Stock Market vs P2P Investing: A Comparison

Feb 28, 2020

Photo c/o Créaude

Today, stocks have become one of the most popular means of making an investment. Thanks to its long history and extreme prominence in the media, almost every person who has an idea about investing and finance also probably has an idea of what the stock market is.

At the same time, other modern forms of investing such as peer-to-peer, person-to-person, or P2P investing have also been gaining worldwide popularity since the turn of the millennium. The internet, coupled with the free-flowing information and the digitization it provides, has strongly influenced the growth in these new alternatives for monetary transactions.

P2P marketplaces have been undergoing strong and steady growth not just in other countries but also in the Philippines. Since majority of the population is either unserved or underserved by banks, the P2P model has provided an alternative for these people to either borrow or lend money while still keeping the fundamentals – the formality and security involved in such transactions – at bay.

While an investment portfolio should always include a diverse assortment of assets, we want help you out in deciding which one is better suited for your requirements. Besides, you shouldn’t be limited to either owning stocks or investing in P2P. We’ll try to give you a general idea of these two types of investment, including their advantages and disadvantages.

So in this article, we’ll compare stock market investment with the alternative solution – P2P investing or lending.

What are stocks and what is the stock market

Stocks represent shares in the ownership of a company. When someone owns stocks, he or she owns or claims part of the company’s assets and earnings. These stocks are easy to buy, and they’re fairly easy to sell, too. You can take back your investment on short notice and you can also reinvest it without much trouble.

How to invest in the stock market

In recent years, the stock market has opened up its doors to make investing more convenient for people to try. So in the context of individual investing and generally speaking, a person can invest a viable minimum of PHP 5,000 depending on transaction fees and other charges. Building a good diversified portfolio can easily require PHP 100,000 which can be a big amount for most people.

But one of the main characteristics of this orthodox type of investment is its volatility. Because of the ever-changing economic, political, and social landscape both locally and internationally, investors can lose a significant portion of their investment in the blink of an eye.

How the stock market works for investors

When buying a company’s stocks, you get to become a part-owner of a company to some extent, but you won’t be guaranteed that you’ll earn a share of its profits. In addition, you’re going to be paid last if the company you’ve invested in goes bankrupt. This is why there are professionals or consultants in charge of closely monitoring the stock market’s situation and its predictability. For individuals, especially those who don’t keep themselves updated about the numbers they need to know, stock market investing can be akin to gambling.

What is P2P investing

We’ve repeatedly covered P2P investing in previous posts. P2P investing simplified, is people lending other people money based on their own criteria and preferences, particularly a set rate for their desired ROI. The lenders get a return on their money when borrowers repay what they owe because they will get paid the principal plus the interest.

Photo c/o Tomorrowmakers

Why choose P2P over the stock market

A lot of people worldwide are continually searching for ways to make a profit through means that are not directly dictated by the economic upturns or downturns. Such alternatives, such as P2P lending, are flourishing, especially at a time when majority of monetary transactions are done online 

  • Stability.

Compared to stock market investing where the risk is determined by the size, location, years in operation, and the industry of the firm you’re investing in, P2P investments are unlikely to fluctuate in value overnight. In P2P investing, you don’t have to rely on speculations about the right time to buy shares or through market forecasts that can go awry and cost you a lot of money.

It’s a typical for P2P investments to be unstable like the stock market; you’re more likely to get the profit you want from the money you lent, so it’s fairly steady and your return rate will be exactly what you expected it to amount to.

  • Access.

Investing on shares means you’ll be reliant on a company’s fiscal year. Some shares could get locked up for certain periods. If you’re looking to sell your shares, there’s a lot of paperwork involved. If you’re looking to get your money back when the stock prices are down, you’re 100% going to lose money.

With P2P lending, you’ll have different options regarding getting your investment back depending on the loan you choose to fund. You can get your money back in three months, six months, and so on. Once you get repaid, you can take all your money or reinvest it again. No need to go through laborious paperwork and all that’s needed from you is a small service fee from the platform you used.

  • Protection.

A lot of P2P companies have certain protections in place to ensure that your investment is safe. For instance, Blend PH checks borrowers for their creditworthiness before they can apply for a loan on the platform. The platform will do its best to make sure that investors are protected, and at the same time commit to being fair to loan applicants.

The same could not be said for stocks or shares. When huge events such as economic crises or profit drops arise, the market or even the firm you’ve invested in could not guarantee you with any protection. In addition, if a P2P platform fails as a company, there will be service providers that will provide back-up. A firm on the stock market might just file for bankruptcy and investors have no way of recouping their hard-earned money.

Reasons to choose Blend PH as platform for investment

As an investor constantly looking for ways to earn a decent ROI, turning to a P2P platform like Blend PH could be your best bet. If you invest money through this modern vehicle, you can get plenty of benefits aside from the previous items mentioned above, including:

  • Less affected by the economy. P2P isn’t dependent on sporadic fluctuations in the market.
  • Offers better flexibility. P2P investing is not as old school as conventional stock market investing. There’s no painstaking paperwork involved aside from the basic requirements and identity checks. You don’t even have to show up in an office.
  • Better return rates (ROI). Earnings can range from 6% to 30% per annum and you can also get it back depending on the period or terms of the loans you funded.
  • An option to diversify your investments. You can fund loans anywhere from a seafarer starting his own business to paying for a working student’s tuition fee for the meantime. You’re not helping a big conglomerate get even bigger; you’ll be helping individuals turn their dreams into reality.
  • Lower investment amount. For as little as PHP 5,000, you can be a lender on the platform and start funding loans. As your earnings grow, you can reinvest the money back and get bigger profit.

The variables involved in stock market investing can make or break your financial investments. Why not try something less risky and volatile? Peer-to-peer investing is person to person investing. You’re investing in real people, you’re not depending on the economic weather, plus it offers better diversification and stability for your investments.

Convinced now? Why not start investing on our growing platform? Check out https://blend.ph/investor/ to learn more about your options.