• 16 August 2019
  • p2b investing|p2b lending|p2p investing|P2P Lending|REITS|stocks

P2P Lending vs Stocks vs REITs

Analysing new investment opportunities in P2P lending.

Peer-to-peer (P2P) lending is a relatively new investment opportunity for Singaporeans. As such, local investors may not realise its full potential, especially when savvy investors are more familiar with more popular stocks and Real Estate Investment Trusts (REITs).

Here’s how P2P lending compares to stocks and REITs. 


  1. Stocks represent company ownership. P2P loans are forms of debt for the company. 

For those who seek absolute returns, P2P lending can work to investors’ advantage. 

Based on the performance of the company, stocks may or may not pay out dividends. Returns will fluctuate, and market volatility can have a significant impact on the portfolio. 

Unlike stocks, P2P loans are a form of debt for the company. The borrower is obliged to repay at the agreed interest rate, regardless of how their business or the market is faring. 

Given the ongoing Sino-US trade war, P2P lending can provide a consistent source of high returns without the volatile risks of stock market turmoil. This is helpful for investors who want a defensive investment position. However, P2P loans cannot pay out more during bull markets. The company’s rising value is irrelevant to the amount that investors stand to gain from interest payments. 

  1. Barring stock trading, equities are generally a long-haul investment. P2P loans are short-term investments. 

Unless actively traded, stock investments are aimed at long-term capital gains over 10 to 15 year periods. Whether in the form of bluechip stocks, indexed funds or unit trusts, stock investments are one of the more volatile asset classes in a portfolio. As such, the longer investment horizon provides time for volatility to even out. Investors who liquidate too soon might make a loss. 

In contrast, P2P lending commits investor capital to shorter periods up to 12 months. This frees up cash for short-term goals, such as covering the down payment of a property purchase in three years’ time.

  1. P2P lending is simpler to invest than stocks. 

Equities require more analysis from investors, who need to delve into prospectuses and annual reports. Some equities-related products can be even more complex than picking one’s own stocks. 

In comparison, P2P lenders know which company they are lending to, and what returns will be given. It is an asset with relatively few moving parts, as credible P2P lenders tend to screen and ensure they are lending to financially sound SMEs. This lowers the possibility of loan defaults. 


  1. P2P lending is also simpler to invest than REITs. 

REITs are a form of collective property investment. There are industrial, hospitality, retail and various other specialised REITs. The performance and behaviour of these trusts vary. 

While hospitality REITs are highly cyclical, office REITs can be closely tied to certain industries such as banking. Investors must also gauge if the portfolio of malls, hotels, industrial parks, and other properties pieced together, is optimal. 

By contrast, P2P investing is simple. The soundness of the borrower’s financial situation can be better assessed with a credible lending platform’s data analytics and credit algorithms. In addition, the returns from P2P lending are fixed. Like stocks, returns from REITs can fluctuate.

  1. REITs are subject to rising interest rates in the long term. 

REITs have performed well over the past decade, partly due to record low interest rates since the 2008 Global Financial Crisis. This resulted in a slew of cheap property loans that improved REITs’ bottom lines and investor returns. 

But it may be unsustainable. When the day comes for interest rates to normalise, there is little room for them to go except up. It is thus not certain if REITs can maintain their current performance in the long term, and P2P loans differentiate with absolute returns over short-term interest repayments.   


Given the pros and cons of different investment types, savvy investors should consider P2P lending as a complement to their existing portfolio. With high fixed returns, P2P lending can offset lower performance of stocks and REITs during a market downturn. 

P2P lending also provides absolute clarity on where the money is invested. To mitigate risk, choose fintech platforms that are regulated and licensed by the Monetary Authority of Singapore. This will ensure that the investment opportunities presented are credible and compliant. 

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