SteveT
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Post by SteveT on Jan 25, 2015 8:40:37 GMT
I'm considering something similar using money I borrowed 7 years ago on a bargain-basement lifetime tracker mortgage (BBR + 0.36%!) and which has 3 years yet to run, now available for repayment / reinvestment after the long-awaited sale of my old home. Whilst I can't afford to take significant risks with the capital, LandBay's 3.5% BBR tracker product (backed by first charge security on residential buy-to-let properties) seems too good to pass up. Any thoughts (or better options) from wiser heads?
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Post by davee39 on Jan 25, 2015 9:41:27 GMT
I would not be happy investing a significant sum on a single platform.For a similar low level of risk I would look at Ratesetter, Wellesley and Zopa for comparable rates on platforms with a solid track record, to share some of the funds. Note that Zopa can be slow to put new investments out to work. Because Zopa and RS repay Monthly you would get the investment back over time and could re-invest over shorter timescales.
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bigfoot12
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Post by bigfoot12 on Jan 25, 2015 10:52:39 GMT
Note that Zopa can be slow to put new investments out to work. Because Zopa and RS repay Monthly you would get the investment back over time and could re-invest over shorter timescales. Zopa has been short of money in the 3 year market recently. If you avoid the first few days of the month I'd expect it to be lent out in a couple of days. My average un-invested balance has been about 0.1 - 0.2%.
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bigfoot12
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Post by bigfoot12 on Jan 25, 2015 11:04:21 GMT
The collateral/margin for that is more than provided for by the stock portfolio outside the ISA (IG lets you link your stockbroking account with your spreadbetting account which frees up quite a lot of cash. Obviously I try to hold stocks and trusts which are as little correlated as possible with the spreadbetting account (I wish they'd allow that with ISA account at some point because eventually I want to have as much as possible inside the ISA.) The borrowing costs with IG should be around 2.5-3% (much less on indeces, gold, oil and other instruments which are actually not very straightforward to buy physically. But in the event of cascade of margin calls (and if physical stock account is not enough to offset them), first port of call is the cash in bank, 2nd are the various p2p platforms... It is interesting that IG let you link the margin. I hadn't spotted that. Are IG any good as a stockbroking account? They weren't on my shortlist last time I had to change account. The one thing that worries me about your scheme is I (and from some of your other posts I think you) expect a liquidity shock in P2P at some point in the future. It wouldn't surprise me if that was about the same time margin calls were coming in on the spread bets. It probably means that I would need to hold cash or Gilts to cover the margin calls. Which reduces the running yield. How long do you get to cover the margin calls?
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Post by valueinvestor123 on Jan 29, 2015 23:05:16 GMT
The collateral/margin for that is more than provided for by the stock portfolio outside the ISA (IG lets you link your stockbroking account with your spreadbetting account which frees up quite a lot of cash. Obviously I try to hold stocks and trusts which are as little correlated as possible with the spreadbetting account (I wish they'd allow that with ISA account at some point because eventually I want to have as much as possible inside the ISA.) The borrowing costs with IG should be around 2.5-3% (much less on indeces, gold, oil and other instruments which are actually not very straightforward to buy physically. But in the event of cascade of margin calls (and if physical stock account is not enough to offset them), first port of call is the cash in bank, 2nd are the various p2p platforms... It is interesting that IG let you link the margin. I hadn't spotted that. Are IG any good as a stockbroking account? They weren't on my shortlist last time I had to change account. The one thing that worries me about your scheme is I (and from some of your other posts I think you) expect a liquidity shock in P2P at some point in the future. It wouldn't surprise me if that was about the same time margin calls were coming in on the spread bets. It probably means that I would need to hold cash or Gilts to cover the margin calls. Which reduces the running yield. How long do you get to cover the margin calls? IG seem fine as a stockbroker, no complaints and relatively cheap. I agree and my fear is also that both p2p liquidity and margin calls might be affected at the same time. That's why I do hold 5-10% in instant access account (only paying about 1%pa). I have accounted for that in my running yield. Perhaps I should hold more. Marin calls: can be a b&%&. In theory they can close you out at any time once you have a margin call. In practice, they usually allow 24 hours or so. If it keeps moving in the same direction, it might be quicker. If you upload a screenshow to show that a transfer has been made (which may take a few days), they will credit your account before receiving the funds so you have some time for the transfers etc. Basically you have to always keep an eye on it and I always allow enough margin for a 5% movement or so.
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jonbvn
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Post by jonbvn on Jan 30, 2015 7:02:24 GMT
Of course with a non-working, tax efficient partner the sums stack up very favourably ;-) That is what me & the OH do in spades (although not for p2p) such that we even had an HMRC inspector question it. Of course our accountant told him to go forth and multiply, given that it is entirely within the law.
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ramblin rose
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“Some people grumble that roses have thorns; I am grateful that thorns have roses.” — Alphonse Karr
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Post by ramblin rose on Feb 4, 2015 11:42:16 GMT
I too am considering adding a little leverage. I am considering selling some equities and replacing them with Futures, CFDs or spread bets. Then I use some of the proceeds in P2P. I think that this solves much of the tax problem as the borrowing costs are built into these products and might even save me some tax. I haven't worked how much cash I will need to keep back to meet margin payments (earning very little) and maybe this will have too big an impact. The implicit interest rate in these products varies and also these products need to be rolled every few months (or more often) and that will have costs (and effort) which I need to work out if it is worth it. This interests me because I am actually doing it. Mainly to make it more tax and capital efficient and increase income for reinvestment/growing portfolio. My liquid assets are currently organized like this: About 50% of physical liquid assets is in equities, from that, half is in ISAs. I have further exposure through IG index (spreadbetting) to a synthetic stock portfolio equivalent to about 30% of liquid assets. The collateral/margin for that is more than provided for by the stock portfolio outside the ISA (IG lets you link your stockbroking account with your spreadbetting account which frees up quite a lot of cash. Obviously I try to hold stocks and trusts which are as little correlated as possible with the spreadbetting account (I wish they'd allow that with ISA account at some point because eventually I want to have as much as possible inside the ISA.) The borrowing costs with IG should be around 2.5-3% (much less on indeces, gold, oil and other instruments which are actually not very straightforward to buy physically. The funding cost is more than offset by interest from p2p investments in my wife's name who doesn't pay much taxes (15% of assets, I might increase this to 20%). I also keep between 5%-10% in cash earning next to nothing just in case and have some corporate bonds (15% of assets). The main risks (apart from wife running away with all the p2p) is that I am not sure what risk category p2p investments should be classified as since there isn't much of a precedent for them and obviously, this set up is suitable under such favourable interest rate environment, I am not sure what will happen once interest rates go to 6-12% which is possible. I can also see p2p rates converging more with BOE rates once they become more mainstream. Also a major risk is the domino effect, should all assets move in the same downward direction. I have to probably make a more 'sophisticated' model to account for various unlikely assumptions. I haven't bothered because, frankly, most unlikely scenarios are supposed to stay beyond ones imagination otherwise they wouldn't be unlikely...But in the event of cascade of margin calls (and if physical stock account is not enough to offset them), first port of call is the cash in bank, 2nd are the various p2p platforms, 3rd the fixed income investments, 4th the physical shares in ISA which is the last resort. It should never come to the 4th port of call (or even 3rd), since p2p and cash is equivalent to roughly 90% spreadbetting holding exposure. Together with corp bonds, it's equivalent to about 180% of synthetic stock held with IG. So not really possible unless I hit my brain and decide to leverage up significantly. As I said I am not sure whether this is the best set up (perhaps it's cheaper through options/CFD) but it does generate about 40-50% more income (6.5% running yield, versus roughly 4% if I had a more traditional 80/20 equity/bond portfolio) with less volatility (so far, it all depends on p2p dependability*) with very little, if any, tax to pay. *I had a hiccup once, aons ago, with Icesave freezing my funds allocated for margin. Luckily I had index-linked gilts which I managed to sell just in time. So various investments/asset classes, even if risky on their own, actually should add up to a less risky portfolio overall in the end, one would hope. And a little cheap leverage can go a long way IMHO. Comments welcome. vi123 What a very interesting discussion - thanks guys. I've been living a more radical version of this for about 10 years now, and so far I haven't come a cropper. Only time will tell if I've been wise or foolish, but I'm very happy with it so far. I shared this over on the Zopa forum a year or so ago, so although a more restricted audience, it's not a new confession  In Jan 2005 I sold the last of my properties (had owned 3 up to that point). It was prompted by a divorce, and I decided to rent while I was deciding what to do with myself. I had been investing in stocks and shares for a fair number of years, and I came to the realisation that I could probably do better with the money invested in things other than a house. So, I didn't buy another one and all the money is now invested in all kinds of things, not least of which is p2p these days, and it makes me enough money for all my living expenses, including rent, and leaves plenty left over for re-investing. It enabled me to give up proper work 4 years ago (and I'm still a fairly long way from what is normally considered 'retirement age') and I now trade various financial instruments at home because I enjoy it, and not because I have to. I still have exposure to the housing market via investments in building related companies, but freeing myself from the irrational need to own my own home gave me financial wings I couldn't have dreamed of before. It was a pivotal moment, and I salute all of you who also dare to think outside the norm. There is a downside - the house I currently rent is up for sale and I'm going to have to move at a time that I don't really want, but I had 9 years in my previous rental which was perfectly stable, and when I had to move up to the other end of the country a year ago I just upped sticks and went, just like that. Hopefully I'll find somewhere that can be as long term as I want again this time.
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jonno
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nil satis nisi optimum
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Post by jonno on Feb 4, 2015 13:04:41 GMT
Eh,@ramblin rose: There's always room in my garden for another rose; especially my favourite variety "Ramblatis Affluentimax"  |
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In Jan 2005 I sold the last of my properties (had owned 3 up to that point). It was prompted by a divorce, and I decided to rent while I was deciding what to do with myself. I had been investing in stocks and shares for a fair number of years, and I came to the realisation that I could probably do better with the money invested in things other than a house. So, I didn't buy another one and all the money is now invested in all kinds of things, not least of which is p2p these days, and it makes me enough money for all my living expenses, including rent, and leaves plenty left over for re-investing. It enabled me to give up proper work 4 years ago (and I'm still a fairly long way from what is normally considered 'retirement age') and I now trade various financial instruments at home because I enjoy it, and not because I have to. I still have exposure to the housing market via investments in building related companies, but freeing myself from the irrational need to own my own home gave me financial wings I couldn't have dreamed of before. It was a pivotal moment, and I salute all of you who also dare to think outside the norm.