Where to park some money for perhaps a year

[sidicks]

drainbrain said:

So the combined and concurrent wisdom of PH finance forum is that there is no highly secure way to keep money safely and liquid for perhaps a year better than to park it where it'll grow at less than the predicted rate of inflation?

Well that's sad.

Perhaps a month.
HTH

[DonkeyApple]

drainbrain said:

What's that pantomime with the Ugly Sisters called again?

Only kidding. I KNOW you two need a bit of reassurance that your, erm, 'expertise' is respected and appreciated. And it's not really fair to make fun of you when you've really worked hard to make this your internet 'home'. But…..where, oh where is that helpful insightful answer to the OP's subject title question?

Lots of wind and pish (not to mention an apparently new know-all capability in psychoanalysis emerging) but no juicy suggestion. Why not? Isn't being relevant one of the rules?

I mean, imaginatively (ooooh matron!! This is risk you're talking about and you've been TOLD you know nothing about it!!) if we've all decided that that boring Cashplus 7% is in fact pretty sure to be ok, an investor could take part of an investment along with a friend who could buy him out after a year, couldn't he?

But 0.75%? Come on…..spill the secret way to get 1%. Maybe 2%.

Oh Sidekick, sidekick! The Cashplus thing was raised in answer to someone asking how6-7% could be got via a bank. Now TECHNICALLY you could say Cashplus isn't a bank at all etc etc BUT the whole thing is a side issue within the original issue. So calm down. Deep breaths. No-one's arguing about anything, despite what Mr Donkey says. Back to the relevant question…….where's the money to go??

It's just the simple reality that to keep money on instant access and with no capital risk that is what the market is. There is no escaping the reality of the real world. And as per usual, you know all of this and are just an argumentative old bugger.

[Behemoth]

DonkeyApple said:

Don't forget P2P is also operated outside of FSCS and the whole capital is technically at risk.

With all these supposed 'new' forms of 'lending/financing' it's always worth noting that none of them are new. They are the same old products that have always been available but now wrapped up in a fancy app and being sold via the world of trendy social media where they can reach a completely new audience.

The reality is that when you look at these products in the cold light of day and realise that you are risking the full amount of your cash to lend to a bunch of punters too daft, lazy or crap to get loans through conventional means and it's being done via an agent who offers you absolutely no influence or control then you start to see that the 7% being offered is a monumental piss take. The reality is that if you met the people on the other side of your money there is absolutely no way in hell you'd let them near your cash for a poxy 7% and no ability to monitor them and send bailiffs in to strip them out or thugs to collect.

I wouldn't ever consider any of these schemes to be remotely sane with any more than 5-10% of your liquid pot.

The FCA is going to be all over P2P and Mini Bonds just as soon as it's too late for them to achieve any good.

The risk profile is what it is. I was simply pointing out that it is more favourable than a 4 year locked in illiquid bond. There are factual errors in what you then rant on about, but that'd be digressing from this thread. 4 year bonds & most of the P2P platforms are inappropriate for the o/p assuming the build is for his family home rather than an investment.

[NRS]

drainbrain said:

So the combined and concurrent wisdom of PH finance forum is that there is no highly secure way to keep money safely and liquid for up to a year better than to park it where it'll grow at less than the predicted rate of inflation?

Well that's sad. (And puh-lease no insult-sprinkled diatribe on why it's secretly excellent and not sad and how I don't see that because of something I don't understand. That'll just make it sadder).

Edited by drainbrain on Saturday 5th November 18:27

Lets put it this way shall we - why is everyone not doing this investment if it's so sure?

Also what do you recommend the OP does if loses 20% of the money he was going to use for his house?

[DonkeyApple]

Behemoth said:

DonkeyApple said:

Don't forget P2P is also operated outside of FSCS and the whole capital is technically at risk.

With all these supposed 'new' forms of 'lending/financing' it's always worth noting that none of them are new. They are the same old products that have always been available but now wrapped up in a fancy app and being sold via the world of trendy social media where they can reach a completely new audience.

The reality is that when you look at these products in the cold light of day and realise that you are risking the full amount of your cash to lend to a bunch of punters too daft, lazy or crap to get loans through conventional means and it's being done via an agent who offers you absolutely no influence or control then you start to see that the 7% being offered is a monumental piss take. The reality is that if you met the people on the other side of your money there is absolutely no way in hell you'd let them near your cash for a poxy 7% and no ability to monitor them and send bailiffs in to strip them out or thugs to collect.

I wouldn't ever consider any of these schemes to be remotely sane with any more than 5-10% of your liquid pot.

The FCA is going to be all over P2P and Mini Bonds just as soon as it's too late for them to achieve any good.

The risk profile is what it is. I was simply pointing out that it is more favourable than a 4 year locked in illiquid bond. There are factual errors in what you then rant on about, but that'd be digressing from this thread. 4 year bonds & most of the P2P platforms are inappropriate for the o/p assuming the build is for his family home rather than an investment.

To be fair, there is little difference. There may be a secondary market in principle but you still have to price to find a buyer and there is no guarantee that there is a buyer. And with regards to spreading your risk, you are still lending to dubious borrowers who have been presented to you by a third party and arguably worse than the above Mini bond they've just been screened by a simplistic also. The capital is still at risk and you are not covered by the FSCS. If the market turns sufficiently to damage the capital of the 4 year mini bond then I really doubt any P2P enterprise will fair any better in the same conditions.

The fact remains that you would never lend to any of these people for just 7% and risking 100% if you were in a room with them and a fancy GUI and trendy verbiage makes no difference in the cold light of day.

[Behemoth]

DonkeyApple said:

you are still lending to dubious borrowers who have been presented to you by a third party and arguably worse than the above Mini bond they've just been screened by a simplistic also

This is simply not true for all P2P. You are simplistically tarring all P2P lenders with a very wide brush. You may as well put all bonds into one basket. P2P are massively diverse in both approach & complexity. I'd run a mile from most & I expect the FCA will fire shots at them, too.

DonkeyApple said:

The fact remains that you would never lend to any of these people for just 7% and risking 100% if you were in a room with them and a fancy GUI and trendy verbiage makes no difference in the cold light of day.

Not true. However, I'm sure I'd run a mile from most funds after meeting their managers. Their fancy brochures & trendy charts certainly make no difference in the cold light of day

[DonkeyApple]

Behemoth said:

DonkeyApple said:

you are still lending to dubious borrowers who have been presented to you by a third party and arguably worse than the above Mini bond they've just been screened by a simplistic also

This is simply not true for all P2P. You are simplistically tarring all P2P lenders with a very wide brush. You may as well put all bonds into one basket. P2P are massively diverse in both approach & complexity. I'd run a mile from most & I expect the FCA will fire shots at them, too.

DonkeyApple said:

The fact remains that you would never lend to any of these people for just 7% and risking 100% if you were in a room with them and a fancy GUI and trendy verbiage makes no difference in the cold light of day.

Not true. However, I'm sure I'd run a mile from most funds after meeting their managers. Their fancy brochures & trendy charts certainly make no difference in the cold light of day

It is true. You wouldn't risk capital for just a 7% loan to a book of people you have no influence or control over and who are generally resorting to a solution outside of the banking system. The % is far too low. It's priced wrong in that regard.

And I'm not aware of any main P2P system which operates under the FSCS. They do very much fall into the same bucket as Mini bonds.

They are both eyes wide open products and it's pretty clear that few clients have their eyes wide open.

[Ozzie Osmond]

Whichever way you look at it unregulated investments are high risk compared with regulated. The problem is that punters are usually risking the whole of their investment.

Whilst I wouldn't recommend the stock market for short-term investment at least the realistic maximum short-term loss would be around 30% of the sum invested - not 100%. For instance, in 2009 the FTSE 100 index fell from about 6,000 to 4,000 before recovering over the next three years.

[Behemoth]

DonkeyApple said:

a book of people you have no influence or control over

Nope, not true. You've got your brush out with that tar on it again

[walm]

jmsgld said:

I need to be able to access the money within 28d should something turn up...

drainbrain said:

Cashplus. On its 4 year bonds. 7%. £1k-£250k.

Back when I went to school the teacher would have said "RTBQ!!".

[DonkeyApple]

Behemoth said:

DonkeyApple said:

a book of people you have no influence or control over

Nope, not true. You've got your brush out with that tar on it again

Sorry Behemoth but you don't have control. You have the illusion of control proffered by a series of algos that supposedly filter on pre-programmed metrics and promote a risk profile to you. Even when you are 'spreading your risk' it is still being defined by algos. If you do not know the name and address of your counter party and you do not have direct influence over how they utilise your money then you are not in control and must price the cost of your lending appropriately.

The key here with P2P is that the rates are simply far too low for the activity that is taking place.

If there is a significant P2P platform where you know exactly who you are lending to, where they are, what assets they have, what guarantees can be implemented and most importantly how to foreclose on them and seize those assets then I will change my view and happily say that 7% could be a fair rate however, without that it is madness to even begin to consider arguing that 7% is remotely a fair rate for the activity that is being conducted.

[Ozzie Osmond]

To my mind P2P is a bit like sub-prime mortgages where investors were led to believe that if poor risk was spread thinly enough it ceased to be poor risk. History subsequently showed that was not correct.

[walm]

Ozzie Osmond said:

To my mind P2P is a bit like sub-prime mortgages where investors were led to believe that if poor risk was spread thinly enough it ceased to be poor risk. History subsequently showed that was not correct.

What? You think that a bunch of SMEs who struggle to get a bank loan might all default at the same time given even a whiff of a recession?
Nah.... that'll never happen...

[Behemoth]

DonkeyApple said:

If there is a significant P2P platform where you know exactly who you are lending to, where they are, what assets they have, what guarantees can be implemented and most importantly how to foreclose on them and seize those assets

Few P2P platforms allow this level of selection but Funding Circle does, for example. Foreclosure is diligent and successful. I also know precisely who I'm lending to and can appraise financials put forwards for the loan. Yes, there are lazy algos to allow users to circumvent it. I don't do that. I actively select every loan I make & reject many, I drop loans if I see circumstances changing that are not to my liking and if my appetite for risk changes.

[walm]

Behemoth said:

I drop loans if I see circumstances changing that are not to my liking and if my appetite for risk changes.

Genuine question but how do you "drop loans"? You sell them on? To who? Is there much liquidity?

[DonkeyApple]

walm said:

Genuine question but how do you "drop loans"? You sell them on? To who? Is there much liquidity?

7. Selling your loan part
7.1 If you want to get access to the money you have lent before it has been repaid, you can sell your loan parts to other investors at Funding Circle, either using another Funding Circle tool called Autosale or by selling your loan parts individually. Please note that you cannot sell loan parts:
(a) with one repayment remaining;
(b) which have moved by more than one risk band or have no risk band;
(c) that are in arrears (have currently missed a repayment) or are in default (that have missed consecutive repayments);
(d) if, after the application of any mark-up or mark-down, the simple interest rate the buyer would receive if they held the loan part to maturity, and the borrower continues to make all repayments on time ("Buyer Rate") is less than 4% per annum; or
(e) where the proposed transaction is part of a loan securitisation exercise (other than a securitisation exercise which has been agreed to by Funding Circle in our absolute discretion).
7.2 The limitation in clause 7.1(a) will not apply where the loan is an interest-only repayment loan.
7.3 You can apply a mark-up of up to 3% or a mark down of up to 20% of the outstanding principal value of each loan part, to each loan part you decide to sell, subject to the restrictions in clause 7.1(d).
7.4 The sale price for loan parts will be the outstanding principal amount lent plus the mark-up or mark-down you may choose to apply to the loan parts plus any interest accrued during the month. The accrued interest will be updated automatically at the end of each day.
7.5 To use Autosale, you choose the total amount you want to raise from selling your loan parts. Autosale will then list loan parts with a total sale value close to the amount you want to raise on the platform. Loan parts for sale will be listed on the platform for sale for 14 days, after which those loan parts that have not been sold will be removed from the sale listing and you will continue to be the investor for that loan. You may choose to relist the loan parts straight away if you wish.
7.6 You can also sell loan parts outside of the Autosale tool on an individual basis, which allows you to decide exactly which loans you wish to sell. You can select the loans you want to sell in the My Account section of the platform, and these loans will be listed on the platform for sale for 14 days after which loan parts will be removed from the sale listing and you will continue to be the investor for that loan.
7.7 If you sell loan parts, the sale proceeds will be transferred to your Funding Circle investor account from the buying investor's Investor Account after deduction of the Funding Circle loan part sale fee (see clause 8.2 below).
7.8 We may decide to extend or reduce the 14 day list period from time to time.
7.9 For the avoidance of doubt, it is not currently possible to sell whole loans (or interests in whole loans) on the Funding Circle platform.
7.10 The legal process of selling a loan part is detailed within clause 6 of the Loan Conditions.

[Behemoth]

walm said:

Genuine question but how do you "drop loans"? You sell them on? To who? Is there much liquidity?

You set your price and sell them on the platform's secondary market. Yes, there's plenty of liquidity there.

Most loans for me have sold within minutes, sometimes hours, a few times days if I try squeezing for too much profit (you can set quite a high premium over the original price).

I've also bought loans off others on the secondary market.

[NickCQ]

Behemoth said:

You set your price and sell them on the platform's secondary market. Yes, there's plenty of liquidity there.

Until there isn't. Which happens when everyone flees for the doors at the same time. Remember in 2007 ABS mezz was so liquid that banks were holding it in treasury (!) portfolios.

[DonkeyApple]

Behemoth said:

DonkeyApple said:

If there is a significant P2P platform where you know exactly who you are lending to, where they are, what assets they have, what guarantees can be implemented and most importantly how to foreclose on them and seize those assets

Few P2P platforms allow this level of selection but Funding Circle does, for example. Foreclosure is diligent and successful. I also know precisely who I'm lending to and can appraise financials put forwards for the loan. Yes, there are lazy algos to allow users to circumvent it. I don't do that. I actively select every loan I make & reject many, I drop loans if I see circumstances changing that are not to my liking and if my appetite for risk changes.

FC is a prime example though. They do use algo's, they carry no counter party risk and the bidding process makes it impossible to price the risk appropriately. Users only think it's a fair price because bank rates are so low. And the liquidity is only there because it's a bouyant market not because the loans are any good.

The key with P2P is that you are risking 100% of your capital and you are responsible for collecting debts and I very much doubt a retail individual could bring to bear the weight of a bank in collecting on defaulters. All of this amounts to my key point that for what is being done a 7% return is far too low.

[Behemoth]

NickCQ said:

Until there isn't. Which happens when everyone flees for the doors at the same time.

Yes this is true, Nick. And it's true for all shares, funds, currencies, commodities, assets in free fall. You can only ever sell stuff if there's a buyer.