Fintech Investment Review

fintech investment

Cryptocurrency Commentary:

First thing to notice is that Cryptocurrency is faraway the highest return at 61% annualised return compare to 14%/10%/2% for others. This hasn’t always been the case as at one point it made a loss.

The idea of cryptocurrency is that it is created to counter inflation from government issued currencies. To this end, the cryptocurrency is issued by a mathematical formula. One of the effect is that cryptocurrency should go up in value every year because the supply is getting less.

The way I’m using this is as an insurance against possibility of hyperinflation. If the original idea is correct and government currency keep losing value, this will protect me.

However, there are 2 flaws to this idea. Since this currency rewards the early adopters and punishes the late comers, there will come a time when the younger people give up this currency as this system will make wealth inequality worse. That is why there are so many cryptocurrencies currently and more coming out everyday. Until they fix this problem, it is still not a serious asset that should be widely accepted.

Crowdfunding commentary:

The idea of crowdfunding is that it is created to connect money from normal people who can’t loan to companies, to companies who can’t normally loan from banks. This happens because technology can create connections cheaply.

Yes, there are defaults, meaning there are companies who can’t pay back the loan. but at this time the returns after minus out defaults is still positive.

This method generate a higher return than if say we put in a bank. Because the bank lend money to more respectable companies, the returns are lower. Obviously if we lend money to someone less respectable, the risk and compensation is higher.

I would say the profitability of this method relies heavily on Crowdfunding companies doing the checking and followup on borrowers. Platforms which do not do checks are definitely out of this scope.

Roboinvest commentary:

This platform is slow to start and only got regulatory license last year. Compare to the other 2 fintech, this is probably the more traditional. It is nothing more than investing in stock markets using low cost ETF and using passive investment strategies.

What we mean by passive investment strategy is based on a study that says buying the top 20 stocks blindly is more profitable than paying a fund manager to buy and sell stocks using research and timing. This is of course doesn’t really make sense until you understand that markets always go up in the long term (due to population and productivity), some fund managers overcharge fees, and sometimes investors panic and sell low.

I just like to highlight the discrepancy between stashaway and MSCI world index benchmark 10% vs 2%, mostly I feel due to 2 factors. 1st of which is the allocation towards Gold, which helped to maintain value in a downturn, but is not strictly a kind of money making business or stock. 2ndly is the investment denomination in USD. The USD denomination is a natural consequence of using ETFs, where the US market has the most choices and is the most flexible. But currently due to virus fear, the USD and US market is the least ugly in a beauty contest.

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