More options for controlling automatic investments#175

At the moment, automatic investment allows you to filter loans by the following criteria:

• max term length
• minimum interest rate
• profit share (include/exclude)

It will take those preferences and invest according to its formula for deciding investments, which I asked Liz how it works. To quote her answer:

“the feature is designed to balance your portfolio across borrowers. It works as follows: The system calculates your current exposure per borrower based on the sum of existing investments. Borrowers are sorted by exposure level, starting with the lowest. Investments are allocated to bring borrower exposure levels closer to parity. To make this more tangible, here is a simplified example:

Current exposure:
Borrower A: €50
Borrower B: €75
Borrower C: €0

New amount to invest: €100
Step 1: Bring the lowest exposure up towards the highest exposure (€75)
Allocate €75 to Borrower C (0 → 75). Remaining amount: €25
Step 2: Allocate the remainder to the next lowest exposure
Allocate €25 to Borrower A (50 → 75). Remaining amount: €0

Result after allocation:
Borrower A: €75
Borrower B: €75
Borrower C: €75”

Personally, I prefer to invest manually, because my preferences can’t be expressed through this. For instance, I’m a bit hesitant to invest as much in borrowers with higher risk ratings, and there are some borrowers that I see as my “favourites” because their projects always sound interesting to me. So there are several additional toggles/settings that I’d like to be able to choose, if I were to use the feature:

• max risk level (A, B, C etc - for investors wanting less risk)
• synthetic US loans (I don’t really trust the US$ right now and rather operate in Euros…)
• (maybe) toggles for each lender or country, or continent (I’m a bit in two minds about this since it would be less “automatic” as you’d have to review it when new borrowers are added, though I suppose they could just be enabled by default. It would however allow the most control and make it most likely that the system invests as you want to)
• spread evenly or increase diversification: basically a setting to turn off the algorithm favouring the borrower you have invested the least in (personally, I am not too fussed about my portfolio being perfectly balanced, so long as the borrowers I am investing in seem likely to be relatively stable and their projects are interesting to me)
• max one investment per loan yes/no (I don’t see much difference between investing twice in Vu Phong 22 or once in 22 and once on 23, but the algorithm apparently does…)

More customisations are good as of themselves, but I would posit that this would be good for Trine, because at the moment the automatic investments feature skews the distribution of investments quite significantly. Basically, assuming that most Trine investors using the feature have portfolios balanced like Trine’s overall portfolio, then money will be distributed in preference order: Miale-Alpha-Charged-Stride-Bisedge/Vu Phong, where those lower on the list will get nothing so long as there are loans available for those higher on the list. I find it hard to believe that it is good for the company and its relations with borrowers to have investment be quite so uneven, and the more people use monthly investments as they are, the more lopsided it will be. (The crowdfunding is of course naturally uneven and that is expected, but usually not in a 100% vs 0% sort of way).

However, with more toggles, a wider range of results would be possible, and if investors use them, then the money would be spread less unevenly. Suppose that all borrowers have loans available when automatic investment happens, this would be the expected result of each toggle:

• spread investments equally: all borrowers will get funds, not just the newest ones
• max risk rating: if set to B, Charged will be skipped. If set to A, only Vu Phong and Stride will be eligible
• synthetic dollar loans: if disabled, Stride becomes ineligible
• geographic or borrower-based toggles could have virtually any effect, depending on what is selected
• multiple investments in the same loan: if a loan has been up for more than a month, this would help it get fully funded

So, assuming that a portion of investors would use each toggle, it is probable that investments would be spread around more between the loans available, as well as aligning closer to investors’ preferences.

While I can understand that it’s good to have more possibility to set better bounderies you fast get a quite complex system to take all the options into considerations. Therefore I think Trines current function that you can have 30 days on you to deside to make your own choice is great and enoght, why make a really complex system out of this?

The system is already complicated, it’s just that its criteria are hidden from you right now. This wouldn’t really make it more complicated for you, it would just add some toggles, which you would be free to use or not use.

Though to be honest, I wrote this up mostly concerned that the more people use automatic reinvestment, the harder it will be for Trine to fund loans from established borrowers (without people necessarily intending this).

That said, I would be tempted to use automatic investments, but I absolutely won’t use it without a maximum risk rating setting.

Hi Pierre,

Our tech team is currently looking into potential improvements to the automatic investment feature. I’ll make sure to update you once any changes or additional options have been implemented.

We appreciate you taking the time to share your suggestions.

Best,

Liz