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Post by jacqueline on Jan 4, 2016 14:44:49 GMT
Hi there,
I’m an investment newbie and, after a fair amount of research into P2P platforms last year, I decided Saving Stream seemed like a safe enough bet given how high the returns are. However, since then I’ve been warned that sites like SS have cropped over the years and gone under because of their high risk portfolio. I’m not well versed enough when I read the SS FAQs to see what the specific risks of SS might be, so I wondered if any of you had advice on where I should be putting my money?
My situation: I have about £9k to play with – and that’s my life savings, for a house deposit, so I don’t want to lose it! On the other hand, I’d love to be able to buy somewhere soon and I live in London so perhaps my desperation is causing me to act irrationally!
-£2k I have in a 5% interest bank account (that’s the limit I can put in there)
- I’m just about to put £1k into a 4% help-to-buy ISA which gives me a 25% return on closing the account on the £200 max a month I’ll be allowed to deposit over the next few years
- I have a couple of other highish interest savings accounts where I put in about £400 a month
- The remaining 6k I have in SS – and I’m loving the fact I’ve made £50 in a month and a half (took a while for me to get the loans)
Is this too risky a spread, and if so, is it worth me maybe keeping a couple of thousand in SS anyway because it’s so high return?
What would be your recommendations for other platforms? Zopa, Ratesetter don’t seem that great really in terms of risk / return ratio… and I’m guessing my amount is too small to think seriously about stocks etc. (I saw an investment platform which looked quite good though, any experience with that?) Most ISAs are useless unless they’re a Help to Buy (I’m wondering whether I can open a couple if they’re in different tax years).
Thanks all and sorry for such a newbie question, but I’d really appreciate your collective experience!
Many thanks,
Jacqueline
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adrianc
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Post by adrianc on Jan 4, 2016 14:58:04 GMT
Think about your exit strategy - when you need that money, it's because you've found the right place, and you want it in a month. All of it.
At the moment, SS's SM (secondary market - selling parts in loans) is about as liquid as the weather. No problem at all. But will it remain so? Probably, yes. But...?
I have to admit, I don't worry about platform risk much - probably not as much as I should do. <shrug> But, then, I avoid the "edgier" platforms, the ones that are more likely to come and go. Z and RS are about as "establishment" as you can get. Safe as any bank, near-as-dammit. Ish. But to get 6% with RS, you're committing to a 5yr term, and you need to reinvest the repayments.
SS is, I think, fairly safe as a platform. The loans themselves are safely backed by assets, so you don't have a high risk of FC-like individual defaults and scrabbling for coppers in the dirt. In your place? Yes, I'd be risking SS. I don't think the loans are as ridiculously high rate for the borrower as they might appear, either - they appear to be about the right rate for commercial bridging loans, which is exactly what they are. But always do your own research...
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pom
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Post by pom on Jan 4, 2016 15:09:28 GMT
Personally I really like SS and am aiming for it to me one of my largest platforms but on principle I wouldn't put all my p2p money there.
You might want to look at Money Thing - also (mostly) 12%, secondary market has been very liquid SO FAR if you need to get out, and although it takes a while to build up a portfolio there it may suit you well as you're a smaller investor.
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SteveT
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Post by SteveT on Jan 4, 2016 15:12:19 GMT
If you want to aim for similar levels of return and similar liquidity (on average) without having all your eggs in the SS basket then perhaps look at MoneyThing, Assetz Capital and Funding Secure. That said, I'd probably back SS as the most robust of these 4 (or at least on par with Assetz) so I don't think you've too much to worry about. SS is by far my largest platform investment currently.
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Post by mrclondon on Jan 4, 2016 15:12:36 GMT
12% yield might seem high, but its "high" for a reason - to compensate you for future capital losses. Over the long term it is probable the returns will be 6 to 7% after capital losses. That said if you ensure you sell any SS loans you hold once they reach (say) 60 days until maturity, you should reduce the risk of capital losses significantly as SS hold interest for the term on account, and the borrower is unlikely to disclose future cashflow issues earlier than a couple of months before maturity.
Loans on SS are fixed 12% yield. If those same loans were to be listed on either AC or TC the yield of each loan would be more closely correlated to the risk of that loan, and probably in the range of 10 to 15% pa.
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Post by wiseclerk on Jan 4, 2016 15:15:42 GMT
and that’s my life savings, for a house deposit, so I don’t want to lose it! On the other hand, I’d love to be able to buy somewhere soon and I live in London so perhaps my desperation is causing me to act irrationally! Many thanks, Jacqueline Given these circumstances p2p lending lending may not be the right choice for your investment. However you selected a platform that provides excellent liquidity (at the moment!), so getting the money out when you need it to buy your house will probably work. But market conditions can change.
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Post by pepperpot on Jan 4, 2016 15:44:19 GMT
All depends on your risk appetite. The difference of return on 9k at 5 or 12% is £630 over a year, it's not going to make a huge dent on a deposit in London, especially if you factor in the possibility of having some money tied up in a non-performing/unsalable loan. SS is a good choice at present, but things can change and if it does on SS it might happen quickly due to an unforeseen event triggering a mass sell off (housing market crash?). In which case 4-5% in a spread of FSCS backed bank accounts would be a much better option, imho.
The same £630 could be achieved in 12 months by tightening your belt a bit (£12 per week less spending, put in a 5% account would net you more at the year end), at least then you know you'd be guaranteed to have it in your pocket.
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davex
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Post by davex on Jan 5, 2016 2:32:34 GMT
All depends on your risk appetite. The difference of return on 9k at 5 or 12% is £630 over a year, it's not going to make a huge dent on a deposit in London, especially if you factor in the possibility of having some money tied up in a non-performing/unsalable loan. SS is a good choice at present, but things can change and if it does on SS it might happen quickly due to an unforeseen event triggering a mass sell off (housing market crash?). In which case 4-5% in a spread of FSCS backed bank accounts would be a much better option, imho. The same £630 could be achieved in 12 months by tightening your belt a bit (£12 per week less spending, put in a 5% account would net you more at the year end), at least then you know you'd be guaranteed to have it in your pocket. Think this is excellent advice. It's very easy to get caught up in the Percentage game, but on smallish investments is the actual cash reward really equal to the risk?
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littleoldlady
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Post by littleoldlady on Jan 5, 2016 8:31:01 GMT
I decided Saving Stream seemed like a safe enough bet given how high the returns are. Jacqueline Actually as a rough rule of thumb the higher the returns the less safe. We SS investors are betting that SS is an exception to the rule but I would not advise putting money that you really cannot afford to lose in any non-FSCS scheme.
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ben
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Post by ben on Jan 5, 2016 14:25:42 GMT
with the asset backed ones like SS it depends on how much you feel the property will get if it went into default, the genearl valuations are usually pretty high and would not get that much if had to be sold but the question becomes would it get the 70% that most seem to lend at. Again probably doubtful it depends how much of the loan has actually been used on improving the property or whatever it is, SS could probably survive a few of the smaller ones going down without anyone really noticing its the bigger if they fail which could be the undoing
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Post by chris on Jan 11, 2016 10:58:21 GMT
with the asset backed ones like SS it depends on how much you feel the property will get if it went into default, the genearl valuations are usually pretty high and would not get that much if had to be sold but the question becomes would it get the 70% that most seem to lend at. Again probably doubtful it depends how much of the loan has actually been used on improving the property or whatever it is, SS could probably survive a few of the smaller ones going down without anyone really noticing its the bigger if they fail which could be the undoing There's a few other risks to factor in as well such as are the platform's processes robust enough to minimise the risk of title fraud; is the LTV based on land value, distressed sale, the works as they are being carried out (which can devalue the security), upon completion, etc.; are their systems compliant and not running the risk of another TrustBuddy situation; are they likely to be successfully authorised by the FCA or will they have to shut down whilst changes are made; are their legal processes sufficient to convince a judge that the loan was not missold (such as enforcing independent legal advice); and so on. No one platform has yet hit upon a magic formula or is 100% risk free whilst being able to pay lenders as much as they want.
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