I earn 10.25% interest, is this good?

Jonbvn

chucknorris wrote: »

Zopa doesn't look like value to me, I don't think the reward offered is sufficient to compensate you for the risk taken. I would (and have) rather risk a stock market investment (for a small part ie 20% of my cash investments)

On average the return from ZOPA is on a par with the long term return from the markets. Therefore, it offers an interesting alternative investment strategy.

It is certainly not something I would invest everything into. Diversity as always, is the key.

topgearfan08

Jonbvn wrote: »

Your father's selection of investments were clearly far outside of his risk profile. To write off all investment due to this is naive (IMHO) to say the least.

I could offer numerous anecdotes of myself and others doing extremely well in S&S and bonds etc. However, if you are extremely risk averse then perhaps you better stick to premium bonds.

Not outside his risk profile, the 20k wasnt the end of the world to him as it wasnt a massive portion of his portfolio, then again nobody can really see a crash happening... but I personally would not like to ever risk that much... I prefer the low - medium risk...

I class Zopa as high risk personally...

Jonbvn

topgearfan08 wrote: »

Not outside his risk profile, the 20k wasnt the end of the world to him as it wasnt a massive portion of his portfolio, then again nobody can really see a crash happening... but I personally would not like to ever risk that much... I prefer the low - medium risk...

I class Zopa as high risk personally...

Having money in savings accounts paying less than inflation is not without risk.

Then you have to consider those rubbish PB's you're holding, which are also losing you money.
http://www.telegraph.co.uk/finance/personalfinance/savings/7607815/The-seven-deadly-sins-of-NSandI-Premium-Bonds.html

mroller

TheProdigalSon wrote: »

Ladies/Gentlemen,

I've been lending with Zopa for a little while now, not huge amounts of money as I was initially sceptical about the whole thing, so far though it's went really well and I'm pleased with the returns. I've now seriously started to think about closing my savings accout held with my bank, it pays an absolute pittance at 0.10% and I'm thinking that instead I could use my Zopa account as my main investment, only keeping my Current Accout with my bank, would you recommend this?

I have large savings of just under £85,000, simply from hard work and living within my means and I'm thinking about transferring it over to Zopa and making it work harder for me, often get annoyed when I realise how little I'm getting from my bank for having this money with them, would this be safe to do? is my money covered should anything go wrong? Do you think I should continue with Zopa? as I say I haven't invested huge amounts of money in it but from the £500 that I've lent with them I now have aroud £670 or so three years later and I understand that if I lent more I'd have greater potential for bigger returns.

Thank you

If you are happy with the returns, why dont you increase the amount you lend gradually and see how it goes?
Add another 500 and then another 500 until you start having too many defaults.

JasX

mroller wrote: »

If you are happy with the returns, why dont you increase the amount you lend gradually and see how it goes?
Add another 500 and then another 500 until you start having too many defaults.

or another macro event like the credit crunch happens again and the majority of the investment defaults at once......

A.Jones

I earn 10.25% interest, is this good?

I disagree that you earn 10.25% interest. You earn that much on a very small amount of your savings (~£600). You earn 0.1% on the vast majority (~£85000).

The total amount you will earn on those sums this year, if we take those rates to be exact will be: £61.50 + £85.00 = £146.50

Your actual interest rate for your investments is 0.17%. When you factor in inflation, you are losing money.

Just because a small sum invested in Zopa has given you a good rate, it doesn't mean a larger sum will give you the same good rate. I once bought an item from a charity shop for 50p, and sold it a week later on ebay for about £60. I would love my weekly interest rate to be that high, but it was just one small investment in many. Many of the other things I have bought in the past have sold for much less. Its the same with loans. You may have got the better people at a decent time. Stick significantly more in and the rates may change, the range of people you lend to may change and the economy may change people's behaviour.

mroller

JasX wrote: »

or another macro event like the credit crunch happens again and the majority of the investment defaults at once......

I think you misunderstand how zopa works.

There is no reason his returns will be different at 500 or 5000 pounds.

and if history is any guide, returns have gone up in Zopa during the credit crunch.

I dont invest myself in Zopa, the reason being that i dont want to fill a tax return but that's a diiferent matter.

topgearfan08

Jonbvn wrote: »

Having money in savings accounts paying less than inflation is not without risk.

Then you have to consider those rubbish PB's you're holding, which are also losing you money.
http://www.telegraph.co.uk/finance/personalfinance/savings/7607815/The-seven-deadly-sins-of-NSandI-Premium-Bonds.html

I agree money in accounts paying less than inflation is not good, but not a risk, as your money will still be there, even if its worth slightly less..

I know that premium bonds "generally" provide a worse rate of return than savings, but so far £50 is on track... who knows next month could be more, maybe nothing. At least its stopping me playing the lottery every week where I cant even get a measly tenner!

Jonbvn

mroller wrote: »

and if history is any guide, returns have gone up in Zopa during the credit crunch.

So have the defaults.

G-M_3

TheProdigalSon wrote: »

Ladies/Gentlemen,

I've been lending with Zopa for a little while now, not huge amounts of money as I was initially sceptical about the whole thing, so far though it's went really well and I'm pleased with the returns. I've now seriously started to think about closing my savings accout held with my bank, it pays an absolute pittance at 0.10% and I'm thinking that instead I could use my Zopa account as my main investment, only keeping my Current Accout with my bank, would you recommend this?

I have large savings of just under £85,000, simply from hard work and living within my means and I'm thinking about transferring it over to Zopa and making it work harder for me, often get annoyed when I realise how little I'm getting from my bank for having this money with them, would this be safe to do? is my money covered should anything go wrong? Do you think I should continue with Zopa? as I say I haven't invested huge amounts of money in it but from the £500 that I've lent with them I now have aroud £670 or so three years later and I understand that if I lent more I'd have greater potential for bigger returns.

Thank you

There seems to be a lot of misinformation in this thread.

You know the score with zopa - you lend your money out and accept a degree of risk based on which markets you choose, if you have many small individual loans your default rate is likely to be similar to the overall average which you can find on their site. You have had your £500 in there during this recession and it has still made you a decent return so all this talk of losing everything is rubbish!

It is up to you what proportion of your savings you keep with zopa - I think putting all of it there is unwise, and you would be best to use your ISA allowance and consider other investments, but it could reasonably be a lot more than £500. Zopa is not guaranteed like a savings account, but is low risk compared to stocks and shares.

I would suggest you read the info on the zopa site and their forums to get an impression of the risk level and where it might fit with your savings plan.