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Risks and returns when investing

In the latest edition of Financial Adviser, Neil Faulkner, CEO of peer-to-peer (P2P) research specialist 4th Way, considers the Financial Conduct Authority’s recent comment that Innovative Finance ISAs are “generally high-risk” investments.

“To many risk-adverse individuals with savings, any amount of risk above bank savings is going to feel like high,” Neil writes. He adds that it’s never a good idea “to put all your money in one basket, whatever you are investing in.”

There’s no such thing as a risk-free investment and it’s important to remember that your capital is at risk when you lend to businesses. That’s why diversification – not putting all your money in one basket – is key to managing risk when investing.

We make it easy to instantly create a diversified portfolio of business loans with our Growth Account and Income Account, both of which can be held within our Innovative Finance ISA for tax-free returns. Please note that tax treatment depends on the individual circumstances of each investor and may be subject to change in future.

To help achieve an optimum level of diversification within our investors’ portfolios, this week we launched our AutoBalance and AutoQueue features for Growth and Income accounts. These features will work together to ensure that investors do not have too high a proportion of their funds in any one business loan.

In his Financial Adviser article, Neil goes on to explain the research that 4th Way – a valued partner of LendingCrowd – carries out on the loan books of P2P lending platforms. It’s a very informative article and you can read it in full here.

At LendingCrowd, we combine cutting-edge technology with extensive financial services experience to decide which businesses will be able to use our platform to raise funds. Between January 2016 and March 2019, we only paid out loans to 8% of borrower applications. Read more in our Investing toolkit.

LendingCrowd founder and CEO Stuart Lunn said: “LendingCrowd has been at the forefront of innovation in the fintech investing and lending space since we launched almost five years ago. Our proprietary technology, developed in-house at our Edinburgh headquarters, allowed us to become one of the first platforms to offer an Innovative Finance ISA and means we can develop and launch additional account features rapidly and efficiently.

“We believe that diversification will be a key element of future regulation and we are keen to be at the forefront of best practice.”

Please remember that your capital is at risk when lending to businesses. LendingCrowd and its products are not covered by the Financial Services Compensation Scheme.

Article author

Gareth Mackie

Gareth Mackie

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If you invest through LendingCrowd you should understand that your capital is at risk.

LendingCrowd is the trading name of Edinburgh Alternative Finance Limited, Company Number SC468392, authorised and regulated by the Financial Conduct Authority (Firm reference number 670991). LendingCrowd and its products are not covered by the Financial Services Compensation Scheme.

Read more about the risk involved when investing and borrowing.

The company's registered office is 23 Manor Place, Edinburgh, EH3 7DX.

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