P2P or Stock Markets

Not really comparable.

With the stock markets there is greater volatility for sure, but there is also a theoretical uncapped upside to it. 

With P2P the upside is limited to whatever interest they say. Of course there is much less volatility. 

In the case of a lot of platforms I am becoming more nervous about counterparty risk, particularly if sentiment goes against the industry. Ignoring all the stuff at the start with Collateral it seems unwinding even a straightforward loan book is actually very complicated and expensive, so if a really big fish went bust, it would be some time before you got the money back. 

Personally I like to be in both, however most of my investment capital (by far) is in a diversified portfolio of stocks, bonds, REIT's and gold like this: obviousinvestor.com/my-investments/growth-portfolio/

Although the past is not necessarily indicative of the future, it makes me more comfortable to know how these assets have performed for the past 20 or 30 years. I've personally had capital in these assets for over 20 years, through 2 major financial crisis, and lots of other market pullbacks, they always work together to deliver in the end.

P2P is still very new and apart from a couple of companies, hasn't had to weather a major crisis yet, so no one knows how these assets will perform when the next one hits. Probably in another 10 or 20 years I might move more capital in to P2P if it continues to perform, because as someone mentioned earlier in this thread, it's nice not to have to take the capital drawdowns that occur every few years in the securities markets. Even when you're used to it, it's still not comfortable for sure.

Hopefully the P2P market will be as good in 10 years as it is today. We'll see :-)

Mark

interesting read and they make some good points.But the trouble with funds is they could run the data again One week later and the results could be much better for funds(or even worse!)but the P2P average would be the same.Also not sure why they used gilt funds.Really think only property and strategic bond funds,high yield bond funds(such as the Royal London) or the type of income funds run by the likes of Twentyfour investments compere.But hopefully they could do the same review quarterly moving forward and  we could see the difference maybe go the other way
                    

Totally agree on those points!

You could even say:

P2P capped gains & uncapped losses. But when capital is defaulted on unsecured loans, bye-bye!
S&S un-caped gains & uncapped losses, but you still own the assets, so eventually will likely come back.

I'm also <5% P2P of total wealth, and my total P2P returns around 6%. S&S just under 10% for 20+ years. Diversification is a must, so P2P plays its part. However S&S + other tangible assets = no brain'er....

The thing is that sharpe ratio needs a standard deviation which is only meaningful when pricing is set in a market.
Using 0 as standard deviation massively distorts the result. This is Finanace 101.

Liquidity is only an issue if the platforms don’t have an active secondary market I sell at a profit 30% of my portfolio weekly and have nearly 500k for sale at any one time. I can sell most of my investments before they become even capable of being a problem. Liquidity at what cost ?? Over the last 5 years you would struggle to make 10% PA .My P2P has made averages above 15% tax free.

I spend a lot of time managing small individual investments in P2P to give good returns this is impossible in S&S due to trading fees.  I can sell £25 loan part and make 1% to sell £25 in shares costs 10-50% in fees  the same again to re invest. Unless you are making hundreds of trades . Even then small trades are costly.. 

I do have several hundred thousand in S&S purely to have diversification. Fortunately I can wait for recovery and sell at appropriate times.