borofan
Member of DD Central
Posts: 65 
Likes: 13
|
Post by borofan on Jul 26, 2015 9:02:22 GMT
A bit of newbie question, but what are the advantages of investing with SS (or similar company) that pay 12%, compared with investing in a low to medium risk tracker funds? I've been using this HL tool: www.hl.co.uk/funds/master-portfoliosto look at tracker funds with low fees (such as the Vanguard Lifestrategy funds). I take it some of you guys will have these type of funds in your portfolio as well as p2p? Thanks. |
|
jimc99
Member of DD Central
Posts: 284
Likes: 115
|
Post by jimc99 on Jul 26, 2015 10:05:06 GMT
Well I have the Vanguard ETFs. Bit in Europe, UK and the S&P 500. Pleased with the regular dividends which are around 2-3% per annum.
For p2p have ratesetter, saving stream, money thing and mintos.
For me the trackers are for the long term with dividends reinvested and chance of capital gains. I look at the p2p as a bit of a gamble but hope to get if not the headline rates then much better than the banks.
|
|
|
|
Post by Deleted on Jul 26, 2015 10:28:39 GMT
Well if the index goes down, so does the tracker. Just because the bull run has been consistent since 2008 does not mean it will carry on forever. You could argue that that share value is linked to business activity but research shows that "it ain't necessarily so". So your capital is at risk (as is your income). But P2P carries on paying 12%, and your capital is at risk, and you have a good idea of the range of possible default rates. What helped me understand all this was to read Graham and try and define what is a bear and what is a bull market (there is nothing clear about this). Once you can do that you can weigh up the risks. My own view is that you need to diversify your investments and you need to make best use of your tax allowances. Hope that helps  |
|
|
|
Post by Duane Dibley on Jul 26, 2015 10:31:59 GMT
I take it some of you guys will have these type of funds in your portfolio as well as p2p? Oh yes. LS100 is a major part of my portfolio. It's not a case of 'vs' it's a case of balance. A balanced portfolio should consist of equities, bonds, property, commodities and cash. P2P can add to that but shouldn't replace it in my opinion. Equities have done exceptionally well over the last five or six years and bonds have exceeded all expectation over the last 18 months. What will happen in the future? Who knows, certainly not me. But what is certain is that there will be a big correction some time and that's the time you'll be glad you've got your money spread around. Personally I'm about 40% invested in equities (mainly trackers), 30% in property and 30% in fixed interest & cash. LS100 is about 50% of my equities. P2P 50% of my fixed interest. SS 25% of my P2P. Any one loan 5% of my SS. Eggs and baskets. Eggs and baskets. By the way plenty of good information at Monevator on constructing a balanced portfolio and Life Strategy funds.
|
|
webwiz
Posts: 1,133
Likes: 210
|
Post by webwiz on Jul 26, 2015 15:53:41 GMT
I take it some of you guys will have these type of funds in your portfolio as well as p2p? Equities have done exceptionally well over the last five or six years and bonds have exceeded all expectation over the last 18 months. But equities are still not back to where they were 15 years ago, and both equities and bonds have been fuelled by QE and ultra low interest rates, both of which are coming to an end.
|
|
|
|
Post by tybalt on Jul 26, 2015 17:04:37 GMT
For what it is worth I believe equities are over valued but a buoyed up by pension and investment funds vested interests. Where I understand the industry I believe valuations are driven from historic performance and the rate of change and longevity of brands is decreasing. Where I do not understand the industry I leave well alone. Result most of my wealth in in the house and a final salary pension scheme which I hope will stay solvent long enough to see me out. The cash I can realise is in P2P at an average return after losses of 9.8% - 2.5 years in mostly on ThinCats but typically no more than 3% with any company or group and a very selective process.
|
|
am
Posts: 1,495
Likes: 601
|
Post by am on Jul 26, 2015 17:51:36 GMT
But equities are still not back to where they were 15 years ago, and both equities and bonds have been fuelled by QE and ultra low interest rates, both of which are coming to an end. I don't think it's quite fair to compare the peak of a bubble with the lower end to middle of the current trading range - it's not comparing like with like. If you correct for that the FTSE-100 is about 10% up. But what I understand is that the FTSE-100 has performed badly compared to the wider market - it's heavily weighted towards banks and oil and metal producers. The banks still haven't recovered from the banking crises, and the economic cycle is weighing against raw material producers. (Glaxo, another big constituent, hasn't performed very well either.) The FTSE-250 is apparently nearly 3 times its level of 15 years ago (17000-18000, versus 6000-7000). Persimmon is about 9-10 times its level of 16 years ago, and is now paying an annual dividend of over 40% of my purchase price.
|
|
bababill
Member of DD Central
Posts: 525
Likes: 243
|
Post by bababill on Jul 26, 2015 18:06:27 GMT
Only last month I sold half of my portfolio of tracker funds to put into P2P. Though I had already more then 50 percent exposure to P2P I figured its gotta be better then earning 5.6 percent per year since approximately 1998-circa 2007. Only good thing about these trackers is they were in ISA's.. but even then i sold to put into P2P. Take the case of R.S. 5 year bond earning 6.1% and way less volatility then trackers.
|
|
mikes1531
Member of DD Central
Posts: 6,452
Likes: 2,320
|
Post by mikes1531 on Jul 26, 2015 20:29:41 GMT
Only good thing about these trackers is they were in ISA's.. but even then i sold to put into P2P. Take the case of R.S. 5 year bond earning 6.1% and way less volatility then trackers. It's too late now for bababill, but I'd recommend against taking money out of ISAs in order to invest in P2P. If someone ever gets into the higher rate band, the tax-free nature of an ISA would be invaluable. And it's worth nearly a couple of percentage points of return even for basic rate taxpayers. Not to mention that in less than a year it should be possible to invest in P2P via an ISA, and it probably will be possible to transfer money from existing ISA's into P2P ISAs and retain the tax protection.
|
|
|
|
Post by Financial Thing on Jul 26, 2015 23:12:22 GMT
Maybe I'm being a downer but you have to factor in risk which isn't being talked about enough in this thread. The stock market has a 100 years of history. P2P doesn't. What would happen if another housing crisis or economic crisis occurred and people started running for the P2P exits? We have no idea which P2P platforms would survive. Many P2P platforms are operating at a loss. Look at the list of busted P2P platforms hereI love P2P as much as the next guy but we are happily handing over our hard earned wonga to companies we know very little about. If the stock market was returning 10%-12% annually, less people would be considering P2P simply because of the risks involved. It still amazes me that people are happy to receive 4% in P2P because they are so used to seeing a 1% savings rate. Remember the number one rule of investing in unit trusts? Look at returns over long periods of time. P2P is sill very young. Keep in the back of your minds how comfortable people became throwing money at speculative real estate investments when the housing market was booming. My advice would be to invest in in the Vanuguard Total Stock Market Index fund (S&P500) and continue buying through the highs and the lows. I would steer clear of Europe and the FTSE. Do some P2P also, but not more than you are willing to lose. In 10 years after there is some proven history, my advice may be different. |
|
webwiz
Posts: 1,133
Likes: 210
|
Post by webwiz on Jul 27, 2015 7:17:24 GMT
I don't think it's quite fair to compare the peak of a bubble with the lower end to middle of the current trading range - it's not comparing like with like. If you correct for that the FTSE-100 is about 10% up.
Hindsight is a wonderful thing. We can all see how we could have made money. The fact is that more people were buying shares when the market peaked 15 years ago than now. They (we) did not know that it was peaking. Similarly you cannot know for sure that it is not peaking again today. If the market is really 10% up after "correcting" that's only 0.7% pa, plus dividends of course.
I'd recommend against taking money out of ISAs in order to invest in P2P. If someone ever gets into the higher rate band, the tax-free nature of an ISA would be invaluable. And it's worth nearly a couple of percentage points of return even for basic rate taxpayers.
The benefits of S&S ISAs are trumpeted by those trying to sell them but are in fact non-existent for the majority of investors. A standard rate tax payer with capital gains of under £10K gets no benefit at all.
My advice would be to invest in in the Vanguard Total Stock Market Index fund (S&P500) and continue buying through the highs and the lows.
You can't keep buying for ever - you have to sell sometime. it's hard to see how the value of the total stock market can exceed growth in GDP on average in the long term.
|
|
james
Posts: 2,205
Likes: 955
|
Post by james on Jul 27, 2015 8:56:52 GMT
The benefits of S&S ISAs are trumpeted by those trying to sell them but are in fact non-existent for the majority of investors. A standard rate tax payer with capital gains of under £10K gets no benefit at all. Even a person paying no tax using a S&S ISA gets to avoid having to track all purchases and sales so that they can do proper CGT reporting. That's particularly messy to do outside an ISA or pension if accumulation funds are used. But you rather missed the point, I think. The P2P ISA is likely to be only eight months away and the potential tax saving on interest there is significant given P2P interest rates.
|
|
mikes1531
Member of DD Central
Posts: 6,452
Likes: 2,320
|
Post by mikes1531 on Jul 27, 2015 12:13:35 GMT
it's hard to see how the value of the total stock market can exceed growth in GDP on average in the long term. I think the above ignores dividends. Even if GDP were to stop growing and flatline, companies could still be earning money and could afford to pay dividends ad infinitum. So even if investors were not getting capital gains, they'd still be getting income from dividend-paying shares.
|
|
|
|
Post by Financial Thing on Jul 27, 2015 13:11:18 GMT
You can't keep buying for ever - you have to sell sometime. it's hard to see how the value of the total stock market can exceed growth in GDP on average in the long term. Millions of people wrote about not being able to envision the Dow ever reaching 10,000 after 2008. Companies will continue to profit as they have for decades, or they will simply no longer exist. Of course the stock market will correct if levels are unsustainable, but the market is viewed by smart people as a very long term investment. That's why we invest through the lows and the highs. Those who try to pick individuals stocks by trading usually lose money over the long run. It's still a safe bet.
|
|
webwiz
Posts: 1,133
Likes: 210
|
Post by webwiz on Jul 27, 2015 15:34:40 GMT
The benefits of S&S ISAs are trumpeted by those trying to sell them but are in fact non-existent for the majority of investors. A standard rate tax payer with capital gains of under £10K gets no benefit at all. Even a person paying no tax using a S&S ISA gets to avoid having to track all purchases and sales so that they can do proper CGT reporting. That's particularly messy to do outside an ISA or pension if accumulation funds are used. But you rather missed the point, I think. The P2P ISA is likely to be only eight months away and the potential tax saving on interest there is significant given P2P interest rates. No I did not miss the point. I was referring to S&S ISAs. I am eagerly looking forward to the Innovative Finance ISA. I wonder whether existing p2p investments will be allowed to transfer in. The advantage of a S&S ISA you mention is a fair point, but it is not a financial advantage, which is what many/most small investors think they are getting.
|
|
