It’s already been more than a month ago since I left my home country to start my new life as a digital nomad entrepreneur so in this update I will give you a short recap about my first month in Albania and about what keeps me busy at the moment. Apart from my regular portfolio update for the month of August I will also dive a bit deeper into the licensing situation in the Peer-to-Peer market, as I think this is a very important development.
My First Month As A Digital Nomad
By the end of July I was finally fully vaccinated and ready to jump on a plane to Albania to start my life as a digital nomad. For me this didn’t mean just going on a holiday or traveling to meet other nomads to get inspiration for what business to start or how to make money online. I already had plenty of ideas and just wanted the time for execution so I can learn, fail and learn again until I manage to reach some form of success.
In my last update I already shared some of the reasons why I picked Albania as a first destination. What I didn’t yet share is that I’ve already been working for a while on a project that is related to the tourism boom in Albania. Whether this idea will work out or not and if I will be able to earn any money from it, only time will tell if I keep putting my efforts into it.
So how do I finance my current life without a job? Well…initially I budgeted to allocate a part of my savings to make this step and to be able finance my life for at least a year or maybe two to give myself the time to build up income from new sources. Luckily this is not needed anymore since I managed to land some freelance work that provides me with enough income to live off, but still provides enough flexibility to work from anywhere and have plenty of time left for my own ventures.
So quitting my job has not been the big bang moment I thought it would be when I started dreaming about it years ago. I didn’t just quit one day, to have nothing to do anymore the next day. I’ve been double jobbing for a while and rather felt the urge to catch up with the projects and ideas that I had already planned out for a while.
My first month in Albania has therefore been exciting but overwhelming at the same time. I haven’t yet found the right balance between working, social life and actually enjoying the lifestyle as my focus has been so much on working and the practical side of settling into a new country, but I’m sure this will all come with time. Despite the lack of time I’m still committed to stay consistent with The Money Passport so I managed to scheduled some time for my monthly portfolio update for August.
My Passive Income in August
My total passive income in August was €551,19. The largest part of this, €321,90, came from my P2P investments and the remaining €229,29 were dividend payments from stocks and ETFs.
Since the total passive income was lower than in July, my procentual achievement towards my goals of €1500 of monthly passive income also dropped to 37%.
Although my passive income fluctuates from month to month, you can see in the graph below that the trend is going up which is the most important.
P2P Lending Portfolio
My portfolio in P2P loans brought me €321,19 in interest during August, the hightest amount I ever received! I also added another €750 at the beginning of August so at the end of the month my portfolio looked as follows:
Like in previous months I deposited another €500 to my Mintos account at the beginning of August. Throughout the month I also received €106,68 in interest which I obviously reinvested as well.
Mintos Obtains Investment Firm License
And then there was also white smoke coming from the Mintos camp as they are the first P2P platform to officially obtained the long-expected Investment Firm and Electronic Institution License from the Latvian authorities. Since I believe this is a very important milestone for Mintos, but also for the entire P2P market, I will dive a bit deeper into what the licence actually is and what it means for us as investors.
Who Is Issuing The License?
First of all there has never been any financial regulations in place in the P2P market and since the P2P platforms operate internationally with lending companies and investors in many different countries, the best would be to arrange this at a European level. This is a significant operation that might still be years away and since Latvia has a significant fintech industry, the local regulators in Latvia have stepped up and went ahead with the introduction of new regulations in their own country. The idea is to have a head start and to be able to passport the licenses to other countries or to a European level in the future. So for now the governing body that is issuing the licenses is the Latvian Financial Capital Markets Commission (FCMC).
What Does The License Actually Mean?
To get licensed Mintos and other platforms that will obtain the license need to comply to a set of rules set by the regulator which requires them to operate in a more structured way and provide more transparency to the regulators and to investors. Here are some of the key points:
- Client verification: Platforms need to comply with Anti Money Loundering (AML) and Know Your Customer (KYC) regulation by requiring certain data from their clients. My personal opinion is that this is not a benefit for investors but rather a bureaucratic annoyance that requires additional time and paperwork. However we see the same requirements in mature industries like banking and other investment firms and stock brokers, so by complying to this the P2P markets gets taken more seriously.
- Suitability and appropriateness assessment: Clients will be required to pass a test so only people with the appropriate knowledge of the products and risks can invest. I believe this is also part of becoming a more mature and regulated market and to prevent people who have no clue what they’re doing from getting talked or advertised into taking more risk than is good for them. But for me and other knowledgable investors this is nothing more than another annoyance that doesn’t provide any value.
- Information about risks: Licensed platforms need to provide sufficient documentation to their clients about the risks involved with their investments. Same as above, to me as an existing and experienced investor this also provides no added value but it’s good that it’s written in black and white and provides more transparency to new investors.
- Possibility to offer additional investment products: As a registered investment firm Mintos can create and offer new products and has already announced that they plan to introduce an ETF. I’m personally very keen to hear more about this!
- Notes will replace loans: This is absolutely one of the most important implications as investors won’t be able to invest in loans directly anymore more, but in so-called ‘notes’. Loans will be grouped together based on similarity, like same lending company, country, loan type, duration and placed into a note that you can invest in. Notes will be an officially registered investment product and therefore have an International Securities Identification Number (ISIN), similar to stocks and ETFs and will have prospectuses and final terms instead of loan assignment agreements.
- Introduction of Special Purpose Vehicles (SPCs): Notes will be issued by SPCs which are controlled by Mintos, but will serve as a separate legal entity. Due to the introduction of notes, investors won’t have any claim rights on a loan anymore so the SPC will be the sole creditor against the loan originator, instead of many individual investors. This will lead to a leaner process without any room for other 3rd parties or creditors to intervene in the process of distributing the money back to investors.
- Separation of funds: Clients’ assets and funds are separated from the balance sheet of Mintos, which safeguards them in case something happens to Mintos.
- Three investor categories: Investors will be assigned one of three categories: 1) retail clients, like me as a simple investor, 2) professional clients and so-called 3) eligible counterparties, like institutional investors. The level of investor protection by the authorities will depend on the investor category with retail investors gaining the highest level of protection.
- Investor protection scheme: Under this scheme investors will be compensated up to €20.000 in case Mintos would default. It’s very important to understand that this does in no way mean that you can’t lose your money as this only applies in the very unlikely event that Mintos itself would no longer fulfill its obligations to investors. So this does not safeguard your investments from defaulted loans or loan originators.
Timeline For Mintos
Now that Mintos has officially received the license, they will soon update their terms and conditions which investors will need to accept in order to continue investing on the platform. Then they will also start the introduction of notes and during an estimated transition period of 6 months stop issuing new loans and only offer notes instead so the transition is expected to be completed in early 2022.
My View And Conclusions
Being the first P2P platform to voluntarily obtain the license improves my confidence in Mintos. The entire process of obtaining the license is also costly and economies of scale do really apply which is a big advantage for Mintos as the largest P2P platform in Europe. The downside of the costs and efforts involved is that it makes it harder for smaller plaforms and single loan originator platforms which might make them opt not to go for it with the consequense that investors will leave. On the other hand this is good for Mintos as they have seen some originators leave and start their own platform and maybe they will end up coming back to Mintos.
The licensing is in my opinion also good for the entire P2P market as it will make a distrinction between more credible, licensed platforms and the rest. Investors could end up only chosing licensed platforms and leaving the non-licensed platforms. With only licensed platforms left in the market, it will be much harder for start-ups to enter the market, which in my opinion is actually a good thing, as this will only leave room for serious parties with a solid plan and business model. Malicious people will have a much harder time trying to set up a scam so hopefully we won’t see any of those anymore in the future.
In August I received €117,36 in interest on EstateGuru, the largest monthly amount since I started investing on this platform. With the large amount of interest I also received a large sum of principle payments back in my account, which I haven’t yet all been able to reinvest yet. Hopefully there will soon be enough interesting projects as I don’t like to keep too much of my funds uninvested.
In August I received €22,76 in interest from Bondora Go&Grow and deposted another €250. My goal is still to reach €1 a day from my Bondora Go&Grow account and with a current daily average of €0,73 I’m currently at 73% towards that goal.
In August I received €33,76 from my investments on the IUVO Group platform and I made no further changes to my strategy.
During August I received a total of €25,39 in interest payments from PeerBerry and made no changes to my strategy.
In August I received €15,95 in interest from Viainvest and also didn’t make any changes to my strategy here.
Unfortunately Viainvest has just lowered the fixed interest rates on consumer loans to 11% from 12% previously, starting September 1st. The new fixed rate only applies to consumer rates, so all other loan types are unaffected. I believe that this was unavoidable as the average interest rates are down on almost all platforms.
There was also very positive news from Viainvest as they have announced that they are also close to obtaining the investment firm license from the Latvian FCMC. They haven’t yet communicated an exact timeline yet but similar to Mintos, they also mention a transition period of 6 months once they obtain the license.
P2P bonus offers
Do you want to invest in the P2P platforms that I discussed above? Make sure to check which platforms currently offer a bonus for new signups. You’re not only doing yourself a favor but by using my links you are also supporting my blog so I can continue to create more valuable content.
Stocks & ETFs
In August I received a total of €229,29 in dividend payments from the following stocks and ETFs:
|Procter & Gamble||€6,31|
|SPDR S&P Global Dividend Aristocrats (ETF)||€90,58|
The total amount in dividend payments was lower than in the previous months, which is the sole reason why my total passive income for August was lower than in the previous two months. Dividend payments can fluctuate a lot between individual months since none of the stocks and ETFs I hold are paying monthly, but rather quarterly, yearly or twice a year. For me the importance is that the trailing average is rising over the long term and besides that I can already see that September will be a record month again as a lot of the dividend payments have already been declared and scheduled.
In the meantime I keep adding as much capital into a bucket of ETFs as I can, now that I don’t have the same income anymore without a full-time job.
I feel like I’m repeating myself every month saying I have tons of ideas for more content and that I’d love to share more about my new life as a digital nomad, but the truth is that I simply haven’t had the time yet to write more. Since I can only stay in Albania for 90 days without going through the hassle of applying for a residency permit, I need to make my time here count.
So I’m asking for a bit more patience for more content as I’m destined to grow The Money Passport’s blog and Youtube channel when I have the time, so I can share my journey with more people.