way, the investment amount increases at each stage of the project, due to the LTV increase.

Conveniently, EstateGuru allows investors to filter by interest rate, LTV, Country and Schedule Type. Schedule Types come in the forms of Annuity, Bullet or Full Bullet, the latter being the riskiest out of the three.

In an annuity-type schedule, both the loan interest and the principal will be paid periodically. In a bullet-type schedule, the loan interest will be paid periodically, with the principal amount being paid at the end of the loan period. Consequently, in a full bullet type schedule, both the interest and the principal will be paid at the end of the loan period.

At the time of this review, their latest investments were presenting higher loan amounts with Bullet type schedules. This shows an increase in higher-risk investments compared to their previous projects.

EstateGuru presents investors with extensive information regarding each project and the borrower.

This includes:

A general overview of the project
Loan terms, including the Loan to Value (LTV) rate
Collateral information
A description of the commercial market of the respective country
Borrower information and any previous projects

The project pages provide images of the development, and in some cases, renders of the proposed finished product.

Another great feature is that the address and map for each project are listed on the right-hand side of each project page. This is coupled with an appraisal report.

You will notice that certain projects have an added 1% bonus to their annual interests. This means that the borrower adds this bonus for any investments of €10,000 or more.

With no fees for investors, it is encouraged to diversify your portfolio as much as possible to mitigate risk and maximize returns.

How Secure are These Investments?

EstateGuru employs a business model that places a high priority on security, a conservative approach to risk, liquidity, a focus on short-term loans, and the fact that the real estate market is most likely to suffer less than other industries in this crisis.

Over 90% of the loans offered on EstateGuru’s platform are secured with a first rank mortgage. This means that, in the rare cases where loans go into default, investors are offered great protection against loss of capital.

As an additional layer of security, the average Loan to Value (LTV) level on the platform is below 60%. This buffer means that even a significant drop in real estate values will not impact investors’ capital or the ability to recover principal loan amounts in the case of defaults.

EstateGuru have always been very conservative in terms of risk. They emphasize the fact that they thoroughly analyze every project (borrower, collateral, business plan) no matter how small the loan amount.

Real estate, by its very nature, makes valuation easy and offers a level of predictability that other markets in the P2P industry cannot match. Sending an independent evaluator with local knowledge to a property to determine the viability of the application offers great transparency when EstateGuru determines LTV rates. In addition, they always double-check using Automatic Valuation Models.

EstateGuru’s LTV rates are calculated on the current value of the property, never the projected future value.

As we are seeing, many of the P2P platforms that are struggling generally act as middlemen between investors and loan originators. This adds a murky third layer to the entire exercise and it can be very hard for investors to know exactly who they are funding.

As the P2P market has grown to become a widespread asset class with a proliferation of platforms vying for investments, the number of companies offering this service has grown exponentially.

Despite all this, EstateGuru has shown clear signs of mismanagement as many of their loans have not been recovered.

🕵️ Transparency

EstateGuru’s CEO and co-founder Marek Pärtel has been involved in the real estate industry since 2002. He is joined by Kristjan-Thor Vähi, who currently acts as a passive co-founder within the platform. Pärtel is also the co-founder of Invego – a property development group, of which Vähi is the Managing Partner.

EstateGuru promotes transparency throughout its website, with statistics and annual reports easily found in their footer section. EstateGuru was very responsive to any questions relating to the people behind the platform, a very good sign for any platform.

The team members behind the platform are all listed, together with their LinkedIn profiles and email addresses. The EstateGuru team consists of finance, banking, IT and real estate experts. Whenever Marek publishes posts on the company’s blog he writes in flawless English and communicates his ideas very clearly. As an investor, I really appreciate having someone like him at the helm of a platform I’m putting my trust in.

🙋 FAQs

Who can invest in EstateGuru?

Any individual above 18 years of age who has a bank account in any of the EEA member states or Switzerland can invest on the platform.

What is the average LTV?

EstateGuru guarantees an average LTV (Loan to Value) of 60% (max 75%). The LTV is the ratio between real estate value and real estate debt. A property valued at €100,000 with a loan amount of €70,000 results in an LTV ratio of 70%. EstateGuru’s maximum lending rate is 75% and on average it is even lower at around 60%.

What is the project investment period?

Investment periods (the period in which the loan will be repaid) and loan terms for EstateGuru’s selection of real estate projects varies between six months and two years.

What is the difference between a development, bridge, and business loan?

A development loan is a loan used to finance the construction or planning process of a project.

A bridge loan is a short-term loan used until permanent financing is secured, or current obligations met. It provides immediate cash flow required to achieve a specific target, such as enhancing the value of the property or selling the underlying asset.

A business loan is a loan used to cover day-to-day expenses of the firm, acquisition of goods or equipment, business expansion, pending obligations, etc.

All EstateGuru’s loans are secured with a mortgage, regardless of type.

Does EstateGuru have an Auto Invest feature?

Yes, EstateGuru provides an Auto Invest feature starting from €50, with advanced settings available from €250.

Does EstateGuru have a secondary market?

Yes, EstateGuru’s secondary market can be used as a liquidity facility.

Can I invest through my mobile phone?

Although EstateGuru does not have a specifically designed App, the website works well on all devices, so you can keep track of your investments on the go.

Will I be notified of any deal alerts?

EstateGuru allows users to dictate the amount of information being sent through notifications to make the most out of deals on the platform. You can opt for notifications regarding every single investment opportunity that comes up, or take a broader approach with updates at regular intervals. It’s all up to you.

Conclusion

Given the significant challenges that EstateGuru has faced over the past year, potential investors should exercise caution and conduct thorough due diligence before investing. The high default rates, combined with increased fees and prolonged recovery timelines, have made EstateGuru a much riskier platform than it was in its earlier years. Existing investors are advised to closely monitor their portfolios, stay informed about the platform’s ongoing recovery efforts, and carefully evaluate whether the risk-reward profile still aligns with their investment goals.

While EstateGuru is attempting to address its current difficulties through enhanced due diligence and management restructuring, it remains to be seen whether these changes will be effective. For now, the platform may no longer be suitable for conservative investors seeking stable, passive income. Instead, it may appeal to those who are willing to take on substantial risk in the hope of benefiting from potential future improvements in the platform’s performance.

Alternative real estate platforms that you can try instead are Raizers in France, StockCrowdIN and Brickstarter in Spain, and CrowdProperty in the UK, thus obtaining a well-diversified property portfolio.

🤔 Monethera Review 2020 – Serious Concerns about this P2P Lending Platform

Last updated: March 15, 202216 Comments

Here’s another platform that I don’t trust. When parting with my money for investment purposes, I always make sure that as far as I can see, the investment platform or opportunity checks out 100% and has no red flags.

To be clear, if I find just one red flag, I am not touching that investment.

That’s the case for Monethera. When I checked out this platform recently, I liked the overall design of the website but a recent change raised an important red flag.

I can’t comment on the quality of loans they offer or the people running the platform, because I stopped looking at the platform the moment I came across this buyback guarantee red flag.

Basically, late in December 2019, Monethera announced that they have a deal in place with a third party company, based in Hong Kong, that is willing to cover 95% of any bad loans on the platform.

[Read more…]

Why You Shouldn’t Ask For Financial Advice Online

Last updated: October 23, 2020Leave a Comment

In a recent post, I told you about the fact that I don’t attach much importance to income and net worth reports from financial bloggers and entrepreneurs who choose to share them with the whole world.

I simply don’t think they are relevant or useful to me. On the contrary, I might also risk being swayed into doing something rash with my money if I did follow these reports closely. It is human nature to want to do what others are doing, especially if it sounds like they’re getting everything right, while we, as readers, are losing out on some important opportunity.

A topic that is closely related is that of asking for financial advice online.

Since business and investing are two of my biggest passions and I write about those topics quite a lot on this blog, I also get a lot of requests for financial advice.

I wanted to put this post out there so that I can refer these people to it when they email me.

While I commend people for taking an interest in their financial situation and for the humility and courage to reach out for help to someone who they deem to be more knowledgeable or experienced, it is simply not a good idea for either of the two parties.

Let’s call the two parties as follows:

Aspiring investor
Typically a young person who wants to grow his wealth and possibly aim for financial independence; or someone nearing retirement with a lump sum to invest.
Experienced investor
Typically a finance blogger, startup founder, venture capitalist, etc.

The first important thing to consider is that every single person is different in his capabilities, interests, family situation, etc. We all live incredibly complex lives intertwined with those of our family and people close to us, as well as our jobs or businesses, not to mention the countries and economies we live in.

The best way for an aspiring investor to not lose money and make long-term profits is to educate himself as much as possible. This can be done in various ways, including reading blogs of experienced investors, reading educational books, going to conferences, and myriad other ways.

I stress that it is of paramount importance that you read as much as possible, and adopt a skeptical attitude. When you feel that you know enough to make your first investments, start small and give the investments some time to see if you were right in the first place, or whether you have further learning to do.

An ethical seasoned investor will never dish out financial advice. They know that it is not responsible to tell anyone where to invest their money without spending hours studying their financial situation. That is a full-time job, one that is performed by a financial advisor.

If you want to invest your money and you don’t want to spend a ton of time learning about investing, the second-best thing would be to go to a good financial advisor and let him guide you. You wouldn’t ask for health advice online if you are sick (I hope), so do yourself a favor and pay someone to help you with your financial matters if you think that you need this help. It is far better to invest some money to get a professional’s advice than to invest irresponsibly and lose your money later.

I hope that this post helps explain why I don’t give financial advice. All I can do is write about my experiences and opinions, and the best thing you can do is to read those articles as part of your overall journey in educating yourself about personal finance, taking small steps and thinking twice before taking action.

This is a long journey and the most important thing in investing, as Warren Buffet says, is not to lose money. If you manage to avoid losing money, you’ll already be ahead of most people, so don’t feel pressured by what you read or what people say. More importantly, do not let this push you into making speedy decisions to avoid the so-called fear of missing out (FOMO).

To wrap things up, I feel privileged and honored when people email me to share their financial situation or investing experiences, however, please understand that it would not be in your best interest if I were to give you advice on your financial matters.

As always, your views are very much welcome.

What to do instead

If you want to learn how to invest and manage your money in a better way, I suggest doing the following:

Read as many books on the topic as you can.
Network with other investors and find masterminds of like minded people.
Get coached and mentored by an experienced investor. My friend Shlomo Freund offers such a service, so check that out.

Where Can Businesses Invest Their Retained Earnings?

Last updated: November 14, 20223 Comments

YouHodler Savings Account Rates

As an owner of a successful business, you will sooner or later amass a good amount of retained earnings in your business.

Retained earnings are what remains of the net profit after all dividends to shareholders have been issued. These retained earnings are usually kept in the business to re-invest into new products or expansion. However, even after those are taken care of, there might still be considerable funds sitting idle in bank accounts, and that’s almost never good, as inflation will eat away at the real value of those funds.

The key to maintaining the real value of those retained earnings, is, of course, to find stable low-risk investments with high liquidity.

Here are my top places to invest retained earnings:

YouHodler – This is a platform where you can lend money to borrowers who put up their crypto as collateral, while you earn a yearly return of up to 9%. You can withdraw the money at any time, giving you full liquidity.

If you are ready to take higher risks, you could invest some of your company’s retained earnings into pure P2P lending platforms. I would suggest using systems like Mintos autoinvest or Bondora’s Go and Grow to maintain a high degree of liquidity.

Real estate investments can also provide relatively safe places to park a company’s money, however, they can be more illiquid, especially if the platforms don’t have a great secondary market.

What are your thoughts on this? Do you have any other ideas on investing company retained earnings?