Peer to peer lending in this day and age

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steve321
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Peer to peer lending in this day and age

Post by steve321 » Sat May 23, 2020 3:06 am

I have got a little investment (less than 100k) in P2P in the Uk where I live; I hardly ever watch it but at this time I get messages from the company Zopa explaining that many borrowers will be late with repayments due to the current situation. Zopa had navigated the 2008 crisis rather well, so I am not too worried.
I know that Larry Swedroe recommended P2P investments so I am wandering whether there are many Bogleheads who have invested in these products and if so how they are reacting? Selling now one would incur losses since interests have gone up; besides these loans are probably not very liquid.
Any thoughts/experiences you want to share?
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Re: Peer to peer lending in this day and age

Post by minimalistmarc » Sat May 23, 2020 5:20 am

steve321 wrote:
Sat May 23, 2020 3:06 am
I have got a little investment (less than 100k) in P2P in the Uk where I live; I hardly ever watch it but at this time I get messages from the company Zopa explaining that many borrowers will be late with repayments due to the current situation. Zopa had navigated the 2008 crisis rather well, so I am not too worried.
I know that Larry Swedroe recommended P2P investments so I am wandering whether there are many Bogleheads who have invested in these products and if so how they are reacting? Selling now one would incur losses since interests have gone up; besides these loans are probably not very liquid.
Any thoughts/experiences you want to share?
I’m also in the U.K. and unfortunately have 150k in 2 P2P companies in administration (hoping to get >50%) back and another 50k in performing loans amortising ok. I stupidly went into the high interest 12 - 18% asset backed area.

I wish I’d never gotten into P2P and can’t wait to get shot and all into equities. I let the tax tail wag the dog and during good times was enjoying 17k tax free income a year by investing in my non earning spouses name and using all their allowances. I genuinely had delusions of only needing 500k to retire comfortably on P2P income alone.

If only I’d discovered bogleheads a few years ago when my assets started growing

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Re: Peer to peer lending in this day and age

Post by steve321 » Sat May 23, 2020 5:45 am

minimalistmarc wrote:
Sat May 23, 2020 5:20 am
steve321 wrote:
Sat May 23, 2020 3:06 am
I have got a little investment (less than 100k) in P2P in the Uk where I live; I hardly ever watch it but at this time I get messages from the company Zopa explaining that many borrowers will be late with repayments due to the current situation. Zopa had navigated the 2008 crisis rather well, so I am not too worried.
I know that Larry Swedroe recommended P2P investments so I am wandering whether there are many Bogleheads who have invested in these products and if so how they are reacting? Selling now one would incur losses since interests have gone up; besides these loans are probably not very liquid.
Any thoughts/experiences you want to share?
I’m also in the U.K. and unfortunately have 150k in 2 P2P companies in administration (hoping to get >50%) back and another 50k in performing loans amortising ok. I stupidly went into the high interest 12 - 18% asset backed area.

I wish I’d never gotten into P2P and can’t wait to get shot and all into equities. I let the tax tail wag the dog and during good times was enjoying 17k tax free income a year by investing in my non earning spouses name and using all their allowances. I genuinely had delusions of only needing 500k to retire comfortably on P2P income alone.

If only I’d discovered bogleheads a few years ago when my assets started growing
So I understand you are looking to get out? Have you heard of Zopa? They seemed to do ok in 2008 so I was thinking of just waiting and holding my loans, since amongst other things you can't sell loans that are defaulting...
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Re: Peer to peer lending in this day and age

Post by nisiprius » Sat May 23, 2020 6:14 am

steve321 wrote:
Sat May 23, 2020 3:06 am
...I know that Larry Swedroe recommended P2P investments...
He didn't recommend direct individual investments in peer-to-peer lending. As a part of a portfolio, he recommended a combination of one mutual fund and three interval funds--QSPRX, AVRPX, SRRIX, and LENDX--in equal amounts. The relative correlations of the four funds was important, and he said he expected the combination to have "equity-like" returns with half the volatility of equities.

But it wasn't a recommendation of peer-to-peer lending as such, only as part of a combination of four alternatives. And it was a recommendation to make the investment in a particular way. LENDX is the Stone Ridge Alternative Lending Risk Premium Fund, and it is a professionally managed interval fund which, according to the February 2020 annual report, holds about 4308 pages x 60 items per page = 24,000 individual peer-to-peer loans.
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Re: Peer to peer lending in this day and age

Post by David Althaus » Sat May 23, 2020 6:30 am

If your can get your hands on Thursday's issue of the Wall Street Journal do so. It outlines how March 16 almost blew up the financial system because of cash (that's right) and bonds. My takeaway is there is plenty of risk to digest in plain vanilla bond funds. When we reach for more we often get burned. Has P to P ever really been severely pressure-tested?

All the best

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Re: Peer to peer lending in this day and age

Post by steve321 » Sat May 23, 2020 6:43 am

nisiprius wrote:
Sat May 23, 2020 6:14 am
steve321 wrote:
Sat May 23, 2020 3:06 am
...I know that Larry Swedroe recommended P2P investments...
He didn't recommend direct individual investments in peer-to-peer lending. As a part of a portfolio, he recommended a combination of one mutual fund and three interval funds--QSPRX, AVRPX, SRRIX, and LENDX--in equal amounts. The relative correlations of the four funds was important, and he said he expected the combination to have "equity-like" returns with half the volatility of equities.

But it wasn't a recommendation of peer-to-peer lending as such, only as part of a combination of four alternatives. And it was a recommendation to make the investment in a particular way. LENDX is the Stone Ridge Alternative Lending Risk Premium Fund, and it is a professionally managed interval fund which, according to the February 2020 annual report, holds about 4308 pages x 60 items per page = 24,000 individual peer-to-peer loans.
Yeah thanks, I knew about that; I also invested in reinsurance (directly through stocks, not in SRRIX, to avoid Stone Ridge fees and because I'm not in the US. Also invested in VLIQ in the UK (liquidity). But both SRRIX, and LENDX have taken a hit now, so they're not that uncorrelated in real life...
Concerning QSPRX it's AQR so I wouldn't go anywhere near it, even more so now that Taleb has humiliated Asness on Twitter showing AQR mediocre results.
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Re: Peer to peer lending in this day and age

Post by steve321 » Sat May 23, 2020 6:47 am

David Althaus wrote:
Sat May 23, 2020 6:30 am
Has P to P ever really been severely pressure-tested?

All the best
in 2008 Zopa, where I invested (Uk) already existed and managed to navigate the crisis.
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Re: Peer to peer lending in this day and age

Post by minimalistmarc » Sat May 23, 2020 7:22 am

steve321 wrote:
Sat May 23, 2020 6:47 am
David Althaus wrote:
Sat May 23, 2020 6:30 am
Has P to P ever really been severely pressure-tested?

All the best
in 2008 Zopa, where I invested (Uk) already existed and managed to navigate the crisis.
Personally, I would liquidate anything possible in P2P (probably very little) and put it into long term investments equities or high grade bonds.

Have you tried to sell? My understanding is that zopa loans are not asset backed but I believe zopa have a provision fund for bad loans?

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Re: Peer to peer lending in this day and age

Post by steve321 » Sat May 23, 2020 7:46 am

minimalistmarc wrote:
Sat May 23, 2020 7:22 am
steve321 wrote:
Sat May 23, 2020 6:47 am
David Althaus wrote:
Sat May 23, 2020 6:30 am
Has P to P ever really been severely pressure-tested?

All the best
in 2008 Zopa, where I invested (Uk) already existed and managed to navigate the crisis.
Personally, I would liquidate anything possible in P2P (probably very little) and put it into long term investments equities or high grade bonds.

Have you tried to sell? My understanding is that zopa loans are not asset backed but I believe zopa have a provision fund for bad loans?
I think they had that for previous products (like Classic) but the new products (Plus and Core) don't have a provision fund unfortunately I don't think. I never looked into it too closely because I put only a small percentago of my savings in it; also they seem quite serious and diversify across many borrowers.
They seem to manage things professionally, for example the other day I got an email including this:
If a customer has been impacted by the Coronavirus, our dedicated teams will work directly with them to find the best way forward. In line with FCA guidance, they may be eligible for a payment freeze, for an initial period of up to three months, or a temporary reduced payment plan.
And today I got this, which made me feel quite good:
One group we want to make sure we can continue to support through our lending are the amazing key workers that are keeping the UK going and who are working harder than ever. As key workers' skill sets are in demand, their roles are less likely to be put at risk by the current economic situation facing the country. Despite this, they may find it harder to access credit during this period of uncertainty due to a lack of supply in the market.
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Re: Peer to peer lending in this day and age

Post by steve321 » Sat May 23, 2020 7:47 am

minimalistmarc wrote:
Sat May 23, 2020 7:22 am

Have you tried to sell?
Not yet, that's why I posted this. Might do a simulation later on to see how much I would get
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Re: Peer to peer lending in this day and age

Post by JustinR » Sat May 23, 2020 7:50 am

nm...
Last edited by JustinR on Sat May 23, 2020 8:00 am, edited 1 time in total.

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Re: Peer to peer lending in this day and age

Post by steve321 » Sat May 23, 2020 7:58 am

JustinR wrote:
Sat May 23, 2020 7:50 am
You'll regret it.

Remember this post a couple months from now.
I'll regret what: selling now or not selling now?
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Re: Peer to peer lending in this day and age

Post by JustinR » Sat May 23, 2020 8:00 am

steve321 wrote:
Sat May 23, 2020 7:58 am
JustinR wrote:
Sat May 23, 2020 7:50 am
You'll regret it.

Remember this post a couple months from now.
I'll regret what: selling now or not selling now?
Ohh, you already hold them... welp.

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Re: Peer to peer lending in this day and age

Post by Random Walker » Sat May 23, 2020 8:10 am

I’ve been invested in LENDX, and it has performed well. The loans are mainly small business, student, personal I think. They are short duration. The one big expected hit to the fund would be a spike in unemployment, and that is what we have seen big time with Covid-19. The fund though has held up quite well though last several months.

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Re: Peer to peer lending in this day and age

Post by steve321 » Sat May 23, 2020 8:24 am

I did a smulation and I could sell most of my loans now, but due to a market rate re-adjustement I would lose some money. I'd get back roughly as much as I invested 3 years ago. Not sure what to do, probably for a start I might stop re-investing the repayments, which would allow me to ease out of the fund without any fees. Any thoughts?
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Re: Peer to peer lending in this day and age

Post by Schlabba » Sat May 23, 2020 8:32 am

steve321 wrote:
Sat May 23, 2020 8:24 am
I did a smulation and I could sell most of my loans now, but due to a market rate re-adjustement I would lose some money. I'd get back roughly as much as I invested 3 years ago. Not sure what to do, probably for a start I might stop re-investing the repayments, which would allow me to ease out of the fund without any fees. Any thoughts?
What was the reason for getting into P2P lending? What does P2P lending offer that you cannot get with "traditional" financial instruments such as index funds, hedge funds, individual stocks, bonds, high yield bonds, EM bonds, etc.?

The reason I never got into P2P lending is because I have an alternative which is very likely to make me rich in the long run: Index funds.

As for your question on what to do now, let me turn the question around: If you had cash instead of your P2P investments, would you put it into P2P today?
My answer is that I wouldn't, which is a reason to pull it out.
Secretly a dividend investor. Feel free to ask why.

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Re: Peer to peer lending in this day and age

Post by steve321 » Sat May 23, 2020 8:47 am

Schlabba wrote:
Sat May 23, 2020 8:32 am
steve321 wrote:
Sat May 23, 2020 8:24 am
I did a smulation and I could sell most of my loans now, but due to a market rate re-adjustement I would lose some money. I'd get back roughly as much as I invested 3 years ago. Not sure what to do, probably for a start I might stop re-investing the repayments, which would allow me to ease out of the fund without any fees. Any thoughts?
What was the reason for getting into P2P lending? What does P2P lending offer that you cannot get with "traditional" financial instruments such as index funds, hedge funds, individual stocks, bonds, high yield bonds, EM bonds, etc.?

The reason I never got into P2P lending is because I have an alternative which is very likely to make me rich in the long run: Index funds.

As for your question on what to do now, let me turn the question around: If you had cash instead of your P2P investments, would you put it into P2P today?
My answer is that I wouldn't, which is a reason to pull it out.
I put a small amount (below 2% of my assets) because they performED better than bonds; because of diversification and because it was recommended by Swedroe.
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Re: Peer to peer lending in this day and age

Post by minimalistmarc » Sat May 23, 2020 9:16 am

steve321 wrote:
Sat May 23, 2020 8:24 am
I did a smulation and I could sell most of my loans now, but due to a market rate re-adjustement I would lose some money. I'd get back roughly as much as I invested 3 years ago. Not sure what to do, probably for a start I might stop re-investing the repayments, which would allow me to ease out of the fund without any fees. Any thoughts?
Yes, 100% sell. That is incredible liquidity for debt in these times.

I’m aiming to get my entire portfolio into global equities (all world) and may add some Gov bonds at some point.

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Re: Peer to peer lending in this day and age

Post by minimalistmarc » Sat May 23, 2020 9:19 am

steve321 wrote:
Sat May 23, 2020 8:47 am
Schlabba wrote:
Sat May 23, 2020 8:32 am
steve321 wrote:
Sat May 23, 2020 8:24 am
I did a smulation and I could sell most of my loans now, but due to a market rate re-adjustement I would lose some money. I'd get back roughly as much as I invested 3 years ago. Not sure what to do, probably for a start I might stop re-investing the repayments, which would allow me to ease out of the fund without any fees. Any thoughts?
What was the reason for getting into P2P lending? What does P2P lending offer that you cannot get with "traditional" financial instruments such as index funds, hedge funds, individual stocks, bonds, high yield bonds, EM bonds, etc.?

The reason I never got into P2P lending is because I have an alternative which is very likely to make me rich in the long run: Index funds.

As for your question on what to do now, let me turn the question around: If you had cash instead of your P2P investments, would you put it into P2P today?
My answer is that I wouldn't, which is a reason to pull it out.
I put a small amount (below 2% of my assets) because they performED better than bonds; because of diversification and because it was recommended by Swedroe.
If you have 5 million in assets then no need to sweat it but your P2P holding isn’t going to provide much diversification or move the needle much at all

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Re: Peer to peer lending in this day and age

Post by steve321 » Sat May 23, 2020 9:41 am

minimalistmarc wrote:
Sat May 23, 2020 9:19 am

If you have 5 million in assets then no need to sweat it but your P2P holding isn’t going to provide much diversification or move the needle much at all
Yeah actually now I remember the main reason we allocated some funds to P2P. It was this: when it came to deciding about cash and cash equivalent investments, we decided to go for NS&I because it's super safe, even though we would get a bit less than at some banks. Then I thought that if we put a smallish sum in P2P, we would have a kind of barbell portfolio for our cash equivalent (most at NS&I and some in P2P) giving a higher overall yield whilst the bulk at NS&I was safe.
Trouble with this is that P2P is not really a cash equivalent because it's not liquid. Also it could perhaps be more risky than I thought. Anyway apparently there are worse choices out there than Zopa. I am probably going to ease out of it gradually.
You say you want to go into stocks; now valuations are lower but till recently they were pretty high so expected returns were not very promising.
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Re: Peer to peer lending in this day and age

Post by DaufuskieNate » Sat May 23, 2020 3:56 pm

I think that COVID-related payment deferrals are making P2P loan portfolios look better than they really are at this point in time. It’s reasonable to assume that some of these deferred loans would have gone non-performing anyway. The longer unemployment stays high, the worse these portfolios will look as loan payments can’t be deferred indefinitely.

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Re: Peer to peer lending in this day and age

Post by Watty » Sat May 23, 2020 4:11 pm

I have to admit that I have never really understood P2P lending.

I keep thinking of the Groucho Marx quote;

I Don’t Want to Belong to Any Club That Will Accept Me as a Member.

For whatever the reason commercial lenders are not lending money to the people asking for P2P loans.

I doubt that I am smarter than the lenders who make loans as a full time job.

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Re: Peer to peer lending in this day and age

Post by randomguy » Sat May 23, 2020 5:01 pm

Watty wrote:
Sat May 23, 2020 4:11 pm
I have to admit that I have never really understood P2P lending.

I keep thinking of the Groucho Marx quote;

I Don’t Want to Belong to Any Club That Will Accept Me as a Member.

For whatever the reason commercial lenders are not lending money to the people asking for P2P loans.

I doubt that I am smarter than the lenders who make loans as a full time job.

So you don't buy stocks either? After those are the companies are willing to accept you as a member:) But to some extent I agree with the logic. I don't do P2P lending because there are now companies whose full time job is to evaluated P2P loans and they tend to grap the good picks quickly. Last time I looked at places like lendingtree, the returns they promised keep dropping year over year. The returns were worth the risk back in 2008. Now not so much. And I hesistate to try too many conclusions from 2008-10. That market was much smaller back then.

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Re: Peer to peer lending in this day and age

Post by steve321 » Sun May 24, 2020 1:34 pm

nisiprius wrote:
Sat May 23, 2020 6:14 am
steve321 wrote:
Sat May 23, 2020 3:06 am
...I know that Larry Swedroe recommended P2P investments...
He didn't recommend direct individual investments in peer-to-peer lending. As a part of a portfolio, he recommended a combination of one mutual fund and three interval funds--QSPRX, AVRPX, SRRIX, and LENDX--in equal amounts. The relative correlations of the four funds was important, and he said he expected the combination to have "equity-like" returns with half the volatility of equities.
I looked up all 4 funds and they all went down this year (a couple of them had huge DD), so I don't know how you calculate 'the relative correlation of the four funds' but the correlation in 2020 has been pretty high....
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Re: Peer to peer lending in this day and age

Post by annu » Sun May 24, 2020 3:01 pm

steve321 wrote:
Sun May 24, 2020 1:34 pm
nisiprius wrote:
Sat May 23, 2020 6:14 am
steve321 wrote:
Sat May 23, 2020 3:06 am
...I know that Larry Swedroe recommended P2P investments...
He didn't recommend direct individual investments in peer-to-peer lending. As a part of a portfolio, he recommended a combination of one mutual fund and three interval funds--QSPRX, AVRPX, SRRIX, and LENDX--in equal amounts. The relative correlations of the four funds was important, and he said he expected the combination to have "equity-like" returns with half the volatility of equities.
I looked up all 4 funds and they all went down this year (a couple of them had huge DD), so I don't know how you calculate 'the relative correlation of the four funds' but the correlation in 2020 has been pretty high....
Other then avrpx, others had lower drawdown, stocks went much lower. I am not sure if it compares well, but in US there is fundrise, where few of my friends invested and are very stressed due to ongoing situation and defaults

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Re: Peer to peer lending in this day and age

Post by willthrill81 » Sun May 24, 2020 3:04 pm

I wrote the post below back in Feb., 2019, and have since completely exited the P2P lending space.
willthrill81 wrote:
Wed Feb 27, 2019 1:13 am
I would advise you to steer clear of P2P lending at this point.

I opened a small account with Lending Club in 2013. I used Nickel Steamroller, which was free at the time, to find a good set of selection criteria for high reward notes, and earned 9.5% returns, which I was very happy with. I then opened a larger account with them in the fall of 2016, and my returns using the exact same selection criteria as before have been much lower, just above 4%. It is certainly not worth the platform risk alone for those kinds of returns, never mind the illiquidity. This is the same kind of experience that I've heard from many. The P2P companies have lowered their standards for borrowers, and institutional investors have greatly eroded the returns.

I'm winding down both of my LC accounts.
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Re: Peer to peer lending in this day and age

Post by FIREchief » Sun May 24, 2020 3:06 pm

nisiprius wrote:
Sat May 23, 2020 6:14 am
steve321 wrote:
Sat May 23, 2020 3:06 am
...I know that Larry Swedroe recommended P2P investments...
He didn't recommend direct individual investments in peer-to-peer lending. As a part of a portfolio, he recommended a combination of one mutual fund and three interval funds--QSPRX, AVRPX, SRRIX, and LENDX--in equal amounts. The relative correlations of the four funds was important, and he said he expected the combination to have "equity-like" returns with half the volatility of equities.
One more occasion when I'm glad I've totally ignored all of Larry's "expert advice." 8-)
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Re: Peer to peer lending in this day and age

Post by willthrill81 » Sun May 24, 2020 3:10 pm

Random Walker wrote:
Sat May 23, 2020 8:10 am
I’ve been invested in LENDX, and it has performed well.
Would you mind elaborating on this? All of the data I'm looking at for LENDX shows that it's lost money since its inception in 2016, though I don't think that the data I'm looking at includes dividends that may have been paid.
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Re: Peer to peer lending in this day and age

Post by willthrill81 » Sun May 24, 2020 3:12 pm

FIREchief wrote:
Sun May 24, 2020 3:06 pm
nisiprius wrote:
Sat May 23, 2020 6:14 am
steve321 wrote:
Sat May 23, 2020 3:06 am
...I know that Larry Swedroe recommended P2P investments...
He didn't recommend direct individual investments in peer-to-peer lending. As a part of a portfolio, he recommended a combination of one mutual fund and three interval funds--QSPRX, AVRPX, SRRIX, and LENDX--in equal amounts. The relative correlations of the four funds was important, and he said he expected the combination to have "equity-like" returns with half the volatility of equities.
One more occasion when I'm glad I've totally ignored all of Larry's "expert advice." 8-)
I appreciate a lot of Larry's work, but on several occasions, it seems as though he's succumbed to performance chasing.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Peer to peer lending in this day and age

Post by YRT70 » Mon May 25, 2020 3:03 am

I've got less than 2% of my portfolio in Mintos.com.

My average interest is 12%. Currently they're paying 16% on loans with high rating. I haven't noticed much from the crisis yet.

I could liquidate the loans but it would cost me a significant amount.

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Re: Peer to peer lending in this day and age

Post by YRT70 » Mon May 25, 2020 3:25 am

willthrill81 wrote:
Sun May 24, 2020 3:12 pm
FIREchief wrote:
Sun May 24, 2020 3:06 pm
nisiprius wrote:
Sat May 23, 2020 6:14 am
steve321 wrote:
Sat May 23, 2020 3:06 am
...I know that Larry Swedroe recommended P2P investments...
He didn't recommend direct individual investments in peer-to-peer lending. As a part of a portfolio, he recommended a combination of one mutual fund and three interval funds--QSPRX, AVRPX, SRRIX, and LENDX--in equal amounts. The relative correlations of the four funds was important, and he said he expected the combination to have "equity-like" returns with half the volatility of equities.
One more occasion when I'm glad I've totally ignored all of Larry's "expert advice." 8-)
I appreciate a lot of Larry's work, but on several occasions, it seems as though he's succumbed to performance chasing.
Curious why you say performance chasing. Iirc in the last portfolio of Reducing the risk of black swans he reduced the equity holdings to SCV and switched from intermediate bonds to alternatives. Seems more like the opposite of performance chasing no?

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Re: Peer to peer lending in this day and age

Post by Valuethinker » Mon May 25, 2020 6:15 am

steve321 wrote:
Sat May 23, 2020 9:41 am
minimalistmarc wrote:
Sat May 23, 2020 9:19 am

If you have 5 million in assets then no need to sweat it but your P2P holding isn’t going to provide much diversification or move the needle much at all
Yeah actually now I remember the main reason we allocated some funds to P2P. It was this: when it came to deciding about cash and cash equivalent investments, we decided to go for NS&I because it's super safe, even though we would get a bit less than at some banks. Then I thought that if we put a smallish sum in P2P, we would have a kind of barbell portfolio for our cash equivalent (most at NS&I and some in P2P) giving a higher overall yield whilst the bulk at NS&I was safe.
Trouble with this is that P2P is not really a cash equivalent because it's not liquid. Also it could perhaps be more risky than I thought. Anyway apparently there are worse choices out there than Zopa. I am probably going to ease out of it gradually.
You say you want to go into stocks; now valuations are lower but till recently they were pretty high so expected returns were not very promising.
US p2p lending structure very different from UK. See the discussion when Lending Circle IPO'd.

They won't know what NS&I is. This is an American forum.

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Re: Peer to peer lending in this day and age

Post by steve321 » Mon May 25, 2020 6:44 am

Valuethinker wrote:
Mon May 25, 2020 6:15 am
steve321 wrote:
Sat May 23, 2020 9:41 am
minimalistmarc wrote:
Sat May 23, 2020 9:19 am

If you have 5 million in assets then no need to sweat it but your P2P holding isn’t going to provide much diversification or move the needle much at all
Yeah actually now I remember the main reason we allocated some funds to P2P. It was this: when it came to deciding about cash and cash equivalent investments, we decided to go for NS&I because it's super safe, even though we would get a bit less than at some banks. Then I thought that if we put a smallish sum in P2P, we would have a kind of barbell portfolio for our cash equivalent (most at NS&I and some in P2P) giving a higher overall yield whilst the bulk at NS&I was safe.
Trouble with this is that P2P is not really a cash equivalent because it's not liquid. Also it could perhaps be more risky than I thought. Anyway apparently there are worse choices out there than Zopa. I am probably going to ease out of it gradually.
You say you want to go into stocks; now valuations are lower but till recently they were pretty high so expected returns were not very promising.
US p2p lending structure very different from UK. See the discussion when Lending Circle IPO'd.

They won't know what NS&I is. This is an American forum.
minimalist is from the Uk I think
Success does not bring happiness. In fact, happiness IS success. | 'There are only two tragedies in life: one is not getting what one wants, and the other is getting it.' Oscar Wilde

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Re: Peer to peer lending in this day and age

Post by willthrill81 » Mon May 25, 2020 8:35 am

YRT70 wrote:
Mon May 25, 2020 3:25 am
willthrill81 wrote:
Sun May 24, 2020 3:12 pm
FIREchief wrote:
Sun May 24, 2020 3:06 pm
nisiprius wrote:
Sat May 23, 2020 6:14 am
steve321 wrote:
Sat May 23, 2020 3:06 am
...I know that Larry Swedroe recommended P2P investments...
He didn't recommend direct individual investments in peer-to-peer lending. As a part of a portfolio, he recommended a combination of one mutual fund and three interval funds--QSPRX, AVRPX, SRRIX, and LENDX--in equal amounts. The relative correlations of the four funds was important, and he said he expected the combination to have "equity-like" returns with half the volatility of equities.
One more occasion when I'm glad I've totally ignored all of Larry's "expert advice." 8-)
I appreciate a lot of Larry's work, but on several occasions, it seems as though he's succumbed to performance chasing.
Curious why you say performance chasing. Iirc in the last portfolio of Reducing the risk of black swans he reduced the equity holdings to SCV and switched from intermediate bonds to alternatives. Seems more like the opposite of performance chasing no?
By my way of thinking, he became enamored with the alternatives (aka 'alts') after they seemed to perform well. Perhaps I'm wrong.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Peer to peer lending in this day and age

Post by Valuethinker » Mon May 25, 2020 12:17 pm

steve321 wrote:
Mon May 25, 2020 6:44 am
Valuethinker wrote:
Mon May 25, 2020 6:15 am
steve321 wrote:
Sat May 23, 2020 9:41 am
minimalistmarc wrote:
Sat May 23, 2020 9:19 am

If you have 5 million in assets then no need to sweat it but your P2P holding isn’t going to provide much diversification or move the needle much at all
Yeah actually now I remember the main reason we allocated some funds to P2P. It was this: when it came to deciding about cash and cash equivalent investments, we decided to go for NS&I because it's super safe, even though we would get a bit less than at some banks. Then I thought that if we put a smallish sum in P2P, we would have a kind of barbell portfolio for our cash equivalent (most at NS&I and some in P2P) giving a higher overall yield whilst the bulk at NS&I was safe.
Trouble with this is that P2P is not really a cash equivalent because it's not liquid. Also it could perhaps be more risky than I thought. Anyway apparently there are worse choices out there than Zopa. I am probably going to ease out of it gradually.
You say you want to go into stocks; now valuations are lower but till recently they were pretty high so expected returns were not very promising.
US p2p lending structure very different from UK. See the discussion when Lending Circle IPO'd.

They won't know what NS&I is. This is an American forum.
minimalist is from the Uk I think
Yes, he will understand. But we are not carrying this conversation out in the "non US investors" part of the Forum. So unless you are having a private chat with him, in a public forum, and that is your intention to do so by speaking in code, you are not going to get any insightful comment from anyone else.

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Re: Peer to peer lending in this day and age

Post by Valuethinker » Mon May 25, 2020 12:21 pm

willthrill81 wrote:
Mon May 25, 2020 8:35 am
YRT70 wrote:
Mon May 25, 2020 3:25 am
willthrill81 wrote:
Sun May 24, 2020 3:12 pm
FIREchief wrote:
Sun May 24, 2020 3:06 pm
nisiprius wrote:
Sat May 23, 2020 6:14 am
He didn't recommend direct individual investments in peer-to-peer lending. As a part of a portfolio, he recommended a combination of one mutual fund and three interval funds--QSPRX, AVRPX, SRRIX, and LENDX--in equal amounts. The relative correlations of the four funds was important, and he said he expected the combination to have "equity-like" returns with half the volatility of equities.
One more occasion when I'm glad I've totally ignored all of Larry's "expert advice." 8-)
I appreciate a lot of Larry's work, but on several occasions, it seems as though he's succumbed to performance chasing.
Curious why you say performance chasing. Iirc in the last portfolio of Reducing the risk of black swans he reduced the equity holdings to SCV and switched from intermediate bonds to alternatives. Seems more like the opposite of performance chasing no?
By my way of thinking, he became enamored with the alternatives (aka 'alts') after they seemed to perform well. Perhaps I'm wrong.
There was a lot of good research done as to their attractive historical characteristics in terms of returns with uncorrelated risk.

However the past does not necessarily predict the future, as we know.

The problem with all these sorts of strategies, and small cap value may be another, is that once they are discovered and published about, they become a "crowded trade" in the jargon. And thus start to go wrong.

This is why a strict Boglehead approach is often best. Because by the time we hear about them, it's likely that the strategies no longer work well.

In a similar vein, in institutional investing Private Equity & Venture Capital have become very crowded trades. In the VC space you can see it in the Softbank debacle. But generally with the Unicorns. And the buyout market has been pushing down returns for a long time, although paradoxically the current economic fandango no doubt throws up opportunities to sort the wheat from the chaff at attractive prices.

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Re: Peer to peer lending in this day and age

Post by Freefun » Mon May 25, 2020 12:45 pm

The only P2P I do is via Kiva. I don’t care about my return - or if I even lose all the money I’ve lent.
Remember when you wanted what you currently have?

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Re: Peer to peer lending in this day and age

Post by chrisjul » Mon May 25, 2020 12:54 pm

steve321 wrote:
Sat May 23, 2020 3:06 am
I have got a little investment (less than 100k) in P2P in the Uk where I live; I hardly ever watch it but at this time I get messages from the company Zopa explaining that many borrowers will be late with repayments due to the current situation. Zopa had navigated the 2008 crisis rather well, so I am not too worried.
I know that Larry Swedroe recommended P2P investments so I am wandering whether there are many Bogleheads who have invested in these products and if so how they are reacting? Selling now one would incur losses since interests have gone up; besides these loans are probably not very liquid.
Any thoughts/experiences you want to share?

I have been happily invested in Lending Club for over 5 years, until Florida was not allowed to trade. I am drawing down my account due to this. I have not noticed my returns change recently.

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Re: Peer to peer lending in this day and age

Post by nisiprius » Mon May 25, 2020 2:58 pm

steve321 wrote:
Sun May 24, 2020 1:34 pm
nisiprius wrote:
Sat May 23, 2020 6:14 am
steve321 wrote:
Sat May 23, 2020 3:06 am
...I know that Larry Swedroe recommended P2P investments...
He didn't recommend direct individual investments in peer-to-peer lending. As a part of a portfolio, he recommended a combination of one mutual fund and three interval funds--QSPRX, AVRPX, SRRIX, and LENDX--in equal amounts. The relative correlations of the four funds was important, and he said he expected the combination to have "equity-like" returns with half the volatility of equities.
I looked up all 4 funds and they all went down this year (a couple of them had huge DD), so I don't know how you calculate 'the relative correlation of the four funds' but the correlation in 2020 has been pretty high....
I didn't say I agreed with Larry Swedroe. I have to be careful about "sour grapes" because, not being the client of any advisory firm, I don't have access to any of those funds. But my personal feeling is that a) I wouldn't touch 'em with a ten-foot pole, and b) based on what the prospectuses say, none of them would be suitable for me.

As far I know and can remember:

1) He's never recommended peer-to-peer lending except in a specific context;

2) The specific context involves the use of a Stone Ridge interval fund, LENDX, never individual peer-to-peer lending contracts;

3) He didn't recommend LENDX in isolation, but as part of a package of four funds--QSPIX, AVRPX, SRRIX, LENDX;

4) He did not recommend these as a major part of a portfolio, but an addition to a portfolio of DFA funds, which invest in traditional securities, are "passive" but not actually index funds, and which use factor investing techniques.

For a statement of his position--which is not mine and has been controversial in this forum--he gives one quick summary at the end of an article on The Four Horseman of Your Portfolio.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: Peer to peer lending in this day and age

Post by willthrill81 » Mon May 25, 2020 3:06 pm

Freefun wrote:
Mon May 25, 2020 12:45 pm
The only P2P I do is via Kiva. I don’t care about my return - or if I even lose all the money I’ve lent.
In that case, I have a bridge that you might be interested in buying! :twisted:
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Peer to peer lending in this day and age

Post by willthrill81 » Mon May 25, 2020 3:14 pm

Valuethinker wrote:
Mon May 25, 2020 12:21 pm
willthrill81 wrote:
Mon May 25, 2020 8:35 am
YRT70 wrote:
Mon May 25, 2020 3:25 am
willthrill81 wrote:
Sun May 24, 2020 3:12 pm
FIREchief wrote:
Sun May 24, 2020 3:06 pm


One more occasion when I'm glad I've totally ignored all of Larry's "expert advice." 8-)
I appreciate a lot of Larry's work, but on several occasions, it seems as though he's succumbed to performance chasing.
Curious why you say performance chasing. Iirc in the last portfolio of Reducing the risk of black swans he reduced the equity holdings to SCV and switched from intermediate bonds to alternatives. Seems more like the opposite of performance chasing no?
By my way of thinking, he became enamored with the alternatives (aka 'alts') after they seemed to perform well. Perhaps I'm wrong.
There was a lot of good research done as to their attractive historical characteristics in terms of returns with uncorrelated risk.

However the past does not necessarily predict the future, as we know.

The problem with all these sorts of strategies, and small cap value may be another, is that once they are discovered and published about, they become a "crowded trade" in the jargon. And thus start to go wrong.

This is why a strict Boglehead approach is often best. Because by the time we hear about them, it's likely that the strategies no longer work well.

In a similar vein, in institutional investing Private Equity & Venture Capital have become very crowded trades. In the VC space you can see it in the Softbank debacle. But generally with the Unicorns. And the buyout market has been pushing down returns for a long time, although paradoxically the current economic fandango no doubt throws up opportunities to sort the wheat from the chaff at attractive prices.
The P2P lending space has certainly become very crowded, and this is now widely acknowledged by many who 'got in the ground floor'. Once institutional investors entered the space, returns went down significantly for most. Plus, there are only so many 'well qualified' borrowers out there, so Lending Club at least lowered their standards for borrowers in order to meet increased demand on the lending side, and that naturally resulted in lower returns as well.

When it comes to P2P lending, many investors felt the allure of 'entering the consumer lending space that has been dominated by credit cards, where lenders have had great returns for years'. But it's far from apples-to-apples since (1) credit card interest rates (aside from intro rates) are virtually always significantly higher than are P2P notes for borrowers of a given credit rating, (2) lenders of credit cards pay lower fees to intermediaries, and (3) the big banks providing the funding for credit cards can very effectively leverage their returns with relatively cheap borrowed money that retail investors don't have access to. Even with defaults, if I could borrow at 1% and consistently get 6% net returns, you can bet that I'd do that all day long.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Peer to peer lending in this day and age

Post by steve321 » Mon May 25, 2020 9:15 pm

Valuethinker wrote:
Mon May 25, 2020 12:17 pm
steve321 wrote:
Mon May 25, 2020 6:44 am
Valuethinker wrote:
Mon May 25, 2020 6:15 am
steve321 wrote:
Sat May 23, 2020 9:41 am
minimalistmarc wrote:
Sat May 23, 2020 9:19 am

If you have 5 million in assets then no need to sweat it but your P2P holding isn’t going to provide much diversification or move the needle much at all
Yeah actually now I remember the main reason we allocated some funds to P2P. It was this: when it came to deciding about cash and cash equivalent investments, we decided to go for NS&I because it's super safe, even though we would get a bit less than at some banks. Then I thought that if we put a smallish sum in P2P, we would have a kind of barbell portfolio for our cash equivalent (most at NS&I and some in P2P) giving a higher overall yield whilst the bulk at NS&I was safe.
Trouble with this is that P2P is not really a cash equivalent because it's not liquid. Also it could perhaps be more risky than I thought. Anyway apparently there are worse choices out there than Zopa. I am probably going to ease out of it gradually.
You say you want to go into stocks; now valuations are lower but till recently they were pretty high so expected returns were not very promising.
US p2p lending structure very different from UK. See the discussion when Lending Circle IPO'd.

They won't know what NS&I is. This is an American forum.
minimalist is from the Uk I think
Yes, he will understand. But we are not carrying this conversation out in the "non US investors" part of the Forum. So unless you are having a private chat with him, in a public forum, and that is your intention to do so by speaking in code, you are not going to get any insightful comment from anyone else.
I am making myself understood by the general public in my OPs and my general replies I believe. I mentioned a British Institution, NS&I, only in one particular reply and specifically to minimalist, in answer to a question of his. Insofar as the purpose of that sentence was to answer him and not to seek insightful comments from US citizens, I don't see a particular problem. Perhaps it could be argued that my comment did not foster discussion on the subject of OP (P2P), but then neither has this exchange of ours, which has taken a lot more space. So if you want to continue the discussion on this matter may I suggest you do by writing to me a private message, so that this thread can remain devoted to examining the merits on P2P. Cheers.
Success does not bring happiness. In fact, happiness IS success. | 'There are only two tragedies in life: one is not getting what one wants, and the other is getting it.' Oscar Wilde

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Re: Peer to peer lending in this day and age

Post by Valuethinker » Tue May 26, 2020 1:08 am

steve321 wrote:
Mon May 25, 2020 9:15 pm
Valuethinker wrote:
Mon May 25, 2020 12:17 pm
steve321 wrote:
Mon May 25, 2020 6:44 am
Valuethinker wrote:
Mon May 25, 2020 6:15 am
steve321 wrote:
Sat May 23, 2020 9:41 am


Yeah actually now I remember the main reason we allocated some funds to P2P. It was this: when it came to deciding about cash and cash equivalent investments, we decided to go for NS&I because it's super safe, even though we would get a bit less than at some banks. Then I thought that if we put a smallish sum in P2P, we would have a kind of barbell portfolio for our cash equivalent (most at NS&I and some in P2P) giving a higher overall yield whilst the bulk at NS&I was safe.
Trouble with this is that P2P is not really a cash equivalent because it's not liquid. Also it could perhaps be more risky than I thought. Anyway apparently there are worse choices out there than Zopa. I am probably going to ease out of it gradually.
You say you want to go into stocks; now valuations are lower but till recently they were pretty high so expected returns were not very promising.
US p2p lending structure very different from UK. See the discussion when Lending Circle IPO'd.

They won't know what NS&I is. This is an American forum.
minimalist is from the Uk I think
Yes, he will understand. But we are not carrying this conversation out in the "non US investors" part of the Forum. So unless you are having a private chat with him, in a public forum, and that is your intention to do so by speaking in code, you are not going to get any insightful comment from anyone else.
I am making myself understood by the general public in my OPs and my general replies I believe. I mentioned a British Institution, NS&I, only in one particular reply and specifically to minimalist, in answer to a question of his. Insofar as the purpose of that sentence was to answer him and not to seek insightful comments from US citizens, I don't see a particular problem. Perhaps it could be argued that my comment did not foster discussion on the subject of OP (P2P), but then neither has this exchange of ours, which has taken a lot more space. So if you want to continue the discussion on this matter may I suggest you do by writing to me a private message, so that this thread can remain devoted to examining the merits on P2P. Cheers.
I can tell from your tone you are offended. My apologies. It was intended as a small nudge ... being trans Atlantic I am very aware of the "2 countries (3 actually) separated by a common language".

On the original point, I gather that P2P lending is structured quite differently in US vehicles than in the UK ones.

See the discussion of the Lending Club prospectus. In the States you don't actually in a legal sense lend the other person money. Your legal recourse is to LC not the borrower. That raises the systemic risk considerably.

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Re: Peer to peer lending in this day and age

Post by hithere » Tue May 26, 2020 3:05 am

I invest in a few European P2P platforms, and I see P2P lending as an agressive alternative to bonds, i.e. my portfolio consists of stocks and P2P loans. The correlation to the stock market seems to be on the low side, although P2P is a fairly new investment vehicle and there's not enough data to accurately calculate the correlation. But so far it's been doing a great job of replacing bonds by reducing the overall volatility of my portfolio, while still bringing in nice returns.

In the current situation, P2P has been performing fairly well, although one could argue that the worst is yet to come, especially if the economy falls into a recession. I don't think I'll be selling my loans anytime soon though. Even in a recession scenario, I don't expect much volatility from P2P. In my opinion, it's a valuable asset class and will eventually make its way into the "conventional" portfolios.

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Re: Peer to peer lending in this day and age

Post by steve321 » Tue May 26, 2020 4:17 am

Valuethinker wrote:
Tue May 26, 2020 1:08 am
steve321 wrote:
Mon May 25, 2020 9:15 pm
Valuethinker wrote:
Mon May 25, 2020 12:17 pm
steve321 wrote:
Mon May 25, 2020 6:44 am
Valuethinker wrote:
Mon May 25, 2020 6:15 am


US p2p lending structure very different from UK. See the discussion when Lending Circle IPO'd.

They won't know what NS&I is. This is an American forum.
minimalist is from the Uk I think
Yes, he will understand. But we are not carrying this conversation out in the "non US investors" part of the Forum. So unless you are having a private chat with him, in a public forum, and that is your intention to do so by speaking in code, you are not going to get any insightful comment from anyone else.
I am making myself understood by the general public in my OPs and my general replies I believe. I mentioned a British Institution, NS&I, only in one particular reply and specifically to minimalist, in answer to a question of his. Insofar as the purpose of that sentence was to answer him and not to seek insightful comments from US citizens, I don't see a particular problem. Perhaps it could be argued that my comment did not foster discussion on the subject of OP (P2P), but then neither has this exchange of ours, which has taken a lot more space. So if you want to continue the discussion on this matter may I suggest you do by writing to me a private message, so that this thread can remain devoted to examining the merits on P2P. Cheers.
I can tell from your tone you are offended. My apologies. It was intended as a small nudge ... being trans Atlantic I am very aware of the "2 countries (3 actually) separated by a common language".

On the original point, I gather that P2P lending is structured quite differently in US vehicles than in the UK ones.

See the discussion of the Lending Club prospectus. In the States you don't actually in a legal sense lend the other person money. Your legal recourse is to LC not the borrower. That raises the systemic risk considerably.
no offense taken, my apologies in case my tone was not appropriate; I wrote in the middle of a sleepless night as I am quite anxious at this moment in time for investments and particularly for health related reasons.
Success does not bring happiness. In fact, happiness IS success. | 'There are only two tragedies in life: one is not getting what one wants, and the other is getting it.' Oscar Wilde

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Re: Peer to peer lending in this day and age

Post by Valuethinker » Tue May 26, 2020 4:30 am

steve321 wrote:
Tue May 26, 2020 4:17 am
Valuethinker wrote:
Tue May 26, 2020 1:08 am
]

I can tell from your tone you are offended. My apologies. It was intended as a small nudge ... being trans Atlantic I am very aware of the "2 countries (3 actually) separated by a common language".

On the original point, I gather that P2P lending is structured quite differently in US vehicles than in the UK ones.

See the discussion of the Lending Club prospectus. In the States you don't actually in a legal sense lend the other person money. Your legal recourse is to LC not the borrower. That raises the systemic risk considerably.
no offense taken, my apologies in case my tone was not appropriate; I wrote in the middle of a sleepless night as I am quite anxious at this moment in time for investments and particularly for health related reasons.
Then we are good ;-).

Uncertainty is unfortunately a feature of investing. Only nominal gilts will give you a known, fixed return or index-linked gilts a real return (US Treasuries or TIPS for a US analogy). There is no way out of the box that 1. risk-free returns are very low right now, negative in real terms 2. risk assets like equities have a very high degree of uncertainty/ volatility right now.

My best wishes for the health of you and your loved ones - this is a very difficult time.

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Re: Peer to peer lending in this day and age

Post by Noobvestor » Tue May 26, 2020 6:22 am

If the P2P system you're using has an option to sell on a secondary market, I would sell. If it doesn't, ride it out. 2008/09 were one thing, but this ... well, unemployment and other metrics are quite different and a lot more scary, at least to me. Get out of it when/if you can. /2 cents
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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