What % do you put into P2P ?

saver861

jamesd wrote: »

With anticipated annual interest from P2P over £20k a year it'd take much more than a loan of say £1k going bad and having no recovery to make the overall picture negative.

To be getting returns of over £20k would presumably take an investment of over £100k. So, while one default on a £1k loan would barely register on the discomfort scale, equally a significant burp in p2p could presumably make a painful hit on the £100k investment and thus a longer time to recover.

However, as always, I think it is more about the eventual goal rather than investing for the sake of it. Personally I'm good with 2 or 3% above inflation while maximising tax advantages etc.

bowlhead99

pantaiema wrote: »

MadMat wrote: »

I'm getting an average of 6.2% on ratesetter's 5 year market.

Good to see from this point. However keep in mind for such long duration of commitment (e.g 5+), it has been proven statistically that investing in well know fund will get a better return with lower risk.

No.

It has not been "proven statistically that investing in well know fund" will get a better return with lower risk than making peer to peer loans over the next five year period. Because statistics do not tell you what the return from the "well know fund" will be over the next five or ten years nor what returns will be available from p2p; and the level of 'risk' from each may be difficult to quantify.

jamesd

pantaiema wrote: »

Good to see from this point. However keep in mind for such long duration of commitment (e.g 5+), it has been proven statistically that investing in well know fund will get a better return with lower risk.

What proof shows that?

The performance you're apparently suggesting has been or can be beaten is volatility either at zero (deposits) or very close to zero (P2P) and returns above 5%.

Eco_Miser

Daz2009 wrote: »

For the current accounts paying decent interest you normally have to pay in a certain amount every month,often £1,000.
Some people might not be working or on low incomes or variable incomes (like myself) and yet have savings in a low interest savings account or ISA.
That's one possible scenario.

Anyone with £1000 in the bank will have little trouble meeting the required monthly payment, whatever their income, and with only £1000 P2P does not seem like a good idea to me.

A more plausible reason for people accepting 3% for P2P loans is that they have already maxed out the current accounts and regular savers.

Daz2009

Eco_Miser wrote: »

Anyone with £1000 in the bank will have little trouble meeting the required monthly payment, whatever their income, and with only £1000 P2P does not seem like a good idea to me.

A more plausible reason for people accepting 3% for P2P loans is that they have already maxed out the current accounts and regular savers.

You missed my point.
A person might have very little income.....self employed or taking a sabbatical from work or some other reason.....so they can't meet the criteria of paying £1,000 into a current account every month.But they have substantial savings.
They could of course draw £1,000 per month out of their savings and pay it into the current account to earn the 3 - 5% currently on offer.But these current accounts all have limits and to take advantage you may well need to open several accounts and move the money around.A hassle for some people.
So,why not invest that money in P2P where you can get upto 12% interest ?
But I do agree that P2P at the lower return end doesn't have much to recommend it.

masonic

Daz2009 wrote: »

You missed my point.
A person might have very little income.....self employed or taking a sabbatical from work or some other reason.....so they can't meet the criteria of paying £1,000 into a current account every month.But they have substantial savings.
They could of course draw £1,000 per month out of their savings and pay it into the current account to earn the 3 - 5% currently on offer.But these current accounts all have limits and to take advantage you may well need to open several accounts and move the money around.A hassle for some people.
So,why not invest that money in P2P where you can get upto 12% interest ?
But I do agree that P2P at the lower return end doesn't have much to recommend it.

I would think anyone who is unwilling to open several current accounts and shuffle money between them should steer well clear of P2P, because P2P involves a lot more effort than that if you want to benefit from the 12% rate you mention.

The first few thousand of anyone's savings should be in risk free accounts, not P2P.

Daz2009

masonic wrote: »

I would think anyone who is unwilling to open several current accounts and shuffle money between them should steer well clear of P2P, because P2P involves a lot more effort than that if you want to benefit from the 12% rate you mention.

The first few thousand of anyone's savings should be in risk free accounts, not P2P.

I would imagine most peoples savings start off going in cash ISAs.
It's only fairly recently that current accounts have offered better returns.

It's not beyond the realms of possibility for someone to have amassed quite a considerable amount in an ISA over the years and they won't be able to put all that in current acounts as the limits are quite low.
Also there's the tax consideration.

I don't find P2P investing much effort at all.I quite enjoy my time on SS.Reading a few valuation documents etc doesn't take an awful lot of time in the scheme of things.

masonic

Daz2009 wrote: »

I would imagine most peoples savings start off going in cash ISAs.
It's only fairly recently that current accounts have offered better returns.

I've been using high interest current accounts on and off since 2006, so that's 10 years. But I agree that historically a lot of money went into cash ISAs.

It's not beyond the realms of possibility for someone to have amassed quite a considerable amount in an ISA over the years and they won't be able to put all that in current acounts as the limits are quite low.

I'd say it is quite likely, in fact it is almost as if you have seen into my very own past! But I transferred my cash ISA into my S&S ISA about 3 years ago when my 5 year fixed rate of 5% expired. Of course, I did so with a cash emergency fund spread between current accounts and regular savers earning between 4-6%.

Also there's the tax consideration.

Few people will pay any tax on interest from the first few thousand of their savings wherever it is saved.

I don't find P2P investing much effort at all.I quite enjoy my time on SS.Reading a few valuation documents etc doesn't take an awful lot of time in the scheme of things.

In that case, I can't imagine why you would think running a few current accounts would be "a hassle". It's certainly less effort to set up a few standing orders than researching new loans within which to (re)invest your money.

The fact remains that P2P is no place for an emergency fund and everyone should have a suitable emergency fund prior to investing in riskier assets.

saver861

masonic wrote: »

In that case, I can't imagine why you would think running a few current accounts would be "a hassle". It's certainly less effort to set up a few standing orders than researching new loans within which to (re)invest your money.

Maxing the high interest current accounts and setting up the regular standing orders is effortless in comparison to any other form of investment - and the money is safe so no risk. So I don't quite get Daz2009 point - even if someone has no income but substantial savings, then moving the monthly amount for these accounts would not be a problem.

In fact, for most cases, utilising his and hers, someone can put in around £100k gaining interest circa 4% pretty much all tax free. That then begs the question, how much more do you need to make on p2p investment for the same £100k to make the risk worthwhile. Would 10% returns do it? After platform charges that would be down to 9%.

Soooo the extra 5% does not seem worth the p2p risk. Not against the circa 4% current accounts with virtually no risk and instant access.

Of course once you have maxed the current accounts then further decisions are necessary to make the most of the rest.

masonic wrote: »

The fact remains that P2P is no place for an emergency fund and everyone should have a suitable emergency fund prior to investing in riskier assets.

That would be true for sure. These boards are very useful and informative for many issues. However, equally they can lead people into a false sense of being informed. That said, maybe p2p is less opaque than deciding on funds weighting sectors. I don't have the knowledge to distinguish between the potential of Pharmaceuticals & Biotechnology versus Industrial Engineering versus Beverages!!! Personally I would want to be able to make an informed decision on the viability of these options, which would only come with a deal of research.

masonic

saver861 wrote: »

In fact, for most cases, utilising his and hers, someone can put in around £100k gaining interest circa 4% pretty much all tax free. That then begs the question, how much more do you need to make on p2p investment for the same £100k to make the risk worthwhile. Would 10% returns do it? After platform charges that would be down to 9%.

I largely agree with most of your sentiments, but...

- 4% interest on £100k spread over 2 people would result in at least £400 of income tax unless they were on very low incomes.
- Platform charges? I have money in 6 different platforms and none of them have a platform charge.

Personally, I'm happy to put money at risk for a premium of as little as 3-4% over the risk free rate, which is why most of my money is in equities, which I expect to return around 8% over the long term. If there were more 4% and 5% accounts available, I wouldn't pull money out of equities to put into those accounts.