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An affordable investment – 3

Creating personal wealth through Local P2P Investment
After looking at a few options for P2P investment, I chose Harmoney. I can make money from home and on line, using the Internet. By depositing small amounts I can afford, on an intermittent basis, I can build up a substantial investment I could not afford otherwise.

This is not a sales pitch for Harmoney or P2P lending and I’m no investment adviser nor registered finance consultant. I will not receive any rewards from anyone for writing and publishing this information. I just found something that’s working well for me, that could do likewise for you too and unlike investment advisers, who charge a fat fee and get commissions, I personally have invested in Harmoney – you could say, I have put my money where my mouth is.

The interest rates with Harmoney P2P loans range from 9.99% to over 39%. The risks rise accordingly in relation to the interest rate. The higher the rate, the higher their assessment of the risk of default but there are some ways to reduce the effects a default would have on your total portfolio:

Screenshot of Harnoney's Lender's page
A screenshot of some Harmoney loans on offer, showing the risk rating and the interest rates.

Only buy one note in each loan. If you want to buy 5 notes, buy one note in 5 different loans, as opposed to 5 notes in a single loan. The chances of a default wiping out your investment are reduced through diversification. If one person defaults you will only lose $25, not $125. At 20% interest rate, you can lose one in 5 loans and still break even (actually due to the compounding effect, this is possible with just 2 loans at a high interest rate). It’s now January, 10 months since I started investing in Harmony. I have 74 notes and only two have defaulted. Even then, they didn’t default on day one, so I still got some money back. I didn’t lose the whole $25 outlaid for each loan. The proceeds from all the other loans will still yield me a return of 23% on my investment portfolio and that’s with those defaulted loans factored into the calculations.

Your greatest risk is at the very beginning when you have the least number of notes to diversify with. One default when you only have one or two notes, is devastating. One default when you have 50 notes is not a tragedy.

Accept the fact that there will be some defaults and they can occur in any assessment score category. Just because the person is scored A1, doesn’t mean the loan is bullet proof either. It does mean that statistically there is less risk of a default than an F5 loan.

To reduce the risks, invest in many notes right across the risk range. Reign in the greed impulse to invest only in the high interest notes. It’s easy to see the A1 notes at 9.99% as low returns, compared to those at 39.99% but even at 9.99% you are investing at a rate far higher than any bank will offer you and you are able to invest small amounts. Try that with a bank!

I started with 10 notes in March this year. They were spread across each score category. To date none of them have defaulted, all have been making payments on time. Today (December 2016), I have 49 notes, one has been fully repaid, four are late with one payment and none have defaulted (so far!). Even if all four default the total return after tax, on my Harmoney protfolio will be 16.47%. Try getting that from any institution and in only $25 investment increments!

In the next installment we’ll look at some strategies to maximize your return, supplement your portfolio and reduce your risks as you create a P2P investment portfolio.

Update – New research.

Firstly an apology:
The posts here have been erratic, with long delays between. Sorry folks but I have been flat out investigating an online income stream, which involved one month of course study (it was supposed to take 3 months) and another two months of testing, which is due to expire at the end of December. We are about three quarters of the way through testing (and $5,000USD out of pocket – Ouch!) so far. When this goes to press, I think there might be some ruffled feathers out there.

This will throw some light on some of those ‘fast track to becoming a millionaire’ ads you see peppered all over the Internet.

Meanwhile below is the latest instalment of our crypto-currency investigation…

Thanks for your patience.


1. Cryptocurrency

Crypto-currency, cyber-money or virtual currency is something we all need to get our head around. To many people it’s a Geek thing that they don’t understand and is probably shady, at best one of those grey areas in tax law that will soon be closed and it will all come crashing down.
In fact if you are in business, it’s something you will have to come to terms with eventually, like it or not, because it’s another step in the evolution of finance and sooner or later will be the way you trade.
In the next articles we’ll look at the conceptual formation of crypto-currency, how to use it (both the benefits and the pitfalls) , how to convert it to fiat money (the folding stuff we use today) and how to get it.


Because Bitcoin was the original cryptocurrency, we’ll use it as our model but there are other currencies as well.
Until recently it has received a lot of bad press, mainly due to it’s volitility. People who valued it lowly have felt cheated when they got rid of it and then the price soared. Today the price is hovering in the $1,000 range. The fact it is so new is adding to it’s volatility.
To most it’s viewed with scepticism, like some Geeky ponzi scheme. Few people outside the Geek community understand anything about it. It’s seems so strange but in fact it is a natural development and evolution of the old fiat currency system that will eventually render banks redundant and take finances out of the hands of manipulative governments.

Advertising – Targeting to make it pay

If you are in business, you need to advertise. The problem is what type of advertising best suits your business?

There’s a horde of advertising gurus out there, all ready to tell you the best advertising for your business, is what they are selling. Some will sign you up for contracts that tie you down to a year or two of ads that will do little or nothing for your business.

Firstly, you need to define your best customer – who are they? Where do they come from? What job, age, financial income, family status etc?
Are they local, national or international?

If you can deal with international clients, the Internet is perfect for you. If your clients are national, the Internet will work well for you if you convey the fact that you are in the same country. In this case, stress the lower cost delivery, speed of delivery and ease that they can experience dealing at home. Stress the local business with local employment factor and drum up some patriotic support.

If your business is very local, the internet will work best for you, if you focus on local groups. Still have a website but use it more as a reference point with links to local buy sell or swap sites. Facebook and social networking sites work well at the local level if you have enough contacts.

It’s important not to put all your eggs in one basket when it comes to advertising. Advertising is like a reminder, the more places you see it, the better it works. When faced with a decision of which product or service to choose, we favour the ones that are familiar to us. Advertising builds that familiarity even when we have never tried that product or service, it still feels familiar to us because we know the name.

For local business customers these types of advertising get the best results:
Flyers and letters – you’ll get any where from 1% to 35% response.
Facebook/social media – direct them to your website where there is a freebie or discount (not just a miserable 10% either.
Website – run a cash back or discount campaign. What about an email contacts list for a news letter?
Buy sell swap – avoid eBay and look for a local site.
Local paper – don’t be fooled by the numbers of people who throw it out unread. When that want something , they’ll read it.
Community notice boards – these work well to sell a product or service, rather than branding a business.
School, church, club notices etc. – these build up a good image for your business as local and reliable.
FM Radio – FM radio transmission has quite a short range, so it’s going out to locals, as opposed to TV and AM radio.

For National Business customers:
Newsapaper ads – both classified and banner ads. Local newspapers can syndicate and are often affiliated with a national network
Adwords – search engines like Google, are run from within the country, so their ads are national.
eBay and online auction sites – good for attracting new clients but they’ll want this one cheap because these sites are for bargain hunters.
Radio – many stations are networked so an ad cab go out nationally through their network.
TV – expensive but gets good results if they look professional
Billboards, buses and trains – for citywide customers.

For International customers:
National radio and TV – expensive but good to promote your brand.
Internet – works well with an offer, discount or cash back especially if there is customer service involved – people don’t expect that on the Internet.
Magazines – especially coffee table type publications in your area of expertise.

Creating a residual income – Advertising frequency

No-one wants to look at a page full of ads. On the other hand, we want to get the most from each page. The art in all this is to use the right type of advertising media that suits your content, the least times on your page. We are after a balance where we want the reader to absorb the content and feel like they are not being assaulted with lots of advertising.

Advertisement frequency – The advertisers will tell you that lots of large video ads work the best. Don’t be fooled; there’s different types of advertisements for different situations. You won’t look at a page that is full of ads and difficult to find the content you are looking for. If I came up in a search as a top ranking food site for pet advice and you see a page full of advertising, you will backtrack and go to the next site in your search results. All that SEO work to get on page one was wasted. This is a common occurrence on the Internet and has become so bad that people are starting to flick past page one of the search results and begin looking at page two or three.

You need to place the adsvertising so that it spaces your content, not replaces it. I would limit the number of advertisements per page, to approximateley 5 with a maximim of three visable in any one screen load.

Any more and the reader feels they are in a minefield. Keep in mind that most readers will track their reading with their mouse, so are vulnerable to accidentally clicking it once in a while. Ending up on another site because they inadverdently clicked your advertisement, will leave them feeling conned.
And while we are talking about content, there’s one simple rule to remember when designing content – People avoid reading. So, break up your content into bite sized paragraphs and avoid lots of lines of text. (We’ll look at content design more on that later in a later article). A banner add every so often, between paragraphs, espacially at the end of one topic before you start another, will work well.

Getting the most out of your advertising – SEO

How to get started
You can simply open an account with Google or some other advertising provider, follow their prompts and end up with a few lines of code to create the advertisement on your web page.

You will need to choose what size block of advertising, whether it’s a vertical column, banner (wide band) to span between text or a block, like a picture on a page that text surrounds. Now insert the advertising code anywhere within theandtags on your webside code. It is actually as simple as that, however you’ll be lucky to make enough to pay for the web hosting. There’s a few refinements required to generate any form of income:

SEO or Search Engine Optimisation is an important factor. Simply put, it is the various factors in web design that make your website appeal to search engines. In other words, if your page has great SEO, it will appear within the first few pages of a web search on your topic. Since most people will only look at the first few pages of their search results, if you aren’t there, you won’t get seen by too many people. This is a highly competative field, where the criteria are constantly changeing. If you want to do some serious business on line, you would be best advised to use a search engine expert.

There is a trap here though; the search engines sell placings on almost all the first pages of any search result, by auction. In other words if you search for, say bicycles, on Google, you will get something like this:

screen shot of Google search for bicycles
Most of the first page of any search is not searches at all – it’s paid-for content

So if you look at the search page here, there’s only one real search result on it, Hub Cycles and I suspect they paid a fortune to appear number one too. But it’s probably a waste of money.

Several years ago, everyone looked at page one of their search result and might have gone to page 2. Today, because page 1 is mostly advertising or sales pages, people are looking more often at page two and flicking past the first page. Secondly people don’t pay much attention to the bottom of the page anyway.  It used to be vital to appear on page 1 of any search, today it’s not so important.

To get the volume of traffic, you are better off sharing links to (and from) other sites for several reasons:

Many searches today are done by image rather than text. Last decade people typed in what they wanted and picked from a list of web sites. With all the paid advertising, people are searching by image, rather than words. They type in the subject of their search, then select “images” from the top of the search result page (in blue in image below).

Screenshot of Google image search for bicycles
Using Image search I get 12 genuine websites rather than just one and a heap of ads.

So searching by image rather than words, gives me 12 choices of genuine web sites rather than a heap of ads and one website. More and more people are using image searches these days, to escape the advertising. The emphasis is moving away from solely being on page 1.

Even if you made it to page 1, 2 or even 3, very quickly someone will depose you. It’s an ongoing battle all the time. Conversely if you have a link from another site, it is permanent and can only be removed by that site owner. It’s like a trusted endorsement from their site that can direct traffic to yours. The added bonus, is it also makes your website more appealing to the search engines as well, so you get nearer to page one. The visitors you get through that link are already sorted as being highly interested in your topic, not just random searchers.

The important thing to remember is that the search engines are always trying to become more human like. It any one search engine can be more human than the rest, it will get the results humans are looking for and win the traffic (searchers) from the other search engines. They are constantly evolving their search bots. If you simply make your website more human friendly for your readers, you will appeal to the search engines, even as they evolve.

Mimenta’s rule is, create good content and you’ll attract good readers in good numbers.

Good readers in good numbers will create a good income

In the next intallment we’ll look at where to place your ads.

Business and the Internet – Web Host

Some starry eyed business owners see it as an ego trip and have very little idea what a web presence will do for their business. They end up being conned into shelling out thousands of dollars for a site that will do nothing for them. On the other hand, a well matched web presence can be a valuable asset for a business.

You have avoided the “sub-domain trap” and are seriously considering a website  for your business. Let’s start at the beginning – web hosting

The Web Host

First you will need a web host. This is a company who sells space on the Internet. I reality, they sell space on a server connected to the Internet. The really top web hosts sell you space that is replicated over several servers. If one stops, your site is accessible from their other servers.

The cheapest option is a shared server. You will share a server with other users. If they are attacked for any reason, your site can go down with theirs. Personally the bigger the web host, the better their defences against cyber attacks. I use this type of web hosting for my sites, with Bluehost.

This type of shared hosting is not recommended for online sales sites. You need a better security wall. You need a secured server (ssl). The information exchanged between the site and the customer is encrypted. When the customer sends bank card details, addresses and personal information, this is scrambled so anyone intercepting the data, cannot get any sensitive information.

A corridoor lined with servers all with blue and green LEDs
One of many banks of servers storing thousands of web sites.

You should also consider a VPS (Virtual Private Server), rather than a shared server for added security. This is more expensive (currently around $30 a month) than a shared server

For larger businesses use a dedicated server. This gives maximum security and total control over your entire web hosting operation. You can have dozens of web sites all with online shopping, as secure as your bank.

Begin with the shared server and keep your costs down while your business is new and the cash flow can be better utilised. Later you can upgrade your web hosting. It can be done seamlessly.

The best web hosts have a 24/7 help line that is phone, email and online chat based. Don’t make the mistake I did, when I began with an Australian web host, Their phone help referred you to their online help, which required a password. My problem was they didn’t recognise my password and for three months I tried to get the problem fixed. In the finish I registered a new business name, redesigned and printed all my stationery and opened a new web hosting account with Bluehost in the USA. If they say they have telephone support, get the number and call it to check they don’t refer you to their website to lodge a ticket.

The best web hosts will use a customer interface like Cpanel and will have support for WordPress (a simple site design software package), AWStats (a tool to display all your site statistics graphically)  and a range of other software tools for site building and monitoring.

Planning a successful promotion

Here’s where most businesses waste valuable dollars – even the best of them!

Firstly, lose the ego! Unless you were on the cover of some fashion magazine, you should not put your face on your advertising – ever! Many business people are proud of their achievements and want to show off. They forget they can appear unprofessional, shady, a con man or too slick to the public eye. What you see in the mirror is not what a camera sees and can be totally different to what the public will see. You’d be amazed how many people do this and don’t realise that there are people out there who associate negative impressions with them. If you need a face, use an actor who is skilled in projecting the image you want to convey to the public. If that’s too expensive, simply do a voice over and don’t show a face at all.

Step into your customer’s shoes – Often advertisements are set up to convey what the business owner wants or thinks their customer wants, rather than what the customer really wants.
Sounds obvious? . . . Stop and think a minute.
A shop is selling low cost wares and has been advertising they are the cheapest in town. They pepper their advertising with “hot words” like “special, budget, Lowest Prices and discount”.
But are they really appealing to their customer’s needs?
Do you want cheap furniture, lowest priced electrical goods or discounted food . . . or do you want quality furniture, latest electrical goods or export grade food at a lower price?We all want to spend less but above all else, we want quality. Advertising that appeals only on it’s low price will bring in customers who want to haggle and pay less – this erodes your profit margins. Step back and ask yourself what your customer really wants and what type of customer you want to deal with.

Protect your image – this applies to both you personally and your business. Here in Australia, one of the largest electrical goods chain of stores is Harvey Norman. The owner, Gerry Harvey ran a campaign to try and get the Government to tighten up on online sales. He claimed that people were moving to online buying because there was no GST on online sales. He waged a media war and made it into the news broadcasts. The public saw a whining millionaire, already making squillions, who was manipulating the press to try to stop Internet sales. The irony was that the goods he was selling came from overseas and even if you took off the GST three times over, they were still dearer than the same goods on the Internet. The entire campaign drew the public’s attention to the huge price difference between our retailers and online sales and punched a huge hole on both Gerry Harvey’s reputation and Harvey Norman’s bottom line.
Think carefully before doing any campaigning. Ask if all the possible outcomes are in line with your company’s image. If Gerry Harvey was selling Australian products, his campaign would have the total approval of the Australian public, even though his prices were higher than online sales prices.

Don’t get political – We were asked to donate to the political campaign of one of our local candidates in a forthcoming election. We declined but the business next door eagerly wrote out a cheque. Later it was revealed that that party was trying to get a stranglehold on the local council. Next, one of their members was dismissed for misusing public money. The party itself won the federal election and made some unpopular changes that had local repercussions. The next door business was hoping no-one would recall that it had been a supporter of that political party. Political fortunes change rapidly and to support one, the other or even both parties is risky. When they get into power, the donations are forgotten, outweighed by lobbyists. Most people are either for or against one party. By supporting either side, you will polarise your clientele and offend the other side. Support both and you will be seen as attempting to pervert democracy – you can’t win whatever you do, so don’t get involved. If you are privately involved in politics, keep it well away from your business. Any links will be assumed to be corrupt.

Use the appropriate media – TV, newspapers, radio and Internet are not local  advertising media. Many businesses waste large sums of money on ineffective advertising campaigns. Know which medium reaches your target audience best, you don’t have money to throw away on useless advertising. Run feedback campaigns to check your ads are working. A discount voucher or code from an ad that entitles them to a hefty discount will tell you the ads are working. Make sure the media conforms to your business image, as well as the advertising you place on it. A billboard on the side of the motorway is not an ideal medium for a business dealing with local people. Advertising sewing supplies in a cinema slide is unlikely to get you a good return on your advertising dollar.

Do your research. Don’t just accept what the sales people tell you. They are not there to make your business make more money; they are there to sell advertising and whether it works for you is not their concern. A home handyman friend was complaining to me that all his jobs were in districts other than his own and the transport and lost time was making them less profitable. He was advertising in the local paper – unfortunately it was “local” to several districts as well as his own.

The Business Plan – Product or service promotions

Using the information you discovered in the demographics section, you should now know your ideal customer, who needs your product or service and where they reside. Now we need to work out the best way to reach them. Use the information here to design a promotional campaign. To be effective you need to use several types of promotion methods together.

Here’s a brief summary of the different types of promotion methods and their attributes. We’ll start with the local residents as our target and look at what works to reach that market.

Local promotions – this is for the type of business that deals with people in the neighbourhood.

  1. Notice boards – every shopping centre has a notice board. It’s usually free to advertise here and you’d be surprised the people who actually read it. They cater for people in the immediate area and are usually strewn with ads for second hand furniture, kids bikes and car parts. To put an advertisement here usually requires getting a card from the nearest shop of centre management. To make your ad work, it needs to stand out from the rest. It doesn’t have to be stunning because you want people to realise you are just another local, like them. Offer a special discount only for locals. The response rate is not fantastic but this is free advertising. It works best with another local advertising method as a back up.

  2. Letterbox drops – this works extremely well if you use a professionally designed leaflet or an envelop addressed to the home owner. The post office says they can do this as part of their mail rounds – don’t bother, they charge like a wounded bull and you are missing out on a golden promotional opportunity. There’s always some locals who are struggling. See if you can find them and offer them a cash job to distribute your material. You kill two birds with one stone – the material gets delivered and you get someone who will spread a good word for you at the same time. You wanted to impress the community, start here and the local gossip will do your work for you. Some variations can be, adding a discount voucher if they return part of the flyer, limiting the time for the offer, offering a two for one deal rather than a discount, having a discounted day to get trade in on your quiet days, gathering information through a free-be deal. High school students will often be willing to distribute your material for some extra cash. Don’t exploit them though – it’s a fast way to kill your business. It might seem tempting to be a tightwad and reduce your overheads but you’ll end up with them and all their family members telling everyone what a rip off you are.

  3. Newsletters – there are schools, churches and clubs in your immediate area that publish news letters, either in print or on line. Approach them for advertising space. Often they need the funds and are glad to do business with you. Extending a discount to their members, more than any discount offered generally, will impress them to promote you too.

  4. Subsidies – you can approach local clubs and offer a subsidy that goes into the club funds, for every product sold. This works well if you offer a discount as well. People are avaricious and will trade when it’s beneficial to them. Adding the fact they are supporting their club as well, sweetens the deal. The benefit to you, is the club will endorse your business and you have entry into a group that is local and willing to spread the good word for you. It’s vital that they are happy with your product or service. If not the reverse happens and you’ll rapidly get a bad name.

  5. Staff – In Australia this is the most overlooked advertising channel of all. I can name five food outlets here, I would never eat at because their staff have made disparaging comments about their employer. I have never even been inside one of them to see if it’s true. But if anyone knows, it would have to be the people actually working there right? As a nation, we really don’t excel when it comes to looking after our staff. Few businesses here pay above the minimum award rates, even for really good staff. Management are often slow to compliment staff and seldom share credit with those beneath them, who helped them succeed. Your first priority in promotion should be your staff. They are usually local and a positive comment from someone who sees the business front and back, carries more weight than any slick advertising script. It makes sense too because without them, what sort of business would you have?

  6. Mail out – Now we are getting into the more costly forms of advertising. Forget the “To the Householder” letters. If you are going to mail out, use their address if you don’t know their name. Google maps is ideal to get the street numbers off and it shows flats, hidden behind homes. Personally I often throw out envelopes addressed “To the Householder” or “To the Homeowner”. However if it says “To the Householder at 5 Smith Street” I am curious. It might be the council saying they are doing water mains work or . . .

    The Post Office will tell you they are the most efficient at this. Maybe so but they are also very expensive. I did this with four secondary school students over a weekend and they got $50 each. They thought it was Christmas and I got a fantastic job done that yielded very good results. I also scored a couple of long term customers from them and their families too. I still came out $200 ahead of the Post Office fee and I doubt the mail man would be out there saying what a nice guy I am!

    The contents of the letter should be a proper letter, not just a pamphlet suffed in an envelope. This works brilliantly well where you are offering a service because it demonstrates your attention to detail and the fact you take more effort than most. It sets you apart from the competition. The added advantage of mail outs is you can target a group, not just your community. Many clubs have members lists with addresses or even just names. If you have a name, you can look up the address in the electoral roll.

The business plan

Maybe you are the luckiest person on Earth and won’t need finance to start your business off but  you should still do a business plan. However if you are mortal, like the rest of us, you better have one when you meet the bank manager because without it, you won’t get anyone interested in helping you grow your business.

So what is a business plan?

It is an in depth description of your business, how it will begin, what it will do to make money and what you intend it to look like in 5 to 10 years time. It tells who is who in the business and where it all began. It says who your competitors are and why you are different from your competition. The business plan is a living document, updated regularly. Eventually it will be a historical document recording your business’ humble beginnings but will still show where the business is headed.

Use a 4 ring binder or at least a catalogue folder that can take 20 pages, to begin with. Don’t just scribble it, take the time to make this a presentable document because it can actually perform a very important role in your new business. If you were asked to finance one of two businesses and given a wad of paperwork all out of order for one business and a neat professional folder for the other, which would you choose?

Keep in mind at the start, all you really have to showcase your business, is the business plan, so do it well from day 1. It should subtly sell your business by showing how you are different from your competitors and demonstrate how much thought and planning you have put into your business. There are several templates available but if you set it out this way, you can’t go wrong:

Begin with the Introduction – This describes the business generally – the location, who runs it, the legal structure of the business and the legal aspects of a registered business.

  1. Describe the function and location of your business. If you are a limited liability, it is quite likely you have a registered office elsewhere. If you have a warehouse elsewhere this is where you state it. It’s a good idea to include a photo of the existing premises here or at least how it will look when you begin trading. Don’t go into any detail of what your business does yet, just enough so the reader would know the general nature of the business for example. Include your Business Number and any official business documentation. Your aim is to prove to the reader that you are an official business, not some hobby.
    “XYZ .Pty Ltd is a retail food outlet situated on Main St. Abbotsford. The business is structured as a limited liability company with registered offices at Lygon St. Carlton, VIC 3032”
  2. Business Structure – this includes the roles of the business (e.g. selling baked goods over the counter as well as deliveries to coffee bars in the Northern suburbs on a daily basis). Ideally you want to show several income streams here. Also include the officers of the business and their role (manager, accountant, legal advisor, staff and if they are full or part time).
  3. Business Concept – this is where you can say how the idea began. The aim is to describe how you have had an idea and trialled it to discover a niche market. Include evidence (surveys, trial runs, comparisons with similar businesses etc.) Here’s where you convince me you have done more than have some wild idea. You have carried it further to test it works.

This is the end of the first stage of your plan. By now the reader should know that you are seriously business orientated.