FMPP’s position in the investment plethora

Aug 16, 2022

FMPP’s position in the investment plethora

In this blog, we shall go through what traditional investment avenues have to offer. Later on, we shall see how P2P investments offer solutions to problems unsolved with traditional asset classes. And finally, we shall see as to how FMPP is the most all-round investment avenue.

Choosing the right investment avenue

Given the multiplicity of investment avenues on the market, choosing the right one can be too tricky and challenging for someone. Honed investors are baffled by the overwhelming number of asset classes.

However, the factors to consider while choosing the right investment avenue are the returns they offer, whether they are prone to market volatility, the length of the terms they have, etc. Some asset classes offer higher returns with lower probability, while others offer vice versa. 

Some traditional fixed-income investment avenues are non-market-linked and therefore offer predetermined returns. However, the rates of returns they offer are not even good enough to outpace inflation. Hence, opting for a market-linked investment avenue may seem like a viable option; however, due to their market-prone nature, the investments are unprotected. 

P2P investments offer higher returns than traditional investment avenues. LenDenClub has delivered returns of up to 10 to 12% p.a.* for the past five years, along with consistently low NPA. 

FMPP, LenDenClub’s new product offering, has been designed to meet LenDenClub’s returns proposition on an individual level.. 

What makes FMPP so unique?

LenDenClub, India’s leader in the P2P sector, has designed a new algorithm for FMPP. The funds allocated to individual borrowers are as low as ₹1/borrower. This way, with FMPP, LenDenClub makes the best attempt in curbing defaults and NPAs for individual investors. Thus with FMPP, LenDenClub offers Marginalised NPA through Systematic Risk Mitigation.

FMPP vs fixed deposits and Recurring deposits

FMPP is a debt asset class as well as a fixed-term, fixed-maturity investment avenue. Hence, with a committed-term investment of 1, 2, 3, 4, or 5 years, and the flexibility to have multiple FMPP investment plans, one can go for aimed investments like planned big purchases and wealth-building. 

Fixed and recurring deposits offer fixed returns; however, they do not match the rate of inflation. Hence, even though investments grow, there is some loss of value to them at the end of the maturity period. FMPP comes with a double-digit and inflation-beating returns proposition of 10 to 12% p.a.*

Fixed and recurring deposits offer principal protection on investments. Hence, in spite of being market-dependent, in the case of massive NPA, the principal amounts of individual investors are protected. With FMPP, although LenDenClub does not offer principal protection, it offers platform-level uniformity in portfolio performance.

Principal protection of fixed and recurring deposits is subject to the liquidity of a bank’s assets. FMPP’s platform-level uniformity in portfolio performance is based on LenDenClub’s stringent three-prong risk mitigation strategy, i.e. (1) Credit-risk mitigation: on-boarding creditworthy borrowers after further screening them through 200+ verification points; (2) Regulatory-risk mitigation: Escrow account handling of funds, a platform-detached unit for safety of funds, and being RBI-regulated; and (3) Concentration-risk mitigation: using the hyper-diversification principle for Systematic Risk Mitigation to give Marginalised NPA.

FMPP vs market-linked asset classes

FMPP, being a P2P investment plan, is a non-market-linked asset class. Hence, it is not subject to market volatility. Where some market-linked asset classes are of short terms and some are medium terms, FMPP is a medium-term asset class. It has been designed to give an investor the power of compounding. The interest earned over one investment cycle is invested along with the principal, and the cycle continues until maturity is reached, giving recurring interest. With returns of up to 10 to 12% p.a.*, one can earn yield of up to 12.21 to 15.25% p.a.* for a period of five years. One can, therefore, potentially double an investment amount in nearly six years. 

FMPP has been meant to give higher yet returns. So, even if it does not have the potential of delivering returns on a par with some market-linked asset classes, it can give relatively high and worry-free returns.

FMPP vs cryptocurrency investments

Cryptocurrencies are decentralised; hence, it is not regulated by the RBI. Investing in them may be questionable from a security perspective. Cryptocurrencies can potentially offer very high returns; after all, they work on the demand and supply principle of economics. They are, however, highly market-dependent. 

FMPP is fully an RBI-regulated mechanism. LenDenClub is an RBI-registered NBFC-P2P. The funds are handled in escrow accounts as per an RBI mandate. Hence, there is no threat to investors’ funds. As a well-balanced, new-age investment plan, FMPP has been designed to yield High Returns with its non-market-prone mechanism.

Conclusion

FMPP gives the best of every investment avenue: it gives inflation-beating returns that are . And the mechanism is fully RBI-regulated and escrow-compliant. FMPP can be a single investment solution for all to invest over a tenure of 1, 2, 3, 4, or 5 years. 

* On platform level.

*P2P investment is subject to risks. And investment decisions taken by a lender on the basis of this information are at the discretion of the lender, and LenDenClub does not guarantee that the loan amount will be recovered from the borrower.

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