stevio
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Post by stevio on Oct 18, 2015 7:34:27 GMT
Ok, I am in a dilemma!!!
I am invested in just FOUR platforms at the moment!
However, over those 4 platforms, I am fairly diversified over several loans (obviously not as much as I would like, but don't think I will ever be able to reach the holy grail)
I realize this exposes me to risk of one going puff! but I struggle to find others that are :
a) Secured lending - I may as well lend my money to someone down the pub if there is no security
b) Worthwhile rate - for me has been 10%+
c) Low enough default rate
If I lower my selection criteria I risk the loans themselves failing, If I stick with my selection criteria I risk the platform failing
Help?
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bigfoot12
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Post by bigfoot12 on Oct 18, 2015 7:46:18 GMT
I asked a similar question a few weeks back and there were a few suggestions, but the honest answer is that there probably aren't enough good platforms to fully diversify. That is normally the dilemma of diversification - you have to put some money into investments you like less than others. What are your 4? |
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ben
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Post by ben on Oct 18, 2015 9:27:28 GMT
Would agree probably not enough platforms looking at 10% to diversify, main ones I use at moment are MT , FS and SS. I think with these though you need to be more selective rather then lend money on everything.
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Post by xyon100 on Oct 18, 2015 9:47:46 GMT
I'm quite happy to lend money down the pub as long as the losses are offset by the gains. I'm also not going to have ten platforms to lend on, just be very careful about selecting the ones I do use. You have to consider that the more platforms, the more the chance of one going bust. It's often said that twin engines airplanes are safer, but you have double the chance of an engine failure. ;-)
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ben
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Post by ben on Oct 18, 2015 10:11:30 GMT
true but also the chance of the other engine being enough to save you
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webwiz
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Post by webwiz on Oct 18, 2015 11:09:56 GMT
There is a lot of hassle in investing over too many platforms as they all have different procedures eg how and when to fund the account, whether interest is paid prior to drawdown, how the SM (if any) works etc. For safety you should have different user names and passwords etc etc
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Post by xyon100 on Oct 18, 2015 11:16:06 GMT
true but also the chance of the other engine being enough to save you That's the theory, in practise it's often the live engine that kills you. But I think that's not applicable to P2P sites.
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james
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Post by james on Oct 18, 2015 20:25:22 GMT
.... I am invested in just FOUR platforms at the moment! ... realize this exposes me to risk of one going puff! but I struggle to find others that are : a) Secured lending - I may as well lend my money to someone down the pub if there is no security b) Worthwhile rate - for me has been 10%+ c) Low enough default rate ... If I lower my selection criteria I risk the loans themselves failing, If I stick with my selection criteria I risk the platform failing There are a couple of major factors when investing, "risk tolerance" and the less often mentioned "capacity for loss". Can you afford to lose the amount of money in the platform with most of your money without it doing substantial or significant harm to your financial and other plans? If the answer is yes then four platforms with 25% per platform may be acceptable for you. If you haven't already done so, have a look at the Albion VCT when it next goes on sale, perhaps in November. That offers asset-backed investing and includes many things that are no longer permitted for new VCTs because they are too low risk. The combination of 30% money back from HMRC, limited to your income tax paid in the year of purchase, and an anticipated 10% a year of tax free dividend payments can look quite competitive compared to most P2P. You must repay the 30% if you sell within five years, not if your estate does. You might think of this as a virtual extra "P2P" platform, perhaps. Due to initial offering costs you should anticipate an immediate value loss of 8-10% at purchase time because those costs come out of your purchase money in one way or another. That offset by the tax relief and income. If you do need more diversification within P2P then accepting 8-9% for say 20% of your money isn't going to do too much harm to your average return level.
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stevio
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Post by stevio on Oct 19, 2015 4:09:50 GMT
.... I am invested in just FOUR platforms at the moment! ... realize this exposes me to risk of one going puff! but I struggle to find others that are : a) Secured lending - I may as well lend my money to someone down the pub if there is no security b) Worthwhile rate - for me has been 10%+ c) Low enough default rate ... If I lower my selection criteria I risk the loans themselves failing, If I stick with my selection criteria I risk the platform failing There are a couple of major factors when investing, "risk tolerance" and the less often mentioned "capacity for loss". Can you afford to lose the amount of money in the platform with most of your money without it doing substantial or significant harm to your financial and other plans? If the answer is yes then four platforms with 25% per platform may be acceptable for you. If you haven't already done so, have a look at the Albion VCT when it next goes on sale, perhaps in November. That offers asset-backed investing and includes many things that are no longer permitted for new VCTs because they are too low risk. The combination of 30% money back from HMRC, limited to your income tax paid in the year of purchase, and an anticipated 10% a year of tax free dividend payments can look quite competitive compared to most P2P. You must repay the 30% if you sell within five years, not if your estate does. You might think of this as a virtual extra "P2P" platform, perhaps. Due to initial offering costs you should anticipate an immediate value loss of 8-10% at purchase time because those costs come out of your purchase money in one way or another. That offset by the tax relief and income. If you do need more diversification within P2P then accepting 8-9% for say 20% of your money isn't going to do too much harm to your average return level. Love the idea of VCT's as a new platform. Need get time research, moment do I spend time earning money or time working out how to invest it, it has been the former for a while now! But new platforms are at the top of the list, so VCT's now move up with that concept. Initially put off by 30% return in tax just in 1st year, sounded like every year at first!, realize this can effectively be spread out over 5 years and further investment in following years is possible. 10% yearly returns sounds perfect, presume dividends are tax free depending on your circumstances, with already large dividends and change in tax rules I will be taxed.
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upland
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Post by upland on Oct 19, 2015 6:24:54 GMT
Re VCTs , its worth spending some time to try and understand how it all works. If you buy Albion now then by the time you are able to sell them and retain the tax (5 years) the p2p industry will be a different place ! Its a slow game.
Albion are as good as many (I am a holder) , there should be 6 funds on offer each offering a slightly different divi rate and prospects. There have been recent changes in EU related regulation (2015) that have upped Albions appeal a bit. Being tax invisible like ISAs and SIPPs they can help to reduce the amount of HMRC paperwork a lot. There is a good VCT forum on Motley Fool.
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james
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Post by james on Oct 19, 2015 12:05:16 GMT
10% yearly returns sounds perfect, presume dividends are tax free depending on your circumstances, with already large dividends and change in tax rules I will be taxed. VCT dividends are exempt from income tax for all income tax bands. It's part of the tax relief package and there is no need to declare the dividend on a tax return. You do need to fill in an extra page in the online form in the year in which you purchase a VCT, though, to claim the 30% initial VCT relief. If you pay in come tax via PAYE you can tell HMRC about the purchase as soon as you've made it and ask them to adjust your tax code to give you the relief during the tax year. While Albion manage six different VCTs the one I meant in my post was specifically the Albion Venture Capital Trust because it is the one that has almost all investments asset-backed. If you'd take around 50% asset backed the anticipated dividend from the Crown Place VCT that they manage is 11.16% a year. Both pay half of that twice a year. For completeness the anticipated dividends of the others are Albion enterprise: 10.02%, Kings Arms Yard 7.14%, Albion Development 9.47% and Albion Tech & General 8.48%. Those aren't total returns, just the dividend. The high dividend ones might not fully maintain capital values so you should plan for the chance of a 1% drop a year on those two just in case, as a bit of capital might be paid out as dividend. The dividends given are after allowing for the effect of the 30% relief on the purchase price. that is, they are the dividends as a percentage of actual amount invested after relief. Also of possible interest is that they don't actually require a minimum £6,000 investment even though that's what their application forms have said. At their discretion they'd take less, like £1k for one VCT from a new shareholder or perhaps £250 top up for an existing one. You'll find if you call that they are very helpful on the phone. What they are trying to avoid is the overhead of small holdings in a VCT and tiny purchases, particularly at busy times.
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bigfoot12
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Post by bigfoot12 on Oct 19, 2015 12:15:24 GMT
Initially put off by 30% return in tax just in 1st year, sounded like every year at first!, realize this can effectively be spread out over 5 years and further investment in following years is possible. 10% yearly returns sounds perfect, presume dividends are tax free depending on your circumstances, with already large dividends and change in tax rules I will be taxed. The 30% is a tax credit on the invested amount. You would only want to spread it over multiple years if your income tax payable was lower than 30% of your invested amount. Many VCT applications will let you invest for current year and/or next year so splitting across 2 years in normally easy. Watch out for double counting of the 30% tax credit. Many VCTs target a 7% return, which is 10% of your net investment, so you don't normally get the 30% tax credit and 10%! Read a lot more before investing in a VCT.
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upland
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Post by upland on Oct 19, 2015 12:22:10 GMT
10% yearly returns sounds perfect, presume dividends are tax free depending on your circumstances, with already large dividends and change in tax rules I will be taxed. VCT dividends are exempt from income tax for all income tax bands. It's part of the tax relief package and there is no need to declare the dividend on a tax return. You do need to fill in an extra page in the online form in the year in which you purchase a VCT, though, to claim the 30% initial VCT relief. If you pay in come tax via PAYE you can tell HMRC about the purchase as soon as you've made it and ask them to adjust your tax code to give you the relief during the tax year. Its worth mentioning that the tax relief is against income tax and not just earned income. A subtle point that is worth anyone checking for themselves independently. The online tax form works really well and is not hard to reclaim the income tax for your VCT purchases. There are maximums that you are allowed which is true of VCT dividend income too , however it is in the 200K bracket so is not a concern for ordinary mortals. Be aware that its a lossy process with higher than normal discount/spreads because one is buying NAV from the manager but ultimately sell share price to the market.
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Post by Deleted on Oct 19, 2015 12:37:06 GMT
I'm quite happy to lend money down the pub as long as the losses are offset by the gains. I'm also not going to have ten platforms to lend on, just be very careful about selecting the ones I do use. You have to consider that the more platforms, the more the chance of one going bust. It's often said that twin engines airplanes are safer, but you have double the chance of an engine failure. ;-) "You have to consider that the more platforms, the more the chance of one going bust.! AH but the smaller proportion of your money you lose.... 
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james
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Post by james on Oct 19, 2015 12:55:01 GMT
Watch out for double counting of the 30% tax credit. Many VCTs target a 7% return, which is 10% of your net investment, so you don't normally get the 30% tax credit and 10%! Read a lot more before investing in a VCT. You do get both the 30% returned by HMRC and 10% ongoing return: 1. Buy £10,000 worth. 2. HMRC returns £3,000 via PAYE and/or tax return. 3. You get 10% on the net £7,000 invested. 4. You get to invest the £3,000 as you wish, maybe in P2P or more VCT. 5. Because of issue costs your shares will not be worth £7,000 at the start, more likely £6,300 or so. Depends on when you buy because there are discounts for earlier purchasers. 10% is for a late purchase after the discounts have all or mostly expired. So you might want to factor in this initial capital loss in your overall accounting to see whether you have recovered it buy the time you come to sell. So far as selling goes, the Albion VCTs have an investor-friendly 5% discount policy, meaning that they will try to buy back at a price no lower than 95% of the net aset value at the time of sale. Industry common practice is more often 10-15%. So 5% again is that much less that you need to recover from the growth part of the deal (or get paid in dividends, just two sides of the same coin). The effect of the 5% is of course lower the loner you hold the shares, common recommendations are 7-8+ years rather than the minimum 5%. And for a retire who just wants tax free income, could be for life. Its worth mentioning that the tax relief is against income tax and not just earned income. A subtle point that is worth anyone checking for themselves independently. Yes, the relief is against all taxable income and it's possible that in some cases there won't even be enough PAYE income to provide the full relief. Still, getting through PAYE the maximum possible portion is good because there's no delay, you get it as you earn the money. They will pay the rest within a few weeks of 6 April if you enter a provisional tax return and use the note to say which numbers are estimates, then refine later once you have final numbers. It all works very smoothly in my fairly limited experience. For anyone who didn't realise it, you can buy VCTs, sell after 5 years, then reinvest in different VCTs or wait six months and do the same one, and get the 30% tax relief again. Repeat every five years if you like. Provided you do have the taxable income to qualify for the relief, that is. In this way they can provide far higher tax relief than the once-only relief on most of a pension investment and minimum age 55 befor ewithdrawing of anything to einvet to get relief again is allowed, an act which is also subject to various anti-recycling rule that do not apply to VCTs.
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