Automated investing is an efficient and time-saving investment tool. We provide information on how auto-investing works, its benefits, common mistakes and how to make the most of the tool.
What does automatic investing give you?
Time. Manual investing takes up a significant amount of time that can be spent analysing the results you have already achieved or optimising your current strategy.
Opportunities. Without an automated advert, you do not participate in the "auction" of investments in instant loans, where investments of the appropriate rating are usually at significantly higher interest rates.
Higher earnings potential. The XIRR includes only historically employed funds. Uninvested account balances are not included in the overall investment result, so by employing all funds, even if you generate a lower historical XIRR, you can earn more in total, which is usually always the investor's goal.
Competitiveness. Investors with automated ads are the first to receive better offers than those who do not use automated investing, because all offers are "eaten up" by automated ads.
How does automatic investing work?
The auto-investment feature allows investors to pre-select the criteria for investing in credits. When a new loan offer appears, the system automatically checks the criteria of the advert and, if funds are available in the account, invests in the loan on the basis of the selected criteria. Auto-investment adverts investing in loans available at the time are determined by the total pool of investors.
When borrowers opt for an instant loan, priority is given to:
Investors with an auto-investment ad with the lowest annual interest rate (APR);
According to the time of creation of the automatic advert, with preference given to those created earlier.
When borrowers choose to place a loan advert on a stock exchange, priority is given to:
If the credit meets the definition/criteria(s) of good credit, priority is given to ads that have not yet invested in good credit. Good credit is the average MPN (Annual Percentage Rate) (as rated) +3% of the credits financed in the last 30 days. E.g. an A-rated interest rate of 10%, an A-rated good credit would be from 13%. The criteria for good credit are updated daily. Investing in good credit takes into account the fact of the investor's investment, but not the fact of the investor's announcement.
Based on the time of creation of the automated advert, with preference given to those created earlier.
If several auto-investment adverts meet the first criterion in the first point, then the second criterion is additionally assessed, and so on.
Common mistakes when creating an automated ad:
- The advert settings are marked completely different from the ones you choose when investing manually.
- Attempts are made to bypass the ranking by adding additional criteria. The rating evaluates all available data on the borrower against historical data on borrower behaviour. The most influential settings are: credit rating, minimum interest amount and maximum amount invested. All other settings reduce your ability to invest efficiently and distort the risk assessment.
- Choosing too low or too high an investment amount per loan. For successful portfolio diversification, it is theoretically sufficient to spread the amount invested over at least 100 investments. This means that for a portfolio of €10 000, the investment size per borrower should be no more than €100. With more than 200 investments, portfolio diversification no longer has a statistically significant impact on performance, so as your portfolio grows, consider increasing the amount invested.
- The amount invested in the previous month is not taken into account. When creating an automated advert, you can always see the amount of investments made in the previous month based on your criteria. Please also keep in mind that these are only historical results and that more than 13,000,000 active investors qualify for the amount invested.
- The results of automatic investments are not reviewed. Although this tool is designed to save you time, the market is constantly changing, so you should also review your auto-invest settings and results at least once a quarter and tighten or loosen the reins of your investment rules accordingly.
- No help required. Investing always involves risk, so having information and assessing it properly is very important. Contact NEO Finance's investment specialists for a detailed explanation of the auto-investment criteria and the possible impact of the relevant criteria, which will enable you to choose the most appropriate auto-investment criteria for your needs
Please note that all information provided is for information purposes only and should not be construed as investment advice or recommendations. Before making investment decisions, please consider carefully all the risks associated with investing, which may lead to the loss of some or even all of the funds invested.