This week we interviewed Joe who is a successful lender on Bitbond. Interested in investing since the late 90s, Joe has made an exciting career in finance. At the moment he works at a Treasury Department.
In our interview, Joe told us about how his firsts investments ended up, about his principles when investing and also gave some useful tips for beginner investors. You can find his peer-to-peer lending portfolio here.
Bitbond: Hello Joe, thank you for taking the time to talk to us. Could you start off by telling us a little about your background and what you do professionally?
Hi Bitbond, yes of course. I have a degree in business administration and somehow ended up dabbling in equity derivatives. First in a kind of sales function for a US Investment bank and now I am in the treasury department of a former client. Aside from that, I try my luck as a start-up investor which is how I ended-up as an Angel Investor in Bitbond and consequently a lender on the platform.
Bitbond: Can you walk us through when you started investing, what your first investment was and why you decided to go for it?
My first investment was a mutual fund in the late 90s after inheriting some money from my grandma. I did not know any better and thought that a broadly invested mutual fund would be a good idea.
Bitbond: What was the return on that investment?
By the time I closed the investment a few years later I think I lost about 20%. I simply tried to hold-on for too long. Admitting defeat can sometimes take longer than it should. And actually realizing losses is never fun. But sometimes, one just has to cut his/her losses, no matter how painful it is.
Bitbond: You have lent over $20,000 on Bitbond to entrepreneurs all over the world, and have enjoyed around 10% ROI, what are you doing better than other investors? What do you need to work on?
Let me try to explain what I do. If that is good or even better than what others do is not for me to judge. It has worked for me thus far, but who knows if it will work in the future. Apologies if it is going to be a little long-winded answer.
When trying to decide in which loan to put my money, I set myself the following principles which reflect my somewhat risk-averse nature.
1.) The loan size must be large enough that there is a credible threat to the borrower that Bitbond will enforce the loan in case of default.
I would not invest in loans that are so small that the borrower can reasonably assume that it is uneconomical to try to enforce the loan. This would make it crooks far too easy who will know that there is no incentive to come after them.
2.) Only lend in jurisdictions where I feel that there is a sound legal system where a claim can actually be enforced.
There is no use to have a claim that is economical to enforce but where the legal system is so murky that the enforcement will unlikely succeed. Hence I mostly invest in Europe and North America, as I feel comfortable with these jurisdictions. It clearly means that I forgo a lot of opportunities. Good example of fear dominating greed.
3.) Lend to marketplace sellers only.
Again, this is a very conservative measure. However, I feel that fraudsters will have it more difficult to fake a lot of marketplace activity without being caught out by either the market place or BitBond.
4.) Only be active in USD denominated loans.
I personally do not like the volatility that bitcoins exhibit. As I am not XBT functional (I do not really have any XBT income nor expenses) I prefer USD as it tends to be comparatively stable versus my functional currency (EUR).
I also think that this protects me from defaults a little bit, as borrowers can more predictably plan their repayments, given EUR or CAD do not fluctuate as wildly versus USD as they do versus XBT.
I need to get better in sticking to my principles. I have digressed a number of times. And both defaults that I had did fail principles 1) and 2).
If a loan defaults that fulfilled all the principles, I’ll have to check on my principles if they are accurate and/or complete. In my mind these principles should not be static but should constantly be reviewed and adjusted where necessary. I am a bit lazy on that I have to admit.
Bitbond: Had you used bitcoin before you started investing on Bitbond? What do you think 2016 holds in store for bitcoin?
No, I have never used XBT before investing on Bitbond. Buying and transferring XBT to Bitbond was easier than thought though.
I have no real view on XBT but would hope that it will become less volatile as it continues to mature. However, I think a lot of people have hoped that for quite some time now, so I would not want to bet on it happening in 2016.
Bitbond: Could you tell us about an investment mistake that you’ve made and what you learned from that experience?
I lent to an apparent craft beer producer in Argentina. The overall loan size was not big and it would not make economical sense to enforce it. Needless to say, the loan defaulted. Not all stories are as beautiful as they sound. I did really like the story that the guy came up with. So props to that guy for tricking me to diverge from my principles.
Bitbond: What books would you recommend to a beginning investor?
The Intelligent Investor by Benjamin Graham.
Reminiscences of a Stock Operator.
Classic and timeless reading.
But before any book, I would recommend beginning investors to ensure that common sense prevails and to always remember that risk drives returns. There simply is no free lunch. If something is too good to be true, it probably is.
Bitbond: Which features on Bitbond do you like particularly and what features would you love to see on the platform?
I like the simplicity of things. Sleek design with no unnecessary clutter.
Apart from that I very much like the overview over my investments. Clear and frank summary of how my investments are doing.
More generally I like the idea of giving people that fall through the cracks of the traditional banking system access to much needed funds.
Two features that I would like to see are:
1) an enhanced AutoInvest function
I like the idea of the AutoInvest function. However, right now I do not use it as it is still to coarse for my liking. I cannot specify minimum loan size, nor that I only want to lend to marketplace borrowers.
2) automated XBT conversion
I like to take as little XBT FX risk as possible. If I want to absolutely keep it to a minimum, I would have to trade much more in and out of XBT than I do. If I had a wish, I would wish for a solution where XBT’s are automatically exchanged as and when needed or any payments in XBT hit my account.
Bitbond: Thank you so much for taking the time to talk to us. Do you have any final pieces of advice you would like to share with our readers?
I have to thank you for asking and everybody for reading. The best advice I can give is to come-up with reasoned principles, to follow them through and to keep your greed in check.
Thank you for the amazing interview, Joe!
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