Post by wuzimu on Jun 2, 2020 16:40:58 GMT
If your expectation is really to recieve zero back if RS went into administration, that means you are discounting your entire investment on the chances RS will survive (at least) 5 years.
This is a small loss making fintech with no govt support!
In an industry where competitors fail all the time!
Is RS survival risk correctly priced at 3-6% pa?
I don't think so, if it is true nearly nothing would be returned to lenders in the case of RS administration (and I prefer not to speculate on that) I would want a yield of at least 30% pa to fairly compensate me for the risk, probably more....
And this is the problem as diversifier explains its all about duration of loan, I think most people, including me did either not pay attention to the changes in T&C or did not understand. In the Access markets the risk went through the roof as the yields on offer came down. 1 & 5 yr arent much better.
Let us pray that RS to weathers this storm
I absolutely agree duration is important, which is why I struggled to understand the yield discrepancy in the past between the 1 year market and the 5 year market, let alone 5 year and access.
Your point regarding compensation for risk is interesting. Personally no, I don't think access rates are sufficient compensation for the level of risk they represented which is why I did not invest there. Having said that, I also personally don't require 30% p.a. return for taking part in P2P venture. I agree it is risky, but I enjoyed being involved in it, the value of "fun" is hard to assess. But my main mitigation tool was limiting how much went in and putting in money I would not need "early". If I lose everything I have in RS, I would be miffed yes but it wouldn't change the quality of my life nor any of the upcoming decisions I have on the horizon.
RS is well placed to weather the storm better than many, but a storm is definitely coming sadly. A clearer view once we get to the end of the year will let us know where we stand.
starfished, I mean no disrespect to you by pointing out your RS strategy makes you an irrational investor and I would say inclusion of 'fun' as part of the utility of investing is an ex ante manifestation of regret heuristic, but of course being human I understand your reasoning.
All the same a rational investment portfolio should be based on objective assessment of risk vs reward and in the regulated space like P2P , the risks are supposed to be very transparently presented and more so than RS actually did (I feel). RS certainly aren't the only P2P guilty of that by a long way......