Is p2p investing really investing?

So here we are looking at "investing" funds into an entity that exists to lend to people who cannot get funding from a bank. Is this really something that could or should be termed an investment? Brand new vehicle and rapidly growing number of suppliers would seem to be a recipe for a little caution it would seem.

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Originally Posted by BIRMANBOY

So here we are looking at "investing" funds into an entity that exists to lend to people who cannot get funding from a bank. Is this really something that could or should be termed an investment? Brand new vehicle and rapidly growing number of suppliers would seem to be a recipe for a little caution it would seem.

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Borrowers who use p2p are not all in the the 'can't get funding from bank' boat. People who chose to use P2P may do so because the rates are better, approval is faster and criteria more flexible. Why is this?

Banks are laden with legacy issues regarding how they can lend and the cost of lending. Risk, compliance, AML, CAPEX, OPEX and lending arrogance have made a rod for their backs.

Harmoney is the closest you'll find to consumer finance and I agree with you, caution is needed, because these borrowers are near the bottom rung - the interest rates border on usury.

LendMe has the most secure and ethical offer and although they're taking their time, they launched with secured lending. As a business, why wouldn't you want to borrow with an interest rate starting as low as 6.64%, unlike a bank, no hidden costs to inflate the true rate.

Like any investment, proceed with caution, but the FMA has create a once in a generation change for a reason.

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Originally Posted by Colgar

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Harmoney is the closest you'll find to consumer finance and I agree with you, caution is needed, because these borrowers are near the bottom rung - the interest rates border on usury.
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Back when inflation was high, the interest rates the Big Banks were charging on credit cards were high too, and depositors too were receiving high interest on their savings. Is usury dependent on the time and economic and fiscal conditions? Some regard the charging of any interest as usury, as always it depends on where your moral (and/or religious) code draws the line. There are plenty of investment opportunities on the NZX which would be (morally) objectionable to some people.

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Originally Posted by BIRMANBOY

So here we are looking at "investing" funds into an entity that exists to lend to people who cannot get funding from a bank.

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Sounds like a lot of listed small cap stocks, though some would say that is gambling.

Why muddy the waters by bringing in religion or morals...this is, as all investments should be primarily regarded, simply a question of how good is the return blended with how high is the risk. If someone has a predominant leaning to leading their life based on particular religious or certain moral standards then that's a different discussion. This discussion is geared to how "good" is it as an investment or even can it actually be truly considered as an investment. Seems to me to be way too early to call these investments in the traditional usage of the word. What about investing in Cash converters or pawn shops? They lend money to people who need funds as well...at least they have the benefit of having goods to be resold if the loan is not recovered. As interest rates drop generally and as /if banks start losing traction on their loan books it would be easy for them to match/compete with all the new PtoP start ups. This could lead to a big shakeup and shakeout among themselves to stay afloat. As someone said investment may be too kind a word..maybe a gamble is more appropriate.

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Originally Posted by Bjauck

Back when inflation was high, the interest rates the Big Banks were charging on credit cards were high too, and depositors too were receiving high interest on their savings. Is usury dependent on the time and economic and fiscal conditions? Some regard the charging of any interest as usury, as always it depends on where your moral (and/or religious) code draws the line. There are plenty of investment opportunities on the NZX which would be (morally) objectionable to some people.

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Originally Posted by BIRMANBOY

As someone said investment may be too kind a word..maybe a gamble is more appropriate.

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That might have been me but I do think it is an investment. It is providing money in return for a risk weighted return. Gambling is providing money in hope of a chance(lotto)/performance(sports) based return.

Having said that, if you don't diversify, then it become more of a chance based return over a risk based return. I am sure someone in trained in statistics/finance will disagree with me.

Its a continuum...at one end is secure investment at the other end is gambling. Where it sits on that long and winding road depends on the individuals personal perception of the facts combined with an educated (or otherwise) estimate of its future prospects. This particular type P2P is short on facts (no history) and long on hopeful assumption. To my mind this puts it further towards the gamble end of the continuum. Diversification is great but I'm not sure I want to go this far away from the investment end. The longer its been in existence and the more utilized it becomes then it could shift. However there is no growth to be had here. Its not like a good share that will grow in value the longer you hold it. I think the downside here is bigger and conceivably could involve bigger losses if the industry doesn't turn out or becomes saturated with too many entities fighting for a piece of the pie.

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Originally Posted by Harvey Specter

That might have been me but I do think it is an investment. It is providing money in return for a risk weighted return. Gambling is providing money in hope of a chance(lotto)/performance(sports) based return.

Having said that, if you don't diversify, then it become more of a chance based return over a risk based return. I am sure someone in trained in statistics/finance will disagree with me.

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Originally Posted by BIRMANBOY

However there is no growth to be had here. Its not like a good share that will grow in value the longer you hold it. I think the downside here is bigger and conceivably could involve bigger losses if the industry doesn't turn out or becomes saturated with too many entities fighting for a piece of the pie.

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How do yo compare it to the likes of investing in corporate bonds or finance companies - which are its true competition, not shares. I compare it to the finance companies, the difference from the finance companies of old is you are actually being compensated properly (or at least better) for the risk you are taking on.

And if you end scenario does take place, just start withdrawing funds, rather than reinvesting. You might not pick exactly when competition gets to tough but most of you money will be in older loans so you shouldn't be overly impacted unless you have been increasing your investment recently.

Yes your analogy to finance co's is on the money...and we know where that led. Personally wouldn't put bonds into the same category however. I would be worried more with the cataclysmic type of event that may see all funds and loans frozen. Lenders may not have the luxury of exiting gradually. Major concern is this is brand new territory....who knows what may happen or could happen. I'm sure that there have been safeguards written in but nothing has been tested or put under pressure so outcomes are completely unpredictable the fact that the FMA has some oversight wouldn't allow any peace of mind in my opinion.

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Originally Posted by Harvey Specter

How do yo compare it to the likes of investing in corporate bonds or finance companies - which are its true competition, not shares. I compare it to the finance companies, the difference from the finance companies of old is you are actually being compensated properly (or at least better) for the risk you are taking on.

And if you end scenario does take place, just start withdrawing funds, rather than reinvesting. You might not pick exactly when competition gets to tough but most of you money will be in older loans so you shouldn't be overly impacted unless you have been increasing your investment recently.

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every investment there is always a bit of a gamble... loto, hoseracing, stocks , property

p2p - I do think it is an investment. It is providing money in return for a risk weighted return.

Like other investments it also has the other factors like it is not very liquid, in that your money is pretty much tied up for the term.
your initial investment/principal wont grow which is analogous to no capital gain
you do get monthly, or periodic, repayments which is your cash flow.


Overall I do like the idea of p2p as in principal it puts peeople with money together with people who want money and are willing to pay a charge on top.
This in a way cuts out the middleman(the banks) which I like but unfortunately you still need a middleman(harmoney,squirrel...etc) to take their cut.

From a borrowers point of view, I would only use the p2p if it was cheaper and more accessible than going to the banks. But then there will always be people(with the higher risk profile, people who can't go to banks) who would normally go to the 2nd or 3rd tier finance companies for their loans. I guess p2p is competing with these also.

From a borrowees point of view they can put there money in for a certain return. And this return is clipped by the middle man. But it can be diversified enough to sprea the risk.

It will be interesting to see the longterm of these p2p companies, but if the us and uk is anything to go by it seems like they might be here for a long time.

Also interesting is the different operators all have different models.
Lending Crowd
Harmoney
LendMe
Squirrel Money.

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Originally Posted by AppleCrumble

every investment there is always a bit of a gamble... loto, hoseracing, stocks , property

p2p - I do think it is an investment. It is providing money in return for a risk weighted return.

Like other investments it also has the other factors like it is not very liquid, in that your money is pretty much tied up for the term.
your initial investment/principal wont grow which is analogous to no capital gain
you do get monthly, or periodic, repayments which is your cash flow.


Overall I do like the idea of p2p as in principal it puts peeople with money together with people who want money and are willing to pay a charge on top.
This in a way cuts out the middleman(the banks) which I like but unfortunately you still need a middleman(harmoney,squirrel...etc) to take their cut.

From a borrowers point of view, I would only use the p2p if it was cheaper and more accessible than going to the banks. But then there will always be people(with the higher risk profile, people who can't go to banks) who would normally go to the 2nd or 3rd tier finance companies for their loans. I guess p2p is competing with these also.

From a borrowees point of view they can put there money in for a certain return. And this return is clipped by the middle man. But it can be diversified enough to sprea the risk.

It will be interesting to see the longterm of these p2p companies, but if the us and uk is anything to go by it seems like they might be here for a long time.

Also interesting is the different operators all have different models.
Lending Crowd
Harmoney
LendMe
Squirrel Money.

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Don't you mean lenders point of view?

Also, how would you describe each operators model in a sentence?

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Originally Posted by BIRMANBOY

Why muddy the waters by bringing in religion or morals...this is, as all investments should be primarily regarded, simply a question of how good is the return blended with how high is the risk.

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I agree. All investments carry a greater or lesser risk, which the investor will wear according to the investor's tolerance and awareness of the risks involved.

I was responding to a previous post which brought up the term "bordering on usury" in relation to Harmoney. "Usury" is not a "neutral" word and its meaning involves judgment or conscience as to what is reasonable according to the ethical or moral standpoint of the person who uses it.

Usury is, today, the practice of making unethical or immoral monetary loans that unfairly enrich the lender. Wikipaedia https://en.wikipedia.org/wiki/Usury

an unconscionable or exorbitant rate or amount of interest Merriam-Webster

The action or practice of lending money at unreasonably high rates of interest: ‘the medieval prohibition on usury Oxford Dictionary

Hah...and LOL etc...every investment...loto???. horseracing???? That may be stretching the definition of investment just a tad.:p

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Originally Posted by AppleCrumble

every investment there is always a bit of a gamble... loto, hoseracing, stocks , property

p2p - I do think it is an investment. It is providing money in return for a risk weighted return.

Like other investments it also has the other factors like it is not very liquid, in that your money is pretty much tied up for the term.
your initial investment/principal wont grow which is analogous to no capital gain
you do get monthly, or periodic, repayments which is your cash flow.


Overall I do like the idea of p2p as in principal it puts peeople with money together with people who want money and are willing to pay a charge on top.
This in a way cuts out the middleman(the banks) which I like but unfortunately you still need a middleman(harmoney,squirrel...etc) to take their cut.

From a borrowers point of view, I would only use the p2p if it was cheaper and more accessible than going to the banks. But then there will always be people(with the higher risk profile, people who can't go to banks) who would normally go to the 2nd or 3rd tier finance companies for their loans. I guess p2p is competing with these also.

From a borrowees point of view they can put there money in for a certain return. And this return is clipped by the middle man. But it can be diversified enough to sprea the risk.

It will be interesting to see the longterm of these p2p companies, but if the us and uk is anything to go by it seems like they might be here for a long time.

Also interesting is the different operators all have different models.
Lending Crowd
Harmoney
LendMe
Squirrel Money.

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Yes I know what you mean. The posters use of the word usury was probably not meant as such but certainly does carry an emotive connotation and Shakespeare's depiction of Shylock as the (unfortunately) Jewish moneylender in The Merchant of Venice certainly put back the perception of Jews somewhat.... Realistically however credit card companies, finance co's, etc.etc.etc. will always be with us. There is always someone willing to exploit someone else's circumstances, whether it be for money, influence or power. That whole issue is so far reaching and fraught with so many potential opinions and emotions that is detracts from the main issue. Its hard enough judging investments worth on facts and figures. Problem here is as I said not a lot of facts and figures to really go on.

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Originally Posted by Bjauck

I agree. All investments carry a greater or lesser risk, which the investor will wear according to the investor's tolerance and awareness of the risks involved.

I was responding to a previous post which brought up the term "bordering on usury" in relation to Harmoney. "Usury" is not a "neutral" word and its meaning involves judgment or conscience as to what is reasonable according to the ethical or moral standpoint of the person who uses it.

Usury is, today, the practice of making unethical or immoral monetary loans that unfairly enrich the lender. Wikipaedia https://en.wikipedia.org/wiki/Usury

an unconscionable or exorbitant rate or amount of interest Merriam-Webster

The action or practice of lending money at unreasonably high rates of interest: ‘the medieval prohibition on usury Oxford Dictionary

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Originally Posted by BIRMANBOY

Yes I know what you mean. The posters use of the word usury was probably not meant as such but certainly does carry an emotive connotation ...

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I think that "usury" is nearly always used in circumstances in which the writer is expressing ethical repugnance. The word has a negative connotation. If the writer intends a more benign connotation then "at a high interest rate" or similar would be used.

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Originally Posted by BIRMANBOY

... There is always someone willing to exploit someone else's circumstances, whether it be for money, influence or power....

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"Exploit" with its negative meaning requires a moral or ethical judgment. Such activity if proscribed by a nation's law is an illegal activity. Using the neutral connotation of "exploit" then that statement could apply to every investment. And if you add "or whether it be for self-satisfaction" it could be applied to every endeavour including organised charities and research institutions.

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Major concern is this is brand new territory....who knows what may happen or could happen. I'm sure that there have been safeguards written in but nothing has been tested or put under pressure so outcomes are completely unpredictable the fact that the FMA has some oversight wouldn't allow any peace of mind in my opinion.

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P2P lending may be new to NZ but it has been operating in other countries (UK, USA) for some years. Looking at some of the overseas P2P sites you can see similarities with the NZ companies in the way that their sites look and the language that they use. For example, here is Mr Money Moustache's experience of Lending Club after one year

I'd suggest that the NZ sites are merely following (hopefully) best practice of the companies who have been doing this for a while. Time will tell.

While I do like the concept of P2P lending immensely and wish it every Success, now that there is a thread on whether it is an investment , it has clarified my thinking on the matter.

Certainly neither buying shares in a P2P vehicle or lending money to borrowers via a many to many platform could currently be considered of investment grade. None of the vehicles operating have been around long enough - the models aren't proven.

But are they investments? Of course they are though I would place them very firmly in the high risk category, essentially junk.
The reason for this in my opinion is that the theoretical benefits obtained from loan diversification will be negated by high failure rates, and especially high failure rates during periods of stress.
its exactly the same principle as the securitisation of low,quality mortgages a la the cause of the GFC. Having lots of them all bundled together doesn't magically turn them into AAA.

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Originally Posted by peat

Havking lots of them all bundled together doesn't magically turn them into AAA.

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Which is why interest rates are above 5%! Average return is about 15% which corresponds to your statements.

So where is the "strategy" in P2P "investment"? Most investors have some sort of strategy when they invest...and in fact the thread where this sitting is called "Investment Strategies". How can you align lending money to individuals with a strategy? There is no strategy, no intellectual involvement, no examination of company performance and prospects....just an examination? of likelihood that joe borrower will pay back his loan.

Agree...it is not a AAA loan if the borrower is 21 year old borrowing money without security for an overseas holiday. The interest rate will be high to reflect the risk. Would it be justified to call that usurious?

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Originally Posted by BIRMANBOY

So where is the "strategy" in P2P "investment"? Most investors have some sort of strategy when they invest...and in fact the thread where this sitting is called "Investment Strategies". How can you align lending money to individuals with a strategy? There is no strategy, no intellectual involvement, no examination of company performance and prospects....just an examination? of likelihood that joe borrower will pay back his loan.

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I think, in a balanced portfolio it fills a risky place. I think there is probably more thought that goes into the decision to invest in a P2P than would go with the decision to invest in a Big Bank term deposit or even perhaps even in a company bond issue. Maybe there is thought that goes into deciding which P2P and from thereon reliance is placed on the P2P company's assesment of grade of loan. (Just as you rely on the Big Bank's assessment on how they deploy the funds provided by your term deposit).

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Originally Posted by Colgar

Don't you mean lenders point of view?

Also, how would you describe each operators model in a sentence?

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Yep lenders, borrowees is bad english.

this post is a start, it shows what they disclose, on each operators model. I hope to add to it.

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Originally Posted by BIRMANBOY

So where is the "strategy" in P2P "investment"? ...

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With Harmoney the average age of an investor is 41yo (https://www.harmoney.co.nz/assets/Pe...stors-info.png). I think that is quite a low average age for an investor. Part of the reason may be the online platform would be more comfortable for younger investors. However, I remember a Harmoney spokesman said in an interview that many of its investors were people saving for a house deposit. So I think that given the current housing market with prices appreciating more than the rate of inflation, many investors are people seeking returns higher than term deposit rates. So their investment strategy may unfortunately be tinged with desperation, perhaps reflecting the current housing affordability for first time buyers trying to raise a deposit.

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Originally Posted by Bjauck

With Harmoney the average age of an investor is 41yo (https://www.harmoney.co.nz/assets/Pe...stors-info.png). I think that is quite a low average age for an investor. Part of the reason may be the online platform would be more comfortable for younger investors.

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Thats part of it. The other thing is we have already established above that P2P is higher risk, so naturally as you get older, you reduce your exposure to high risk investments. A 65yo probably shouldn't have any money in Harmoney except maybe the A and B loans.

I cant see how you can save for a house deposit in something with a 3y liquidity timeframe.

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Originally Posted by Harvey Specter

Thats part of it. The other thing is we have already established above that P2P is higher risk, so naturally as you get older, you reduce your exposure to high risk investments. A 65yo probably shouldn't have any money in Harmoney except maybe the A and B loans.

I cant see how you can save for a house deposit in something with a 3y liquidity timeframe.

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As you get older you should reduce the percent of your wealth in riskier assets, however your wealth, in many or most cases, increases as you become older, so the total amount invested in riskier assets may actually increase.


I guess if you have a plan to buy a house in say 5 years time, it would allow you to invest for about a cycle or two in P2P loans and allow access to the funds for when you are in a position to look for a property. I see Harmoney are still pushing the "P2P saving for a first home" line. https://www.harmoney.co.nz/blog/saving-for-first-home " The benefit for investors, and first home buyers trying to grow their deposit faster, is that the return on your investment is considerably better than the return offered by high-interest bank accounts, meaning you can save up for that deposit faster."

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Originally Posted by AppleCrumble

every investment there is always a bit of a gamble... loto, hoseracing, stocks , property

p2p - I do think it is an investment. It is providing money in return for a risk weighted return.

Like other investments it also has the other factors like it is not very liquid, in that your money is pretty much tied up for the term.
your initial investment/principal wont grow which is analogous to no capital gain
you do get monthly, or periodic, repayments which is your cash flow.


Overall I do like the idea of p2p as in principal it puts peeople with money together with people who want money and are willing to pay a charge on top.
This in a way cuts out the middleman(the banks) which I like but unfortunately you still need a middleman(harmoney,squirrel...etc) to take their cut.

From a borrowers point of view, I would only use the p2p if it was cheaper and more accessible than going to the banks. But then there will always be people(with the higher risk profile, people who can't go to banks) who would normally go to the 2nd or 3rd tier finance companies for their loans. I guess p2p is competing with these also.

From a borrowees point of view they can put there money in for a certain return. And this return is clipped by the middle man. But it can be diversified enough to sprea the risk.

It will be interesting to see the longterm of these p2p companies, but if the us and uk is anything to go by it seems like they might be here for a long time.

Also interesting is the different operators all have different models.
Lending Crowd
Harmoney
LendMe
Squirrel Money.

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As I see it, NZ has not got the population of investers to support the 4 companies mentioned and so far it seems to me that Harmoney has stolen the march. Lending crowd should be a little more secure than Harmoney but at this stage I have found it moving along too slowly. It has taken me 2 weeks to invest in 4 loans as a trial. I was considering transferring funds from Harmoney to LC but have changed my mind.
Squirrel has just mentioned that they have $1.7m now out in loans. That's way behind Harmoney's first month.
Can't comment on Lend Me, haven't been there.
The successful P2P's in the UK and US are doing well and I hope one or two of ours do also but I can't see them all doing well, the pie's not big enough to feed them all.

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Originally Posted by peat

While I do like the concept of P2P lending immensely and wish it every Success, now that there is a thread on whether it is an investment , it has clarified my thinking on the matter.

Certainly neither buying shares in a P2P vehicle or lending money to borrowers via a many to many platform could currently be considered of investment grade. None of the vehicles operating have been around long enough - the models aren't proven.

But are they investments? Of course they are though I would place them very firmly in the high risk category, essentially junk.
The reason for this in my opinion is that the theoretical benefits obtained from loan diversification will be negated by high failure rates, and especially high failure rates during periods of stress.
its exactly the same principle as the securitisation of low,quality mortgages a la the cause of the GFC. Having lots of them all bundled together doesn't magically turn them into AAA.

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I think you've nailed it and are seeing very clearly. People's investments in finance companies generally ended in tears when the pressure really came on and many of the finance companies loans had reasonable security. Simple logic suggests with much of this lending being unsecured, potentially the outcome could be much worse. This is a brave new frontier of commerce that's not for the faint of heart that's for sure !

Interesting article "The State Of P2P Lending" http://techcrunch.com/2016/01/30/the...f-p2p-lending/

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Originally Posted by Baa_Baa

Interesting article "The State Of P2P Lending" http://techcrunch.com/2016/01/30/the...f-p2p-lending/

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Extract - JP Morgan recently announced a partnership with OnDeck Capital that will allow it to outsource to the OnDeck platform business loans under $250,000.

In NZ large proportion of Harmoney loans are made by Heartland and a hedge fund whose name escapes me.

Hardly Peer to Peer is it

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Originally Posted by winner69

Extract - JP Morgan recently announced a partnership with OnDeck Capital that will allow it to outsource to the OnDeck platform business loans under $250,000.

In NZ large proportion of Harmoney loans are made by Heartland and a hedge fund whose name escapes me.

Hardly Peer to Peer is it

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Good point, it is an inconvenient truth that just by virtue of deploying a genuine P2P platform, major funding sources are the same institutions that might make it difficult for the desperate and needy borrowers through normal banking channels. A way for the bank to conduct higher risk lending with low costs of engagement. In a sense is it B2P (bank 2 person) via a 'low doc' 'low cost' channel. I wonder about when the quantum of low doc loans reaches a marketable 'book' whether the modern equivalent of CFD's will emerge and the book 'sold' into the musical chairs money-go-round until it is held by the institutional party least able to sustain the risk of default.

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Originally Posted by Baa_Baa

Good point, it is an inconvenient truth that just by virtue of deploying a genuine P2P platform, major funding sources are the same institutions that might make it difficult for the desperate and needy borrowers through normal banking channels. A way for the bank to conduct higher risk lending with low costs of engagement. In a sense is it B2P (bank 2 person) via a 'low doc' 'low cost' channel.I wonder about when the quantum of low doc loans reaches a marketable 'book' whether the modern equivalent of CFD's will emerge and the book 'sold' into the musical chairs money-go-round until it is held by the institutional party least able to sustain the risk of default.

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You are on to it mate, esp the last sentence

The money men might be able to resist th temptation

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Originally Posted by Baa_Baa

the modern equivalent of CFD's will emerge and the book 'sold' into the musical chairs money-go-round until it is held by the institutional party least able to sustain the risk of default.

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I think where you used CFD you mean CDO's (collateralised debt obligations cf Contracts for Difference) , but yes the point is valid

"We've looked at the P2P lenders from the perspective of borrowing - but how about if you want to invest?"

http://www.interest.co.nz/personal-f...ou-want-invest

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Originally Posted by peat

While I do like the concept of P2P lending immensely and wish it every Success, now that there is a thread on whether it is an investment , it has clarified my thinking on the matter.

Certainly neither buying shares in a P2P vehicle or lending money to borrowers via a many to many platform could currently be considered of investment grade. None of the vehicles operating have been around long enough - the models aren't proven.

But are they investments? Of course they are though I would place them very firmly in the high risk category, essentially junk.
The reason for this in my opinion is that the theoretical benefits obtained from loan diversification will be negated by high failure rates, and especially high failure rates during periods of stress.
its exactly the same principle as the securitisation of low,quality mortgages a la the cause of the GFC. Having lots of them all bundled together doesn't magically turn them into AAA.

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except that they are highly correlated to and share many similarities with the credit card market

and the credit card market was fine in the biggest recession of recent times, the GFC, as was p2p lending.

http://www.lendingmemo.com/p2p-lendi...n-performance/

"Investing" in Harmoney loans is almost the same as gambling especially the E & F grades. It's a pretty addictive game this so called P2P investing which a fairly new game in NZ and the real test for P2P lending will come during a recession. Harmoney keeps boasting about how much money it's lent but IMO HM should be talking more about how much of "investors" money it has recovered.
IMO Squirrel Money is the best platform out of all the p2p platforms in NZ as you are far more likely to at least get your money back when a recession hits. Warren Buffet's two rules are: 1) Don't loose money and 2) Don't forget the first rule

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Originally Posted by alistar_mid

except that they are highly correlated to and share many similarities with the credit card market

and the credit card market was fine in the biggest recession of recent times, the GFC, as was p2p lending.

http://www.lendingmemo.com/p2p-lendi...n-performance/

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But returns did steeply dive by 20-40%...

i could easily suggest that it is a leap of faith to correlate credit card debt and p2p lending.
It might work out that way.

As I said I am totally for the industry , I think its a great innovation, I just want folks to have a good idea about the risk.

Question for everyone here investing in P2P:

How much of your portfolio is in P2P lending? I have roughly 18% at this stage

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Originally Posted by Kelvin

Question for everyone here investing in P2P:

How much of your portfolio is in P2P lending? I have roughly 18% at this stage

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.002% at this point. I am adding to it tentatively. Started in Harmoney and then Lending Crowd. Once those are at a certain level, Squirrel money is next and then maybe some Lendme.

Its good fun but I regard it as high risk even if security is offered.

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Originally Posted by Kelvin

Question for everyone here investing in P2P:

How much of your portfolio is in P2P lending? I have roughly 18% at this stage

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18% of your fixed interest portfolio or total financial investments or total portfolio including real estate (including equity investment in owner occupied real estate?)

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Originally Posted by peat

But returns did steeply dive by 20-40%...

i could easily suggest that it is a leap of faith to correlate credit card debt and p2p lending.
It might work out that way.

As I said I am totally for the industry , I think its a great innovation, I just want folks to have a good idea about the risk.

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P2P is new sector in NZ and I guess its risk is not fully known. BTW, with investment in NZX 50 companies, the returns(including drop in valuations) averaged about -26% in the financial year ending in 2009.

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Originally Posted by Kelvin

Question for everyone here investing in P2P:

How much of your portfolio is in P2P lending? I have roughly 18% at this stage

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8%, target is 10%.

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Originally Posted by Bjauck

18% of your fixed interest portfolio or total financial investments or total portfolio including real estate (including equity investment in owner occupied real estate?)

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Total portfolio

27% of my total financial investment portfolio at present, but this will reduce. I don't include my home. I only include investments I can make income off.

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Originally Posted by Pipi

27% of my total financial investment portfolio at present, but this will reduce. I don't include my home. I only include investments I can make income off.

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Does your statement mean you are Proactively taking Funds out of P2P? If so can I ask you why?

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Originally Posted by Kelvin

Question for everyone here investing in P2P:

How much of your portfolio is in P2P lending? I have roughly 18% at this stage

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about 7% of my total investments.

Take the rental property out and its about 23%

Including rental and owner occupier property its about 4.3%

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Originally Posted by Pipi

27% of my total financial investment portfolio at present, but this will reduce. I don't include my home. I only include investments I can make income off.

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You can make money from the equity in your home - either by renting it out or taking in lodgers. If you did not have your home you would need to rent. Depending on the home and your stage in life, you could trade down and reinvest the excess. In NZ it is for many their main investment and their pension plan. In my opinion. determining how diversified your investments are becomes meaningless if you don't include the current value of the equity invested in your home - especially when assessing investment diversification among those whom may or may not own their own homes.

In my opinion, 27% in p2p sounds like a high proportion of your investments in a new potentially risky asset class. However, if you have 80% of your total investment equity invested in your own home, then I would not come to that conclusion.

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Originally Posted by alistar_mid

about 7% of my total investments.

Take the rental property out and its about 23%

Including rental and owner occupier property its about 4.3%

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I am cautious. About 10% of my fixed interest.

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Originally Posted by Saamee

Does your statement mean you are Proactively taking Funds out of P2P? If so can I ask you why?

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No I am not, I have put all I want to currently in Harmoney so letting that build up with reinvesting. I'm putting money aside for shares, so my % in p2p will reduce.

I see what you mean. I am new to all this, so have never looked at my home in my investment portfolio, as I will always need a roof over my head. I do include it in my networth though. I look at my investment portfolio as something that will make me money to live off, (currently have no interested in getting borders etc). So if I included this and also my business it brings me down to 4%.

[Bjauck] In my opinion, 27% in p2p sounds like a high proportion of your investments in a new potentially risky asset class. However, if you have 80% of your total investment equity invested in your own home, then I would not come to that conclusion.[/QUOTE]

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Originally Posted by Pipi

I see what you mean. I am new to all this, so have never looked at my home in my investment portfolio, as I will always need a roof over my head. I do include it in my networth though. I look at my investment portfolio as something that will make me money to live off, (currently have no interested in getting borders etc). So if I included this and also my business it brings me down to 4%.

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I dont include my house in my investment portfolio (even though it has capital growth and provides imputed rents) and my decision is not investment based. It is emotional based, I chose it based on the type of house I want to live in and the stage of life and wealth I am at. If it was investment based, I would probably live somewhere smaller or choosen a place with bigger capital gain potential, or maybe even choosen to rent and buy a rental elsewhere.

If I was young, and my house was just a stepping stone, then it might be 100% investment based.

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Originally Posted by Harvey Specter

I dont include my house in my investment portfolio (even though it has capital growth and provides imputed rents) and my decision is not investment based. It is emotional based, I chose it based on the type of house I want to live in and the stage of life and wealth I am at. If it was investment based, I would probably live somewhere smaller or choosen a place with bigger capital gain potential, or maybe even choosen to rent and buy a rental elsewhere.

If I was young, and my house was just a stepping stone, then it might be 100% investment based.

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If you did not have your own home you would need a replacement portfolio of well-performing shares to be able to afford to pay the increasing rent for a similar house over the years. So when comparing investment portfolios between a home owner and a non home owner, you need to include the value of any equity owned in a home. All investment decisions have an emotional component to a greater or lesser degree.

All home purchases have an investment component to greater or lesser degree. Nimby-ism has as much to do with preserving property values as anything else. Nobody likes to see capital values erode - whether it is their home or their portfolio of NZX shares.

I've been "Investing in P2P" in both NZ and AUS since December 2014 (presently hold positions in excess of 400 unsecured and secured loans ranging from ($25 -$1000) and have invested in loans with all P2P providers in NZ plus the two in Australia most accessible to NZ investors wishing to start out with small test amounts to begin with.

I have successfully averaged "stable" annual returns over 10%+ every year through a very fractionalised-diversification secured and unsecured strategy.

Typically the fewer "unsecured" loans you invest the more volatile your investment is, only then would i consider P2P lending unfit as an "Longterm Investment"

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Originally Posted by attraides

I've been "Investing in P2P" in both NZ and AUS since December 2014 (presently hold positions in excess of 400 unsecured and secured loans ranging from ($25 -$1000) and have invested in loans with all P2P providers in NZ plus the two in Australia most accessible to NZ investors wishing to start out with small test amounts to begin with.

I have successfully averaged "stable" annual returns over 10%+ every year through a very fractionalised-diversification secured and unsecured strategy.

Typically the fewer "unsecured" loans you invest the more volatile your investment is, only then would i consider P2P lending unfit as an "Longterm Investment"

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do you have any suggestions for people wanting a bit of longterm investing using Nz p2p?
also what about for older people wanting to retire and live off p2p interest, would you suggest a different strategy?

Quote:

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Originally Posted by attraides

I've been "Investing in P2P" in both NZ and AUS since December 2014 (presently hold positions in excess of 400 unsecured and secured loans ranging from ($25 -$1000) and have invested in loans with all P2P providers in NZ plus the two in Australia most accessible to NZ investors wishing to start out with small test amounts to begin with.

I have successfully averaged "stable" annual returns over 10%+ every year through a very fractionalised-diversification secured and unsecured strategy.

Typically the fewer "unsecured" loans you invest the more volatile your investment is, only then would i consider P2P lending unfit as an "Longterm Investment"

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"Typically the fewer "unsecured" loans you invest the more volatile your investment is"...

I'm struggling to follow the logic there! My mind tells me that the more "Secured Loans" you have = A Less Volatile investment you own??

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Originally Posted by Saamee

"Typically the fewer "unsecured" loans you invest the more volatile your investment is"...

I'm struggling to follow the logic there! My mind tells me that the more "Secured Loans" you have = A Less Volatile investment you own??

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Perhaps he meant the more loans (whether secured/unsecured) you buy, the lesser the income volatility = not too different a view from yours, Saamee. Hence, the fewer "unsecured" (or secured, in your case) loans you invest in, the more volatile your investment ...

Diversification via greater quantity of loans (and in his case via providers, loan grades, NZD/AUD etc)

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Originally Posted by beacon

Perhaps he meant the more loans (whether secured/unsecured) you buy, the lesser the income volatility = not too different a view from yours, Saamee. Hence, the fewer "unsecured" (or secured, in your case) loans you invest in, the more volatile your investment ...

Diversification via greater quantity of loans (and in his case via providers, loan grades, NZD/AUD etc)

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Yes. Agreed :)

If a P2P loan gets written off the amount is tax deductible correct?

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Originally Posted by Entrep

If a P2P loan gets written off the amount is tax deductible correct?

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Only if you are carrying on a lending business. No clear rules on this sadly.

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Originally Posted by RMJH

Only if you are carrying on a lending business. No clear rules on this sadly.

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Thanks, do you know if all the people who lost money in finance companies were able to claim?

@Entrep - This has been well covered over past threads ( before your time I believe ) however I'm sure it was this guy that really had great input on it ( maybe over multiple P2P company threads ).

http://www.sharetrader.co.nz/member.php?11527-Bjauck


May I suggest you do a search of all the P2P threads with their user name and also with Tax as an option.... ( or even just a search of Tax within P2P )

Thanks Saamee, the consensus seemed to be that fees are deductible but write offs are not unless you have a special structure in place (even then not sure).

I will speak to my accountant.

Edit: https://www2.deloitte.com/nz/en/page...p-lending.html

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Originally Posted by Entrep

Thanks, do you know if all the people who lost money in finance companies were able to claim?

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Same rules applied so many (most?) wouldn't have got a deduction.

Around :10 % in default,3% written off
http://www.scoop.co.nz/stories/BU171...+November+2017

Another article based on some of the FMA information:

https://www.interest.co.nz/personal-...comment-972994