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Post by chielamangus on Jan 4, 2014 11:11:02 GMT
As far as I am concerned, this is the big difference between Assetz and FC, and is why I'm not involved with FC. Doing the appropriate analysis of FC opportunities -- as with the late lamented Zopa Listings -- would take too long relative to the potential earnings. "would take too long relative to the potential earnings." A few, very few, people have mentioned this aspect. The majority of investors, I suspect, are not costing their time. The return we get from investing is a return to capital AND labour, and if you allow for labour costs (your opportunity cost) returns to capital are fairly small on FC. I've done some work on these returns and they make very sober reading for the small investor. Some may say that their opportunity cost is zero, but it isn't (unless haunting the FC website and forum is one's preferred way of spending one's life).
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agent69
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Post by agent69 on Jan 4, 2014 11:33:35 GMT
The majority of investors, I suspect, are not costing their time. The return we get from investing is a return to capital AND labour, It all depends on how you look at things Personally I look on the time I spend checking out loans as a positive contribution to the bottom line. While I'm doing my due dil, I'm not wasting money down the pub. Win Win all the way!
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Post by chielamangus on Jan 4, 2014 18:15:03 GMT
Well, agent69, what if the alternative were making love to your wife/partner/glamorous star? Or playing with the kids? Or playing a sport? Or going to the theatre? You get the picture? But if your opportunity cost is making yourself miserable drinking in a pub, then, yes, you have a low opportunity cost and your return via FC might be better. But for most small investors who undertake DD and monitor their investments the time cost is very high in relation to the returns. If you asked them to work for £1 per hour, they would laugh at you - but this is what many earn, and some a lot less. It makes the case for autobid and hang the losses appear quite attractive. Or bid and invest very large amounts. But FC ain't for small investors who have a life.
I've got a model (not that kind!) that allows me to input different interest rates, default rates, bid size, delays in drawdown, and time spent on DD & monitoring, so I can change anything and see the impact on the rest. It quantified what I had long thought, and demonstrated that my investment strategy was plum awful - though in your terms with no apparent time cost it might be deemed satisfactory.
Still, chaque a son gout.
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agent69
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Post by agent69 on Jan 4, 2014 19:14:31 GMT
Well, agent69, what if the alternative were making love to your wife/partner/glamorous star? Or playing with the kids? Or playing a sport? Or going to the theatre? You get the picture? But if your opportunity cost is making yourself miserable drinking in a pub, then, yes, you have a low opportunity cost and your return via FC might be better. But for most small investors who undertake DD and monitor their investments the time cost is very high in relation to the returns. If you asked them to work for £1 per hour, they would laugh at you - but this is what many earn, and some a lot less. It makes the case for autobid and hang the losses appear quite attractive. Or bid and invest very large amounts. But FC ain't for small investors who have a life. I've got a model (not that kind!) that allows me to input different interest rates, default rates, bid size, delays in drawdown, and time spent on DD & monitoring, so I can change anything and see the impact on the rest. It quantified what I had long thought, and demonstrated that my investment strategy was plum awful - though in your terms with no apparent time cost it might be deemed satisfactory. Still, chaque a son gout. I guess it all depends on what cost you put on your spare time. If you charge it out at your typical working rate you would never do anything (for example I can't watch the football on telly because it will cost me £60 of my time). If your doing nothing else (which is normally the situation I'm in) then it costs nothing. And as I said earlier, if it keeps you out the pub it actually saves money.
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Post by chielamangus on Jan 5, 2014 9:57:11 GMT
We are in danger of getting into economic esoterica here - but! If you choose to watch TV rather than spend another hour earning £60 then clearly the value of that TV watching exceeds the £60. And this type of behaviour is absolutely natural. We don't normally value our leisure time in this way, but the value is there implicitly. And after a couple of hours of TV watching, you will begin to think ..I'm not enjoying this ... and you will do something else. There is declining marginal utility from every activity, and there comes a point when we switch to something else with greater marginal utility. The cost of doing anything is not doing the next best preferred activity. And DD and monitoring involves a cost. It's not win-win!
Although "retired" I have so many calls on my time (none of them paying anything in direct £sd - or £p if you will) that I am only too aware of the cost of DD. So I started to quantify it and determine the interest and default rate that would justify the time spent on the investing process. Perhaps I am in a minority on these forums - I would be happy to get 5 per cent guaranteed and not have to think about it at all. A fixed rate bond would suit me perfectly and allow me to spend all of my time on more enjoyable activities (some of which include quantitative modelling).
I should add that the Assetz model with more security is more attractive to me than the FC model which requires more DD for a given level of investment.
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Post by oldnick on Jan 5, 2014 10:18:39 GMT
Have you looked at ZOPA? Not 5% currently, or even their advertised rate if you read the moans on their forum, but they have some sort of sink fund for bad debt and there's hardly any input required these days. Which are the reasons I withdrew my money...
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bugs4me
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Post by bugs4me on Jan 5, 2014 11:05:38 GMT
Have you looked at ZOPA? Not 5% currently, or even their advertised rate if you read the moans on their forum, but they have some sort of sink fund for bad debt and there's hardly any input required these days. Which are the reasons I withdrew my money... I think Zopa now is more for the passive lender/investor simply looking for something to beat the pathetic returns available from the banks. I could have used another word rather than 'pathetic' but think it would have stretched out the tolerance of the mods around these parts.
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mikes1531
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Post by mikes1531 on Jan 5, 2014 16:12:32 GMT
Have you looked at ZOPA? Not 5% currently, or even their advertised rate if you read the moans on their forum, but they have some sort of sink fund for bad debt and there's hardly any input required these days. Which are the reasons I withdrew my money... Or RateSetter? Or Wellesley? All three of those options would mean doing DD on the platform rather than the borrowers, so once it's done, it's done for a while rather than being a continuing effort. I think Zopa now is more for the passive lender/investor simply looking for something to beat the pathetic returns available from the banks. I could have used another word rather than 'pathetic' but think it would have stretched out the tolerance of the mods around these parts. How about "derisory"? That ought to be well within the mods' tolerance! 
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mikeb
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Post by mikeb on Jan 5, 2014 20:35:05 GMT
I think Zopa now is more for the passive lender/investor simply looking for something to beat the pathetic returns available from the banks. I could have used another word rather than 'pathetic' but think it would have stretched out the tolerance of the mods around these parts. Passive? It's pretty much dead. It don't get more passive than that, does it? The rates are now too low to be bothered lending at, and have been for months. Especially considering the massive fat cut ZOPA are taking. They call it a 1% fee, but when it's 1% vs 4.5% being earned, that's actually over 20%. It wasn't so bad when rates were higher, but it's just too much now. These rates, "predicted" as they are, aren't being achieved when lending does take place. The "algorithm" being used to ensure faster and fairer lending is making a mockery of the words "fast" and "fair" in a way only bankers can. This is a very bad thing. It's not FAIR when selected lenders can make 20+ loans a day and others are sitting on money with no sign of lending. It's not FAIR when then only way to lend is to game the system by slapping £1000's in, to trigger lending, and then withdraw it. Is this what ZOPA has come to? What's worse is that the "transparent and open" management have pulled down the shutters and decided not to address any of this, not to explain it, not change it. Nothing substantial at all no matter how many complaints have been raised. It's as if they've all jumped off HMS Zopa and paddled away in the lifeboats, leaving it drifting on autopilot. So we quietly (or loudly) bail out our holding accounts and look elsewhere ... I'm not prepared to RapidReturn out of Zopa and reward them with another 1% "exit penalty"! It's sad that a trailblazer of the P2P sector has gone like that -- at least those following in their wake might succeed where ZOPA has failed.
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