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Post by goldservice on Jan 15, 2015 9:45:52 GMT
Someone, davee39 iirc, suggested buying C parts and selling them before the first repayment in order to get a better rate than A and A+ offer at present. What are the rules and risks of doing this, please?
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Post by GSV3MIaC on Jan 15, 2015 14:02:42 GMT
There are no rules.
The risks are obviously that there will be no buyers .. if you offer them at par, autobid will usually buy them, but you'll have to pay the 0.25% FC fee, out of your interest income. If you offer them at a markup (or discount!) autobid won't touch them, but a manual buyer might.
If the loan goes mammaries skyward before you sell them (some DO fail in first month) you'll be stuck with them. Right now C's are selling on the SM for up to 13.5% (top one) down thru 12.9% (part #500, which is where I usually look), so you need to offer those sort of buyer rates (except if you are selling to autobid buyers, where anything over MBR for C will probably sell).
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Post by davee39 on Jan 15, 2015 16:48:53 GMT
With rates at 12%+ I calculated that a sale at par 3 or 4 days before the first payment can provide a yield of 8 to 9% for about 28 days invested after fee with only minimal failure risk & minimal risk of the part being rejected by Autobid. I did have one loan fail after 2 weeks though. I do this for C- above 14%, and for C above 12%, where I have acquired three or 4 parts though spread bidding (ie 4 bids at rates 0.1% apart) and I only intend to keep one or two. Even then everything goes after 4 months. I am not of course recommending this to anyone, and it may be an excellent way of pouring money down a drain, but my returns over the last year have been a satisfactory 12 to 13% on a portfolio with a max of 1.5% exposure (only for a few days each time).
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Post by GSV3MIaC on Jan 15, 2015 17:54:49 GMT
What you are ignoring is the dead time (0-14 days) between when you place your bid and when you start earning interest (if at all). This is not so significant if you sit on a part for a couple of years, but makes a big dent if you only plan to collect 28 days interest and then start again. The time to get your money bid / invested might be an issue too - if you had £xk on Xmas day and were shopping for Cs at 12%, you might still be waiting (I don't know, I rarely venture down that far).
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