Ratesetter which is better rolling or 1 year
Comments
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You seem to be mixing apples with oranges.
Ha ha - wouldn't surprise me. But, hey, everyone loves a fruit salad ;-)The bonus, obtained after a year of investing in the product, can be withdrawn along with the capital and interest.
Ok, if you go to the effort in order to just acquire £100 extra, maybe just to spend, then fine. But is it really investing? Investing should really be for the long term, shouldn't it? It does assume, as you suggest that all the money should be withdrawn after the 1 year period as the returns are so bad.
But does it make you better off? You said...You would then have £1100 plus interest (less bad debts), which could be invested in the LISA or pension products you mention and would attract the bonuses and tax reliefs you mention - if you are willing to use those structures and do without the money until you're in your late 50s or beyond.
However, this would mean you have to wait a whole year for the £100. It does appear you would get capital and interest paid monthly, albeit with guaranteed low returns.
Wouldn't you be better off just sticking it in a LISA?
You would get the £250 bonus after 6 weeks (rather than waiting a year, for less than half). That £250 bonus could then be invested along with your initial sum of £1000.
Ok, you could loose money, but the long term odds are you stand to make so much more.The free money is something of a giveaway, designed to help them build their business as you trial their product.
Putting it another way - it's a bad deal dreassed-up by the company to look attractive, when it's not.0 -
As a rough rule of thumb, I generally use 1 year fix with Ratesetter. I've had up to 10% on the 1 year rate, although that did repay early - I've generally average over 5.5% on 1 year but have had rates hover at the upper 6%+ end consistantly, although that was mostly last year.
Usually if the 1 year rate is about 1.5% higher than the Rolling rate, I would choose 1 year, because even with the selling fees to exit 1 year, you still come out ahead of rolling.0 -
Did say i agree about funds which is why i have them but as you quote its about growth and maybe some div's.The P2p is a income option so should only perhaps be compared to cash choices so is 5% really a bad deal or even 6.5% (but yes there is a risk i know)Oliver1191 wrote: »https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/h/hsbc-ftse-250-index-class-s-accumulation - this fund averaged 7.65% growth per year over the last 3 years.
https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/i/ishares-japan-equity-index-h-accumulation - this fund averaged 12.33% growth per year over the last 4 years.
https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-global-small-cap-index-accumulation - this fund averaged 11.53 growth per year over the last 5 years.
Ok, the future is not certain, but the risks with lending - particularly small amounts of money - are no lower. I know there is often a contingency fund with these P2P platforms, but even if they do pay you any lost capital (and forgone interest??), it's still dramatically less money made...0 -
The 3%ish offered for a 1 year deposit is not as lucrative as what you could get for the long term in a traditional investment. The total 'package' deal of 3% return plus 10% bonus is excellent in the first year. Then in subsequent years you are only getting the 3% ish so you can withdraw it and invest in a long term solution for the following decades.Oliver1191 wrote: »
Ok, if you go to the effort in order to just acquire £100 extra, maybe just to spend, then fine. But is it really investing? Investing should really be for the long term, shouldn't it? It does assume, as you suggest that all the money should be withdrawn after the 1 year period as the returns are so bad.
If you convert your £1000 to £1100 plus interest in the first year, you will have more to put in the LISA so will get more than £250 LISA bonus. Meanwhile the returns you would have been able to get in the LISA over the first year(excepting the LISA bonus) would not be expected to be as high as 12-13%.However, this would mean you have to wait a whole year for the £100. It does appear you would get capital and interest paid monthly, albeit with guaranteed low returns.
Wouldn't you be better off just sticking it in a LISA?
You would get the £250 bonus after 6 weeks (rather than waiting a year, for less than half). That £250 bonus could then be invested along with your initial sum of £1000.
It stands to reason that if you can generate a short term super-return (due to the marketing team wanting to give you free money in hope of snagging you as a long term customer) and THEN put those total proceeds in the LISA product in year two getting a LISA subscription bonus and earning normal S&S returns for a multi-decade lockup period... you'll do better than if you said, "I don't want the super return at the start, I will just invest in the LISA straight away getting a LISA subscription bonus and earning normal S&S returns for a multi-decade lockup period".
Because the latter scenario doesn't get the free money from the marketing men.
It's a short term deal in which you hope to earn money at a rate better than cash with a risk greater than cash, and also earn a superhuman return on the side.Putting it another way - it's a bad deal dreassed-up by the company to look attractive, when it's not.
After the first year they are only offering a rate better than cash with a risk greater than cash, and are no longer giving you the superhuman return on the side, so it is less compelling, and at that point you can go off and look for another more attractive opportunity.
The point is, the 'dressing it up to make it look attractive' involves giving you free money. So it doesn't just "look attractive when it's not". It actually *is* attractive, until the free money dries up, at which point you can go and get free money from somewhere else like a pension or LISA if you can live with the terms of those.0 -
Did say i agree about funds which is why i have them but as you quote its about growth and maybe some div's.The P2p is a income option so should only perhaps be compared to cash choices so is 5% really a bad deal or even 6.5% (but yes there is a risk i know)
Fair enough. I wonder if it beats funds that target income or income and growth...particularly with funds re-invested.0 -
The total 'package' deal of 3% return plus 10% bonus is excellent in the first year.
I see what you're saying about changing your investments after 1 year. Is 'excellent' the right word to use? A good investment should surely be one you are willing to hold for ever - you have that level of confidence in it.If you convert your £1000 to £1100 plus interest in the first year, you will have more to put in the LISA so will get more than £250 LISA bonus. Meanwhile the returns you would have been able to get in the LISA over the first year(excepting the LISA bonus) would not be expected to be as high as 12-13%.
The thing is that the LISA bonus isn't exempt. You get it in 6 weeks, so the OP could include that in the investment.
I was under the impression that the £100 bonus from the P2P investment came after 12 months - during which time you have to keep the original £1000 invested.
So, in the post above I showed an example fund which had averaged 7%. If it's the case that there is a concern that the fund's value could go down, then the OP could buy say £125 fund units a month, spreading the cost over a year. Personally, i'd just chuck the full £1k in myself as this is such a small figure (then supliment this with additional monthly investments out of my pay). If the fund value goes down, great! - you've been able to purchase more units at a cheaper price. In the long run, the OP would stand to make more money.
Surely it's the same with pensions. Particularly if the OP is a HR tax payer - 40% up for grabs if they are lucky enough to earn that!
It just seems to me that if you invest £1k on p2p, you wait 1 year for a small £100 (and miss that year's subscription to the LISA). In exchange for this con, they give you £30 in interest (or £50 if you obtain 5%).
Whereas, with a LISA, you invest £1k and wait just 6 weeks for £250. So, rather than 10% after a year, you get 25% almost straight away. That £250 can be invested along with the original £1k. So, you could invest that full £1250 straight away and make a nice return in the long run. You can cost average if you're worried about risk. You can even choose a fund which suits your objective - there are plenty of income funds offering 3-5% ish yield, many with the potential for capital growth too. Yes it's a risk, but surely dramatically less of a risk than p2p - you're given more free money, you have substantially less time to wait for the free money, and you have a lot more investment choices to suit your objectives.The point is, the 'dressing it up to make it look attractive' involves giving you free money. So it doesn't just "look attractive when it's not". It actually *is* attractive, until the free money dries up, at which point you can go and get free money from somewhere else like a pension or LISA if you can live with the terms of those.
Surely this only becomes attractive when it's the last option standing for long term investing (the opportunity cost). It's better to max out your LISA and pension contributions for the year first. Once this is done - and you think it's worth your actual time and effort to set it up - then, and only then, should you consider setting up something like ratesetter. It's the worst option out of all of them...BUT, it will still make you money.
The thing is that it's so easy just to invest in your ISA at that point, so it's proably worth maxing that out first too.
Now, if you're wealthy enough to invest that kind of money in a tax year, why would you be fussed by a pathetic £100 bonus that you have to wait a year for?0 -
As the last time i looked at the RIT capital home page it said £10000 reinvested with them since '88 is now worth £330000 i would make you right on that.So hopefully your right about income and growth as most of my investments are in IT's but it beats a BS/bank 1 to 5 year bond at the moment as a cash alternative.Don't get me wrong i'm not all in on p2p so i guess its fair to say i don't have complete trust either! and have never told any family or friends to go in even when talking about it (been tempted by the referral bonus a few times:)Oliver1191 wrote: »Fair enough. I wonder if it beats funds that target income or income and growth...particularly with funds re-invested.
Who knows in a year it could have been a mistake but most of the products we trust now started with i guess suspicion such as F&C when they started the first trust or the mutual's getting people to pool their savings but i don't see it in the same boat as say bitcoin0 -
Don't get me wrong
Don't get me wrong, either ;-) Initially, I was attracted too...it's been pointed out to me how much of a con P2P is.
It plays with your emotions - you feel 'wealthy' to be able to lend. But lending doesn't make you wealthy - certainly not with 1k.
Equally, if you don't want to invest - you want free money to spend on a holiday in 12 months, then this will give you an extra £100 to spend! But in the long run, it's a very poor performing product for investing.0 -
Oliver1191 wrote: »
So, in the post above I showed an example fund which had averaged 7%.
The example investment returns from mainstream S&S investments of 7%, or 3-5% yield plus some capital, in a typical year, are generally going to be inferior to what you get from a 3% PLUS 10% marketing promotion, because that's giving 13% in aggregate - which is out of reach of most S&S investments.You can even choose a fund which suits your objective - there are plenty of income funds offering 3-5% ish yield, many with the potential for capital growth too.
What you are doing from your viewpoint is adding a government tax break/ incentive to standard S&S investment returns and noting that the combination is higher than adding a marketing promotion to standard P2P investment returns.
However, it is not higher than doing the marketing promotion on standard P2P returns and then still taking the government tax break /incentive on the resulting proceeds as part of your longer term investment planning.
Focusing on the just the investment returns piece for the moment (because the government 'free money' is available even if you do the ratesetter promotion first and put the proceeds into the government scheme next), there is not a lot of advantage in being able to choose from hundreds of providers for low risk 3% or high risk 13%, where the Ratesetter offering is relatively low risk 13%.Yes it's a risk, but surely dramatically less of a risk than p2p - you're given more free money, you have substantially less time to wait for the free money, and you have a lot more investment choices to suit your objectives.
If you could choose between millions of options from low risk low reward to high risk high rewards... but none of the options were as good as getting 13% on a low risk holding, the 'lot of investment choices' isn't going to deliver you a better result in terms of risk/reward, compared to what the free marketing money gives you. Only the tax relief/government incentive in exchange for a multi-decade lockup is what would deliver the big boost to reward and give you the better result. And you could generally take that govt bonus/ relief with the proceeds of the ratesetter deal, if you wanted that lockup.
The only reason the ratesetter product would come with an opportunity cost of missing out on the government bonus/ tax relief forever, is if the one-year delay caused you to miss the opportunity to invest using a current year allowance AND you already had enough income in every future tax year to max out your LISA (£4k) and your pension (£40k), so that you could never fit that £1100 in a tax advantaged scheme if you missed the boat this year.
The amount of people that applies to is tiny - and, as you suggest, if you're wealthy enough to not have any future ISA or pension allowance available because you are routinely maxing them out, then you are probably not going to worry too much about the returns on £1000.
And if that 'nice problem' of already being able to max your future allowances due to being overly wealthy is something that applies to you, you're not the target audience of the thread started by someone looking to deploy his £1000 with ratesetter for the year to get their £100 bonus. Basically the company is offering £100 of free marketing money in exchange for opening the account, and it might take you an hour of work over the year. Most people don't earn as much as £100/hr on their day job, so it seems a decent reward that easily compensates for the lack of 'investment choice' on Ratesetter.0 -
Still not sure why it keeps getting called investment when its more like savings.Its like comparing a ETF with an instant access account when there doing different things.But it can be saved in an ISA/pension if you want a tax break not sure about the LISA but i'm to long in the tooth for that0
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