Why is 'Timing' the market bad ?

Apodemus

kidmugsy wrote: »

Not everyone's circumstances will require him to try to beat, or equal, the market.

Thank you, you don't hear this nearly often enough! I wonder if you could please write to Tim Hale and tell him?

jamesd

grey_gym_sock wrote: »

apart from the risk of fraud (or of huge administrative errors, which could have similar consequences), you're also dependent on the p2p company's underwriting process. picking the individual loans you invest in (which i assume is how you personally are doing p2p - i.e. not using any automatic investment option) doesn't eliminate that dependency.

you want the platform to weed out any fraudulent borrowers. and to make a realistic assessment the risk of loans, rejecting any that are poor risks. if the platform is setting the interest rate, you want them to set a realistic rate for the risk level. in all cases, you want them to give you accurate and reasonably complete info about the loan, the borrower, and the security.

there may very well be a conflict of interest between a platform, which wants to grow its business by having more money lent through it, and lenders, who don't want excessive risk, and certainly don't want the platform to understate the risks of a loan.

from what i've read of people discussing p2p platforms on here, some of these issues are far from being purely theoretical.

in a sense, by scrutinizing the info a platform provides about loans, you're carrying out double due diligence, of the individual loans, and of the platform itself. nonetheless, some of the risk - of there being a flawed underwriting process, or inadequate info about loans provided to lenders - remains at the level of the p2p platform.

All loan offers on a platform are covered by the fair, clear and not misleading requirement. I think that at least one platform is not complying with that requirement to a reasonable extent, indeed, I think it has at times deliberately withheld or misrepresented information. There definitely are conflicts of interest involved, just as there were and to some extent still are in the sale of more general commission-remunerated financial sales business.

If a platform did breach the fair, clear and not misleading rule in a way that under-represented the level of risk, the platform would be likely to be liable to pay redress to the misled investors if there was a loss. One of the platform risks is insolvency due to being unable to pay that bill. The requirement to have a funded, insured or otherwise protected run-off plan in place should protect most lenders after that but not the ones who bought on the basis of misrepresentation.

EdGasket

P2P looks like a car crash waiting to happen.

jamesd

Which P2P? And as bad or worse than the routine 40-50% drops that equity markets see when working normally, rather than due to malfeasance?

fun4everyone

I am most concerned about platform fraud/failure leading to losses with P2P, not what will happen to loans during a financial crash (although that is obviously also a concern).


It happened in Sweden already (TrustBuddy). I don't think many of these platforms are making money.


I use P2P a lot but widely diversified by platform. If a "car crash" happens imo it will be due to platform fraud to some degree.

bigadaj

fun4everyone wrote: »

I am most concerned about platform fraud/failure leading to losses with P2P, not what will happen to loans during a financial crash (although that is obviously also a concern).


It happened in Sweden already (TrustBuddy). I don't think many of these platforms are making money.


I use P2P a lot but widely diversified by platform. If a "car crash" happens imo it will be due to platform fraud to some degree.

I'm not so sure it's a car crash waiting to happen, were already seeing soem of the issues. There have been platform failures, defaults are a fact of life and some platforms have far higher rates than others.

I'd agree with teh diversification comment but it's difficult to determine a wide range of platforms with good systems and procedures currently, certainly if you are restricting yourself to secured with decent rates.

Rates are already dropping on most platforms so it pays to be selective on all levels.

Jon_W

AnotherJoe wrote: »

How would you know if there's been a correction? Whats your definition of one? Once prices were falling (for how long and how much?) would you wait until they had dropped a certain amount or until they started rising again? if so how long and how much would they rise before you bought?

Why do you think there will be a worldwide correction after Brexit? What do you think Brexit will encompass (eg what trade deals there will be, with who, what tariffs will there be, etc etc) and why do you think that your vision of Brexit will come about and again, why is that relevant to (for example) US , Hong Kong, China markets?? or were you, very riskily, planning to buy a UK only fund??? That doesn't fit with someone who is so risk averse they will wait two years !!

Also, if your chosen fund rose 20% over the next two years and only then "corrected" -10% on March 29 2019, would you be better off having invested now or after the "correction" ??

If your thinking is like everyone else's though, why haven't prices fallen already? Or if you have an unparalleled knowledge of what will happen in the markets in two years time, why arent you so rich that you dont need to ask about investing in cash?

Finally, "if i were you", I'd do whatever you would do, which I will guess will be prevaricate and eventually start investing a little bit at a time, so little it makes no difference whatever happens.

OTOH, if I were me, which I am, I'd be fully invested within my chosen equities allocation. Spare cash all used up after in the weeks after the Brexit vote panic.

Fair point, and I am not putting all my eggs in the UK basket! It's just that I think I will end up going with a Vanguard LS product and they are fairly heavily weighted to the UK. As you have probably guessed, I am not clued up at all in this game and and a one-stop shop is very appealing.

Thrugelmir

fun4everyone wrote: »

I am most concerned about platform fraud/failure leading to losses with P2P, not what will happen to loans during a financial crash (although that is obviously also a concern).

What's the connection between a "financial crash" and borrowers defaulting on their loans.

Jon_W

I suppose people lose jobs = more default.

Jon_W

Jon_W wrote: »

Fair point, and I am not putting all my eggs in the UK basket! It's just that I think I will end up going with a Vanguard LS product and they are fairly heavily weighted to the UK. As you have probably guessed, I am not clued up at all in this game and and a one-stop shop is very appealing.

So if there was a Brexit vote panic it stands to reason that there will be a panic if we leave without any agreement on access to the single market or of access is somehow limited compared to how it is now.