Changes in the minimum investment amount: The minimum investment amount will depend on the rating
To optimize the process of allocating funds, we would like to notify that as of 1 July 2021, the minimum amount of investment in loans at the NEO Finance will be €20, whereas the minimum amount of investment in A+ rated loans will be €50. So far, the minimum investing amount in all ratings has been €10.
With your help, NEO Finance started growing five years ago, but over time there have been changes that now force us to make decisions and address the challenges facing our investors. We did the same in 2018: the first time, we increased the minimum investment amount from €5 to €10.
At the end of last year, NEO Finance increased the maximum loan amount to €25 K, and the period to 120 months; furthermore, this year, investors were introduced a reduced risk A+ with a 100% Buyback product.
Increasing the minimum investment amount should help avoid situations where, due to the small amount invested, only the interest-free loan amount is repaid at the end of the investment payment schedule for long-term loans. When investing small amounts for a longer period, due to rounding, there may be cases when less than 1 ct of interest may be accrued in the last months, i.e., interest is free.
The need to increase the minimum investment amount is also prompted by our investor statistics: we notice a steady increase in the average portfolio size of investors, which currently stands at €2,900, and recent data show that the average investment in a loan is around €26 and only 28% of the investment was less than €20.
We remind you that a large number of small investments in a portfolio diversifies risk but makes portfolio management more difficult. Thus, when diversifying the investment portfolio, investors could follow the well-known 1% rule: invest about 1% of the portfolio in one loan, and increase each portfolio with each new investment.
Important! The old rules will apply to automatic investments created before the changes in the minimum investment amount, but as of 1 July 2021, when updating or creating a new automatic investment, the new minimum investment amount limits will apply.