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Alternative Investments

6 Different Types Of Alternative Investments You Should Consider

Whether you’re just looking, or starting out in investing, it will be helpful to understand the major instruments with which people tend to invest. This video gives an overview of 6 main investment options, as well as their qualities and characteristics. 

Read More: Starter’s Guide: 6 Different Types of Investments For You To Consider

Read Also: This App Can Help You Kick Start Your Investment Journey

Find out more about alternative investing at Funding Societies here.

Funding Societies is a DollarsAndSense Brand Connect partner. If you are interested to know them better, you can find out more on what they do on our DollarsAndSense Brand Connect Page.

 

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Alternative Investments

How Technology Can Revolutionise The Way We Invest

The older generations love gold and properties as their mode of investment and method to hedge against inflation. With the advancement of the Internet and technology, the new generation of investors are now more well-equipped with information and new investment opportunities. This is especially so in recent decades, when the huge leap in technology opens up a whole lot of new sub sectors in the digital industry which can potentially revolutionise the way we invest.

Let us look into 5 growing digital sub sectors and how it can create new investment opportunities.

1. Crowdfunding

According to Investopedia, Crowdfunding refers to the use of small amounts of capital from a large number of individuals to finance a new business venture. Typically, crowdfunding is either reward-based or equity-based.

For reward-based crowdfunding, entrepreneurs or inventors will pitch their product idea to investors, in exchange for a free or discounted finished product. An example of such crowdfunding website would be Kickstarter, the world largest reward based crowdfunder where over US$2 billion has been pledged by more than 10 million people since they launched in 2009. Oculus Rift began as a Kickstarter project 3 years ago, and eventually raised US$2 billion. Pledgers of the project were promised to get the upcoming Oculus Rift for free (how we wish we knew this project back then!) However, this type of crowdfunding is not considered as an investment.

As for equity-based crowdfunding, investors can chip in for the projects in exchange for the equity of the firm. The more prominent equity-based crowdfunding platforms are Seedr and CrowdFunder. Locally, Fundnel also offers various funding methods for businesses and investors depending on their suitability.

Based on 2014 statistics, Asia is recording exponential growth in crowdfunding market, contributing 21% to the global funding volume. Globally, an estimated US$87,000 is raised every hour.

2. Peer-To-Peer (P2P) Lending 

P2P lending refers to a debt financing method which enables individuals to borrow or lend, without the traditional brick and mortar financial intermediaries. Investors can lend money to the businesses in exchange for periodic interest payment and the principal amount upon maturity. It is also known as social lending. Without the traditional financial intermediaries such as banks and finance companies, P2P lending narrows the interest spread between lenders and the borrowers which is beneficial to both parties.

P2P lending is usually deemed as risker as investors are lending their money to businesses that banks might have rejected their loans. However, there are many reasons why banks can reject a loan. And one of the main reason is that these SMEs do not have enough history of track records in earning ability or cash flows.

P2P lending platforms can help to assure the investors by doing first-round screening of the SMEs before posting them online. Financial information are also provided for the investors to do due diligence.

MoolahSense, Funding Societies and Capital Match are some of the P2P lending platforms in Singapore.

3. Bitcoin

Bitcoin is a digital currency (also known as crypto-currency) created in 2009 with the promise of lower transaction fee than traditional online payment methods. It is the most accepted digital currency and some businesses accept Bitcoin as a mode of payment for goods or services. Besides acting as a mode of payment, Bitcoin is also seen as a type investment for many people. However, price of Bitcoin can be very volatile. The highest recorded price was US$1,151 per Bitcoin in 2013 while the lowest was US$205 in 2015. As at 15 Feb 2015, price of 1 Bitcoin is at US$404.

To find out more: Bitcoins Investopedia 

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4. Direct Purchase Insurance (DPI)

DPI enable consumers to buy basic life insurance policies directly from the insurance companies online, without having to go through financial advisors and hence, bypass commission charges. This initiative implemented by Monetary Authority of Singapore (MAS) to allow Singaporeans to have access to basic protection without any financial advice. Consumers can compare financial products offered by different insurance companies using online platforms like CompareFirst and take their time to decide which policy best suits them.

This initiative, together with vast availability of information online, people can make more informed choice and hence reduces the conflict of interest for insurance agents. The current commission based system might prevent some of the agents from recommend the soundest advice for their clients.

Read Also: Will Buying Life Insurance Online Be The Next Big Thing?

5. Ecommerce

Everyone loves Ecommerce. Yes, everyone, even the Durian sellers.

People love to buy things online for many reasons. It can be due to convenience, price competitiveness, price comparison or variety. The trend of buying things online is set to grow further and hence, listed ecommerce companies presents an unprecedented investment opportunities for the investors. The ecommerce sector is undergoing explosive growth, attracting US$112 billion worth of investments globally in 2014.

With increased connectivity and the advancement of technology, it spurs a new wave of innovation and the birth of new subsectors. This also presents more investment options hence moving investors away from the more traditional investment methods. It is worth looking more in-depth in digital sector than ever before.

To find out more about the digital sector, visit sgx.com/digitalsector

Funding Societies is a DollarsAndSense Brand Connect partner. If you are interested to know them better, you can find out more on what they do on our DollarsAndSense Brand Connect Page.

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Investing

Investing in an Uncertain World

Here’s an example of how uncertainty can affect the average investor: prior to the 2016 US Election Day, most polls had projected a Hillary Clinton victory. The eventual result was different, not to mention unexpected. The shock impacted the markets even before the official winner was declared. As Donald Trump’s victory became more and more assured, gold prices soared; the metal is generally seen as a safe asset and a hedge against inflation. Meanwhile, emerging market stocks tumbled and the US dollar reached its highest point since 2003.

In the immediate aftermath of the 2016 USA elections, the markets certainly reacted and the fluctuation reflected anxiety for the future. Investors asked: is long-term market stability still possible? Will the markets continue on this volatile streak? Will they calm after a while? Given a situation of financial instability, what should the typical investor do?

Donald Trump’s victory was a catalyst for financial swings, but the reality is, market instability often happens and investors need to prepare accordingly. Certain (but not excessive) precautions should be taken to buffer against unexpected upheavals. How to do so? Diversify your portfolio, hunt for new investment opportunities, and stay calm even during choppy times.

Diversify Your Portfolio

Political events often upset both the markets and investor confidence. Some investors choose to behave in a more conservative manner (see the spike in demand for gold immediately after the 2016 USA presidential elections). Others choose to try and time the market in the middle of insecure times by pulling their assets and getting back in later when the markets stabilize.

But timing the market is a very risky affair, even for experts. If you want to fortify your portfolio in anxious times, you should diversify across different asset classes and rebalance your instruments periodically to maintain your risk profile.

Telling investors to diversify is very basic advice, but think about it. Diversifying your investments is something you can control in the midst of uncertainty. You get to choose which instruments to purchase and how much money you are comfortable allocating into each asset class.

The main idea here is to balance the potential for risk and reward. For example, let’s say your portfolio consists of company stocks and precious metals. Your stock value may have been erratic over the USA election season, but the value of your gold has gone up. As you can see, with a well-diversified portfolio, you remain in the clear if the stock markets fluctuate for the long-term, as your returns aren’t determined by the performance of a single asset class.

Don’t overload yourself with real-time market information, but do look at all asset classes and see how they will fit into your portfolio and your risk tolerance. The bottom line is: if your overall portfolio is doing fine, then geopolitical situations matter less.

Read Also: This Infographic Will Tell You All You Need To Know To Defend Your Investments

This Is a Good Time to Hunt for New Investment Opportunities

If you think your investment portfolio is already well-balanced and you have covered the basics (fixed deposits, bonds, gold, stocks, etc), you can research new places to invest your money. There is an advantage to routinely looking at all the available options and seeing how they fit your portfolio because over time, asset classes produce different results. So to maintain your preferred risk profile, an investment portfolio needs periodic rebalancing.

If the current market climate is rendering you a little skittish, you can try investing small sums into alternatives. Technology, for instance, can be a promising sector.

Internet stocks are obvious suspects. Think about how essential brands like Google have become. But note that unless you are an early investor in these tech companies, your returns won’t be spectacular. Also, if you already own company stocks, other areas in technology can answer the gap in your portfolio.

Innovative and profitable technology companies are not exclusive to Western markets. One technology-based investment opportunity that’s growing in Singapore is peer-to-peer (P2P) lending, which utilized online platforms to match borrowers and investors. Borrowers take out financing for working capital or other business necessities, while investors who had collectively funded the financing opportunities gain interest-based earnings in return. Investing in P2P lending has several benefits: good return rates higher than deposits or bonds, a low entry barrier suitable for those wanting to try the business model first, and a streamlined online process.

Despite being a relatively new instrument, a study by the UK Peer to Peer Finance Association (P2PFA) stated that so long as investors are educated and the regulatory framework is sound, P2P lending does notcreate systemic risk. In fact, defaults would need to increase at least threefold from current levels to whittle down investor interest rates to below zero.

These days, certain apps can give you real-time updates on your favorite investments or even figure out the best investment mix for you. New opportunities are out there. Take the time to research and find new investments you can be confident in. Look for instruments with good growth that you can feel secure in.

Stay Calm and Don’t Make Rash Decisions

Yes, it can be difficult to enact this advice when your portfolio contains your hard-earned money, future hopes, and retirement plans. Investing can be as emotional as politics, making it difficult to stop watching the market’s every move. Yet it is counterproductive to overanalyse the current situation; there are too many variables. All the information overload can induce panic and cause you to “sell low, buy high” instead of the other way around. Additionally, don’t succumb to the temptation of making speculations. Impulsive decisions can change your portfolio drastically and at the moment, you need a balanced and stable portfolio.

Read Also: Invest Based On Your Investment Objectives, Not What Others Are Saying

Funding Societies is a DollarsAndSense Brand Connect partner. If you are interested to know them better, you can find out more on what they do on our DollarsAndSense Brand Connect Page.

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Alternative Investments

The Fintech Revolution In Singapore: Here’s Why It’s Here To Stay

It’s undeniable that technology will increasingly impact the way we live, work, communicate and entertain ourselves. From the moment we wake up, we are logged on to technology.

We check our phones to reply any messages we’ve received. We use Grab to book a ride to work or check the arrival timings on buses. We also reply emails or catch up on news stories and social media gossips on the way to work.

Throughout the day, we use Google to search for information, Facebook to look into what our friends and family are doing, browse Agoda, Expedia, TripAdvisor and Airbnb, to look into our holiday plans. Other aspects of our lives including dating, either using Tinder or stalking dates on social media, travelling, using Google Maps, playing games on our phones, shopping on Zalora and Alibaba or RedMart and Amazon, and also to watch our favourite TV shows on Netflix if we are willing to pay, or to stream from illegal websites if we are not.

Having infiltrated most aspects of our lives, it’s not difficult to fathom that our phones will not only be our source of entertainment, our shopping mall, our travel agent and our personal assistant, it will also be our bank.

The Fintech Revolution In Singapore

As a nimble, technologically advanced country with an educated population, Singapore is well-placed to be a laboratory for technological solutions and innovations, including in the Fintech space.

Testament to the importance placed on fintech in Singapore, several schools themselves have started to include fintech modules into their courses. This will supply a talented pipeline of workers to the sector as schools continue to broaden their programmes to include fintech.

At the tail-end of 2016, Singapore hosted its first Singapore Fintech Festival. Just to get an idea of the scale of this, there were more than 11,000 attendees from more than 50 countries over the five day festival.

The country has also showed its intention to continue being at the forefront of fintech by committing to an investment of over $225 million over the next five years in 2015. Besides funds, implementing a collaborative system and vibrant fintech infrastructure is another initiative the Singapore government is taking seriously to grow the industry.

For the longer-term, the government seems set to playing its part to drive the industry. The MAS (Monetary Authority of Singapore) has confirmed that it will host the Singapore Fintech Festival again this year. Moreover, it will also be awarding up to $1.15 million at the Fintech Awards.

Read Also: 4 Jobs In Finance That Technology Will Be Disrupting

Despite these efforts, there are some reports stating that fintech penetration in Singapore is not the pretty picture everyone is painting it. Ernst & Young’s EY FinTech Adoption Index 2017 placed fintech adoption in our island nation at 23%. This is behind the likes of Switzerland, Hong Kong and Mexico, and way behind even developing nations such as China, India and Brazil.

The reason for this may be that penetration is easier for developing countries whose regulations are more relax. Whereas in Singapore, there are strict laws in place, which includes protecting copyrights and intellectual properties.

There are also developed countries that place ahead of Singapore, and this is an area that should be improved. One reason it may have happened is due to the strong companies that dominate the local financial marketplace, especially in the banking and insurance sectors. These companies that dominate the local markets are also highly profitable, which makes it less likely they would change the status quo without being encouraged to do by regulation.

How some of these walls can be broken is by good regulation and working with industry players to seek win-win solutions. This can be seen in MAS’ recent establishment of a Payment Council, that includes 20 leaders of such institutions in Singapore. The country has a great number and penetration of e-payment systems – but these are not interconnected which makes it a hassle for consumers even though easy solutions could be at hand to link them to one another.

Fintech Companies Are Also Doing Their Part

Companies and individuals in the country are also doing their part to upkeep a vibrant fintech arena.

Block 71 at Ayer Rajah, proclaimed as the world’s most tightly packed entrepreneurial eco-system with close to 750 start-ups, has been producing many technological companies, several in the fintech space, which are ready to make their mark in Singapore and beyond.

At the same time, Lattice80, a co-working space, was launched in the heart of our Central Business District during the fintech festival. Claiming to be the world’s largest fintech hub, Lattice80 says it prides itself on creating an eco-system for fintech start-ups to collaborate, connect and co-create.

Events like ShareInvestor’s InvestFair has also started to adopt a fintech spin to put forward a relevant event for audiences. DollarsAndSense was invited to be the moderator of two panel discussions this year, and we gained good insights into what the industry was doing.

How You Can Benefit From The Fintech Wave

In the insurance space, there are more and more companies trying to sell insurance online. This means consumers get more information and may pay less in commissions to insurance agents if they’re savvy enough to buy the insurance products they need.

Some new insurance companies are also trying to be the Agoda of insurance, where they list products and help you compare and rate insurance policies, letting you make a more informed decision. One such company you can buy travel, car, home, pet or maid insurance from is Insurance Market, which does not have a single agent selling products for the company – everything is done online.

Within the payments space, e-wallets and mobile applications such as DBS’ Pay Lah!, OCBC’s Pay Anyone as well as a peer-to-peer payments system Pay Now that allows consumers to transfer money to anyone. Mobile payment solutions have also been accelerated by Samsung Pay, Apple Pay, Google Wallet, PayPal and even cryptocurrencies such as bitcoin playing their part ensure consumers have the most convenient solutions to make their payment. This space is one of the most vibrant with many players in the market.

The lending space is predominantly catered to companies that require financing. Some of these companies may not be able to receive it because they haven’t built enough traction to get a bank loan or in other occasions they only require it for a very short term. Based in Singapore, Funding Societies, the only Southeast Asian digital lender to ranked in Fintech 250, a global list by CB Insights of the top 250 fintech companies in the world.

Also Read: One FinTech Company Hopes To Help SMEs Solve Cash Flow Challenges That Even Banks Have Problems With

Funding Societies provides P2P lending to SMEs in Singapore, Malaysia and Indonesia. Even though they lend money out to riskier borrowers to earn a higher rate of return, they have a robust system in place to ensure credit risk is minimised. Investors like us can earn higher returns by putting our money with them. To-date, Funding Societies has made over 750 loans and have a repayment rate of 96.1%.

Investing is another sector that investors can greatly benefit from. Traditionally, we used to use brokers and this gradually moved to many people investing through online portals. The next wave is to leverage on robo-advisors to invest your money for you.

Companies like iFast has its My Assisted Portfolio Solution (MAPS) that frees you from the challenge of building a robust investment portfolio and then having to constantly monitor and rebalance it. And because this is done through algorithm-based investing, transaction and management fees are brought down too.

Read Also: FSMOne: How Singapore Investors Can Now Trade SGX Stocks With The Same Platform They Use For Bonds & Unit Trusts

Funding Societies is a DollarsAndSense Brand Connect partner. If you are interested to know them better, you can find out more on what they do on our DollarsAndSense Brand Connect Page.

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Alternative Investments

5 Useful Tips To Keep Your Business Finances Healthy

A good financial condition holds your business together. Without the right financial management, a business is as good as doomed. Healthy finances allow your business to function smoothly. The thing is, not everyone is a financial guru. Chances are you’re not one either. But you don’t need to be a math genius to keep your company finances in check. Here are a few quick tips to help keep your finances healthy.

Track Your Expenses, Including Hidden Costs

What do you use your business money for? Whether it’s for office supplies, travel, employee meals, you need to track all your expenses. This applies for any hidden costs, too. For example, maintenance, upgrade, and training costs are not included in the price tag of new equipment, but they are costs nonetheless.

Once all the numbers are in front of you and you have taken the time to tally up total cost, you can easily make a proper financial plan, including a budget.

Read also: 5 Steps For Better Cash Flow Management

Establish a Routine

One of the most important habits to keeping your finances healthy is by staying organized. But you won’t be able to do that without a system or routine to keep you on track.

It doesn’t need to be complex, but having a designated time every day or every week to go through your bookkeeping will help you stay organized. After all, it’s better overall to keep an eye on your accounting once a week rather than letting everything build up over a few months.

Don’t Forget About Your Taxes

All businesses must pay tax on their income. Period. You need to start paying taxes from the time you make your first earnings. But the amount of tax you need to pay might vary, depending on your business and where you run your business.

Invest in Accounting Software

You might have already hired an accountant, but it’s always a good idea to invest in reliable accounting software. It can help you effectively track your finances and help you get an accurate picture of your profit, loss, and income statements. If possible, pick a cloud-based accounting software so that you can access your business financial data anytime and anywhere. This allows you to collaborate with your accountant or bookkeeper regardless of everyone’s current position.

Read also: Growing Your Business Without Breaking The Bank

Build and Maintain an Emergency Fund

An emergency fund is money prepared solely for emergency purposes. The money is intended to help you pay for things that wouldn’t be normally included in your regular budgets, such as an economic downturn or large increases in facility or material costs. Ideally, you need to save three to six months’ of expenses in an emergency fund, but we think it’s better to save more.

A healthy finance indicates a healthy business. To keep your business finances healthy, you can start with the five quick tips above and don’t forget – good accounting and bookkeeping habits are the basic foundations for your business financial health!

Find out more about SME Business Loans through crowdfunding via the Funding Societies.

Funding Societies is a DollarsAndSense Brand Connect partner. If you are interested to know them better, you can find out more on what they do on our DollarsAndSense Brand Connect Page.

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Alternative Investments

Is Your P2P Platform’s Interests Aligned With Yours?

Peer-to-Peer (P2P) lending platforms earn fees from matching borrowers with investors, but investors bear the full risk if loans default. Thus, it is important for investors to pay attention to the risks associated with the ‘originate and distribute’ model and look for lending platforms whose interests are aligned with investors.

Watch this video to find out how to check if the interests of platforms are aligned with investors:

Read also: 5 Things That You Can Learn From How Temasek Holdings Invests And Builds Its Portfolio

Find out more about the peer-to-peer loan at Funding Societies here.

Funding Societies is a DollarsAndSense Brand Connect partner. If you are interested to know them better, you can find out more on what they do on our DollarsAndSense Brand Connect Page.

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Starter’s Guide: 6 Different Types Of Investments For You To Consider

If it is long-term financial security you are after, you will have to start investing – and better sooner than later. In this post, we will focus on the types of available. Major instruments include:

  1. Time deposits

A time deposit is a bank deposit with (i) a higher interest rate than a regular savings account, and (ii) a clear date of maturity. There are penalties for early withdrawals but once the account reaches maturity, you can withdraw funds without any fines. Or you can choose to leave your funds for another term. The longer you leave your money alone and the higher the amount of funds, the more interest you earn.

Time deposits are considered a low-risk, safe form of investment. It’s also easy to set up and is not complicated to grasp – so much so that time deposits are considered a beginner’s investment.

There are disadvantages, however. You can’t touch your funds during the term’s duration, so make sure you can afford to have your money locked away for the time being. Also, while a time deposit’s interest rate may be higher than a regular savings account, the same interest rate is lower than other types of investments and is in fact so low that time deposits’ rates often lose out to inflation rates.

  1. Precious Metals

Gold is a classic investment that remains popular throughout Asia. There are differing opinions on whether or not gold is still a viable investment. For your reference, we will include three varying arguments: from Investopedia, from CNN Money, and from the Daily Telegraph.

In general, gold and precious metals preserve wealth against rising inflation. For a long time, they have been considered safe investments during political and economic upheavals.

However, gold prices are actually very volatile. Also, gold pays its owner no income, unlike say, bonds or dividend stocks.

  1. Property

Property serves a similar function to gold: it is seen to preserve wealth against rising inflation. The value of property generally appreciates overtime, making property a popular long-term investment.

However, the main disadvantage of investing in property is glaringly obvious: entry cost is high. You need a lot of money to buy property. Additionally, property is not liquid and requires plenty of upkeep.

If you do have the resources to invest in property, you have options. You can hold on to your property and wait for its value to increase before selling it off for profit. Something else you can do is rent your property.

Renting your property is a great way to generate steady, passive income. However, you run the risk of ending up with a bad, destructive tenant. Or worse, no tenants.

  1. Bonds

When companies and governments need funds – perhaps to expand, perhaps to build infrastructure, they can choose not to borrow money from banks. Instead, they can issue bonds. Basically, bonds are a form of debt where a corporation/government is the borrower, while you – the bonds buyer – are the lender.

For example, if you buy a bond with a face value of $1000, an interest rate of 6%, and a maturity of five years – that means you’ll consistently receive $60 of interest per year for the next five years. When your bond matures after five years, your $1000 will be returned to you.

Bonds are lower-risk investment, but provide lower returns than, say, stocks. However, bonds’ fluctuations are also less dramatic than stocks. In addition, like time deposits and unlike gold, bonds provide a stable passive income.

  1. Stocks

Stocks are arguably the most well-known of all investments. Stocks are shares in the ownership of a company. When you own a company’s stocks, you have a claim on the company’s earnings – also called dividends. Stocks are popular for a reason: they offer higher returns than other instruments like bonds and time deposits. However, stocks are higher-risk investments, with prices rising and falling dramatically.

Ultimately, there are two types of stocks: dividend stocks and growth stocks. A growth stock is a stock in a quickly growing company. However, growth stocks pay back none of the company’s earnings as the growing company would rather use their earnings to expand their business. The only way you can make money from growth stocks is by selling off your stocks. Dividend stocks are the opposite. They pay stockholders part of the company’s earnings. The more dividend stocks you own, the larger your dividend portion.

While you can make money selling off excellent growth stocks, there is no guaranteed return. Meanwhile, dividend stocks replaces your income by paying you back in dividends. It all depends on your risk tolerance.

  1. Alternative Investments

Traditionally, alternative investments include investments that are not in the traditional forms of stocks, bonds, and cash assets. Artwork, antiques, and precious jewelry are all considered alternative investment.

Once upon a time, alternative investments were more intended for the wealthy. After all, you need money to build a painting or jewelry collection.

However, the status quo is changing thanks to the development of financial technology. Forms of alternative investments are increasing. A notable example is peer-to-peer lending.

Peer-to-peer lending platforms match investors and borrowers via digital technology. Borrowers get loans with competitive interest rates and investors are consistently paid back in installments.

Compared to other forms of alternative investments, the entry cost to investing in peer-to-peer lending is low. Like bonds and dividend stocks, peer-to-peer lending is a good source of passive income. While it does carry risk because borrowers can default, a good peer-to-peer lending platform will have performed the necessary due diligence.

Find out more about Alternative Investments through Funding Societies here.

Funding Societies is a DollarsAndSense Brand Connect partner. If you are interested to know them better, you can find out more on what they do on our DollarsAndSense Brand Connect Page.

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Alternative Investments

What Is P2P Lending And How It Actually Works

The Peer-to-Peer (P2P) lending sector has gained quite a fair bit of attention as financial services have taken greater heights in its innovation phase in Singapore.

Read also: 3 Reasons Why Peer-To-Peer Lending Should Be In Your Portfolio

Whether you are an interested lender or borrower, it is important to note the pros and cons of P2P lending. Watch this video to find out more about P2P lending and how it actually works before considering it as part of your investment portfolio:

Read also: Three Key Risks Of Peer-To-Peer Lending

Find out more about the peer-to-peer loan at Funding Societies here.

Funding Societies is a DollarsAndSense Brand Connect partner. If you are interested to know them better, you can find out more on what they do on our DollarsAndSense Brand Connect Page.

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The Myths and Misconceptions about Peer-to-Peer Lending

Over the past couple of years, peer-to-peer (P2P) lending has become an excellent alternative source of business financing, especially for SMEs and start-ups. With peer-to-peer lending, SMEs and start-ups can gain the funding they need for business development. Not only that, peer-to-peer lending is attractive to investors too, with its high returns and easy concept. However, with the rise of peer-to-peer lending, some myths have attached themselves to the concept. Want to separate fact and fiction? Here are some myths and misconceptions about peer-to-peer lending, along with the reality.

“You need a lot of money to get started”

False. In fact, one of peer-to-peer lending’s key advantages is its low entry barriers. Take our investment product, for example. With a S$1000 minimum first deposit at Funding Societies, you can start investing – and for better diversification, you can invest S$100 into ten loans each. You don’t need much to get started at all.

As a P2P investor, you also have flexibility as you are able to choose from the loans provided. You get to pick whichever loan has the tenor and interest rate that appeals to you most.

“It’s not a mainstream investment”

It depends on what you think of as “mainstream.” Yes, P2P lending as a concept has gained traction only recently, but there’s really nothing new about a business model where investors pool together the amount needed for a loan requested by a borrower. But these days, P2P lending activities are easier to facilitate thanks to online platforms and digital technology.

“There are no regulations for peer-to-peer lending”

One of the typical misconceptions about peer-to-peer lending is that the model is not yet regulated so investing in P2P lending or borrowing from a P2P platform can be risky. But it really depends on the region and country. In Singapore, MAS (Monetary Authority of Singapore) has issued a framework for the P2P lending model. Look for a local P2P lending platform that has been licensed!

“Peer-to-peer lending is crowdfunding”

Not really, but it’s easy to make the mistake. After all, peer-to-peer lending is a category of crowdfunding. Certain principles are the same, but there are a few differences between the two concepts. Crowdfunding pools resources from multiple individuals to gather financing for a particular project, perhaps a creative project or the creation of a product. Sometimes the individuals who help pitch in money for a crowdfunding campaign get rewarded with gifts and sometimes there are no physical rewards, similar to a donation.

Peer-to-peer lending, in the meantime, operates more like a lending and borrowing model. Investors and borrowers are connected through an online facilitator. Together, investors pool together finances for borrowers. The borrower will use the disbursed loan and repay his investors with interest.

“If you lend money on P2P platform, it will be locked for a fixed period”

Well, yes. A P2P investor is asked to commit funds for a fixed period, but for a shorter period than most other investments. On our platform, loan tenures range from 3 to 24 months, which compares favorably to other instruments.

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We hope the above have dispelled some of the tangles and confusion. With its advantages, P2P lending is an attractive solution for both investor and borrowers. Do you agree?

Find out more about the peer-to-peer loan at Funding Societies here.

Funding Societies is a DollarsAndSense Brand Connect partner. If you are interested to know them better, you can find out more on what they do on our DollarsAndSense Brand Connect Page.

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Business

5 Steps for Better Cash Flow Management

Financing is the most important aspect of any business and smart entrepreneurs know that well-managed cash flow will prevent unnecessary costs and charges. Most business owners are aware of the importance of cash flow management, yet many have no idea how to do so. Whether you are a complete beginner or you want to get some more tips, read on for five steps to better cash flow management.

Read also: Growing Your Business Without Breaking The Bank

#1 Never expect quick payments

Have you ever had an experience when a customer did not pay you on time? It may not necessarily be because they are unable to pay the invoice. If your customer has ordered your product, it means that they are likely to have enough funds to pay for your goods. But unforeseen circumstances happen. Perhaps your customer has guidelines on extending payment terms. So it’s best never to expect quick payment on your sales. Instead, determine if you have enough working capital to keep your business running well in the event of payment delays. Remember the saying: hope for the best, but prepare for the worst.

#2 Read the details of your agreement

It’s rare to have a completely accurate invoicing process. However, understanding your customers’ payment processes or at least using the right purchase order numbers on every piece of communication can help you get paid on time. Carefully study the details of your payment agreement. Make sure you prepare everything you can so that your customers have no excuses to delay payment.

#3 Forecast your cash flow

Doing business without forecasting your cash flow is like driving a car in the rain without windscreen wipers: you can drive but you can’t see where you are going. Account for all expected incomes and expenses in the future.  Being aware of every completed transaction and updating your records accordingly can also help in managing your cash flow.

#4 Find the root of your cash flow problems

Analyze the root causes of your cash flow problem. Late payments are the most common cause of cash flow problems and financial mismanagement. You should also consider potential problems such as inaccurate invoicing, inconsistent pricing, lack of customer contact, or misunderstanding your customer’s payment cycles.

#5 Make use of technology

Ease your financing by using technology. Several software programs are available to help you manage your cash flow. This includes reminder notifications to help you ensure timely payment from your customers. Some software programs even help you to create consistent and professional invoices.

By having well-managed cash flow, you will be able to determine if you need financing support. Even beginners can improve cash flow management by simply incorporating these steps into their business practice. So, start working towards an optimised cash flow position today!

Find out more about the peer-to-peer loan at Funding Societies here.

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Funding Societies is a DollarsAndSense Brand Connect partner. If you are interested to know them better, you can find out more on what they do on our DollarsAndSense Brand Connect Page.

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