What % do you put into P2P ?

JohnRo

TheTracker wrote: »

...I reckon I'd need a catastrophic macro economic event, worse than a bad recession, to suffer equity style losses on stable and scaled p2p platform with a well diversified portfolio of loans.

Isn't the obvious retort, already made somewhere up thread by rollinghome, that equity 'losses' aren't any such thing unless you're forced or panicked into selling up at that point.

Were a catastrophic economic event to occur it would be just that for unrecovered loans, where as 'losses' in the equity market are more often than not an opportunity and act as a springboard to a better long term outcome. It's the nature of equity investment that a rise and fall in value will occur and to expect it and plan accordingly.

That said maybe p2p really is the holy grail of investment returns, something tells me it'll fall well short of that at some point though, but this thread has certainly piqued my interest in p2p again.

masonic

Kendall80 wrote: »

Should such a scenario occur and indeed persist, there is the concern that it would be difficult to sell loans/access funds tied up in P2P.

That could be something of an understatement. Buyers are likely to abandon the secondary markets at the first sign of any serious problems. I think it would be reasonable to assume you will be locked in to any loans unless you believe you will be amongst the first to stop any trouble.

JohnRo wrote: »

Isn't the obvious retort, already made somewhere up thread by rollinghome, that equity 'losses' aren't any such thing unless you're forced or panicked into selling up at that point.

Were a catastrophic economic event to occur it would be just that for unrecovered loans, where as 'losses' in the equity market are more often than not an opportunity and act as a springboard to a better long term outcome. It's the nature of equity investment that a rise and fall in value will occur and to expect it and plan accordingly.

Management of the recovery process could be a critical factor here. Selling assets at the bottom of a recession may be the equivalent of bailing out of equities and crystallising losses. It may be better to delay such action. Some platforms have empowered themselves to try to act in customers best interests, while others put such decisions to a vote amongst lenders - but in either situation, the outcome is outside of your control.

That said maybe p2p really is the holy grail of investment returns, something tells me it'll fall well short of that at some point though, but this thread has certainly piqued my interest in p2p again.

I think the more likely situation is that it there is a temporary high risk premium, which will be eroded as the sector becomes more mainstream and better understood. But only time will tell...

fun4everyone

OK I have continued to read and learn - and have started to dip my toe in.


Diversification amongst platforms is pretty easy as there are so many, I have signed up and started using a couple already. Going to add several more to my portfolio so I ended up reading about one called "Saving Stream". Now am I reading their website and marketing wrong? They offer a fixed 12% per year on your money? In fact it is slightly better than that as the way it is done is 1% per month?


Frankly to me that just seems too good to be true. I understand you are taking on risk to your capital as an investor but the same is true for stock market investments? And when I read about them I am told to only expect 5% above inflation over the long term with substantial risk to capital in the short term? That seems less than what saving stream offer.


12% PA for something which has a provision fund just seems too good to be true? I find it hard to believe that will continue indefinitely without something bad happening.

masonic

fun4everyone wrote: »

12% PA for something which has a provision fund just seems too good to be true? I find it hard to believe that will continue indefinitely without something bad happening.

Risk has been discussed extensively in this thread. It doesn't make much sense to repeat the same points again. If you want more, I'd suggest having a look around p2p independent forum. For example, this thread and this one. The p2p forum is quite easy to search (better than here).

fun4everyone

masonic wrote: »

Risk has been discussed extensively in this thread. It doesn't make much sense to repeat the same points again. If you want more, I'd suggest having a look around p2p independent forum. For example, this thread and this one. The p2p forum is quite easy to search (better than here).

Ahh yes fair enough. In my defence I am not talking about risk of borrowers defaulting. I am more saying I think the 12% PA is flat out unsustainable and there will be tears down the line. I am of course probably wrong.

masonic

fun4everyone wrote: »

Ahh yes fair enough. In my defence I am not talking about risk of borrowers defaulting. I am more saying I think the 12% PA is flat out unsustainable and there will be tears down the line. I am of course probably wrong.

I think that you are right that 12% pa is unsustainable. As P2P becomes more popular and the asset class and platforms gain a track record, there will be more money chasing each loan, rates are likely to fall. There will surely be some defaults along the way too, so 12% pa is unlikely to be the final rate achieved over the long term due to both of these aspects.

Flobberchops

fun4everyone wrote: »

Ahh yes fair enough. In my defence I am not talking about risk of borrowers defaulting. I am more saying I think the 12% PA is flat out unsustainable and there will be tears down the line. I am of course probably wrong.

Of course it's unsustainable. I don't see that as any reason to not capitalise on the opportunity in the present, though.

fun4everyone

Flobberchops wrote: »

Of course it's unsustainable. I don't see that as any reason to not capitalise on the opportunity in the present, though.

Right, I understand you. However I prefer to put my money with sites that are honest.

Saving Stream scream on their front page you get a 12% return with them. a "fixed rate of 1% per month" they say

They also claim on the "how we do it" section that to ensure this return is delivered they have a "tried and tested model"

We are in agreement this in reality cannot last. I presume if you want to capitalise on it now you consider that when reality catches up with them it will simply be a matter of rates dropping. I consider the risk of something worse happening to be higher at a site which makes these claims than elsewhere, so I am avoiding altogether and will use more realistic honest providers.

Of course in all likelihood I will just miss out on these 12% returns whilst they are available, too much caution probably

Flobberchops

fun4everyone wrote: »

Right, I understand you. However I prefer to put my money with sites that are honest.

Sure, you have to tailor your investments to your own risk appetite. A few extra percent isn't worth it if you subsequently don't sleep at night.

You're right, I expect P2P will eventually cease to be as attractive as it is now - that's not to say we should expect a crash (although we also shouldn't rule one out) but it's more likely that rates for lenders will eventually settle to an equilibrium point where, after bad loans, investors probably won't be getting *much* more than they would in a highstreet bank. I believe we're already seeing this happen, for example RateSetter's 3-year rate falling to a crummy 2.0% as a result of a saturated lending market. There are still rich seams to be mined elsewhere, so I think that P2P is still, for now, a safe and profitable venture as long as you follow sensible advice about diversification.

Horses for courses :beer:

nushnush

to suggest that the platform is not honest is plain rude unless you have proof, i use SS and have been in contact via email, not once did i feel like i was being sold anything. they tell the truth on the SS website, you get 12% return but your cash is at risk. read the info and understand this is an investment opportunity not a free for all give away.