Portfolio %

I guess a lot depends on your attitude to risk.

My P2P portfolio represents about 10% of my liquidatable assets, and I am comfortable with that

IN MY PERSONAL OPINION:

I have 5% (5 platforms), but the wife is on nearer 20% (1 platform, no mugs for guessing which one) which is probably unwise. Especially as I work in the industry.

My personal view is that 5% with a single platform is about right (a bit like with a single equity in a share portfolio), maybe at a stretch 10% with one of the big three is acceptable. But with diversification up to 20% P2P lending is OK, but should limit to 1 or 2% with the small riskier platforms.

Kevin.

It depends how safe you perceive p2p to be.

On other sites I've seen people include p2p, mostly your zopas and ratesetters, in their cash allocation.

Some people consider 25% cash to be ok.

I think that's overkill.

Ive seen Others compare ratesetter to the way bonds function and those approaching retirement can be happy with 60-80% in bonds- see the very popular vanguard life strategy funds for example. Again for me this is over kill, but then I'm in my 30s.

There is no right answer.


If you would like us to make a suggestion on what we would do in your situation then really we would need to know more about your circumstances?

If you would like to know what we do, its not hugely relevant without knowing our circumstances.


Risk tolerance, age, perception and attitude to risk will all be a factor.

Also p2p is very broad. Some platforms are less likely to incur capital loss than others. You are on the ratesetter board, so are you really asking what percentage would be reasonable in just this platform?

Actually I'd be more inclined to lump it with high yield bonds (or bond funds) .. some default risk, and some liquidity risk if you need to get it out in a rush, especially if rates move up (as they must, but who knows how much or when). But yes, even in P2P there is a spectrum (of which you are at the 'safer' end) .. large punts to individual dodgy companies, backed by worthless guarantees, being at the other end. I'd put no more than you can afford to lose in any one place, and being mindful of contagion (i.e if RS or ZOPA went down, the other would be under a lot of pressure, to say the least), and bear in mind that there are still tax advantages to ISAs, SIPPs, EISs, VCTs and various other loopholes if you are threatened by higher rate tax in particular. As someone said on another thread, always be mindful that your return ON capital is handsomely trumped by return OF your capital!!

When you start to worry about it, you are over exposed (unless you are just paranoid, of course).

Interesting that you think that P2P won't outperform Cash ISAs long term. I get 1% on my ISAs and 6.1% before tax on one of my 5Yr RS contracts. ISA rates will definitely rise soon but I'll take a chance with that kind of difference.  Do you reckon RS will insist on the new ISA being based on new money only?  There's going to be a big temptation to switch cash ISA money into it in any event, despite the lack of protection.  

I think these P2P numbers will change drastically based on how the stock market performs and how interest rates move. If the stock market overall returned to its 10% annual average gains, then I see investos jumping more into stocks and lowering their p2p exposure. If savings accounts started paying 5% again, same.

Many average Joe investors jump from pillar to post chasing returns. 

PS. I only invest in the S&P500 as I have little faith in the FTSE's long term performance and growth.

This really depends on your risk appetite, how much you can afford to lose or perhaps get tied up for a lot longer period than you thought you agreed to when committing funds and the risk/rewards.

The problem is P2P has only been around for a few years so the risks are difficult/impossible to access, when we have the next finical crises we will then be able to see how good the credit checks and disaster planning of the P2P platforms are. The best we can effectively do is assessing the risk/rewards of the various platforms against each other and/or the loan rating within the platform. For me RS is one of the safest but I will use other platforms to get a spread of the risk.

IMHO in the long term main factor in how much to commit (if anything) is risk against return; I will not commit funds when interest rates are low, if you look at RS today, one and three years below 4%, one month at 2.5%, for me far below acceptable risk/returns at these levels. I feel a good equity portfolio would give a better risk/return or perhaps even PIBs but this may well change within the month as rates move about.

One other thing to consider is how much time you have available to achieve a decent risk/reward given the volatile nature of RS rates and no interest while you funds are on the market it takes some effort to achieve what I consider an acceptable return. I find it worthwhile but it depends on how much free time you have and the size of your funds.