I intend to put £5000 in RateSetter, with £100 referral and 3% return on the rolling market, selling the loans in 6 months, with a month to spare to sell the loans.
I intend to put £3000 in Funding Circle, on their conservative 4.3-4.7% rate, and sell in loans in 6 months, with a month to spare to sell.
I intent to put £2000 in Stocks and Shares, no idea what, we’ll see.
I can afford to lose £2000.
Id suggest a fund, trust or similar that will expose you to a larger portion of the market that the fund is targeting, rather than single stocks. Also consider that you may very likely will want to leave your money there longer than 6 months. There’s no guarantee of continued growth in that time period.
Lindsell Train global equity fund for example, which has been performing very well over its existence looks great but at a 6 month period it might give you nothing in return, or a loss.
As example here, if you bought in June/July, you’d be breaking even/making a very small gain if you sold in 6 months. If you bought in July/August it would be February/March before you broke even again
So your £2k i would suggest you consider being able to keep it in longer, or keeping it aside from your 6 months requirement all together and put it towards a long term investment.
yes, i take your point about 6 months stock invertments. i should know better.
i’ll find something else. REIT look interesting
Keep an eye on Dozens 5% trust bonds as well, already mentioned earlier.
No idea when these are being released, but they might be released in the coming weeks.
The process of investing in them is quite faffy but a £2k investment shouldn’t be a problem.
You could go for funds less exposed to equity and with a larger exposed to bonds, worth considering, but the short term will still leave you with greater exposure.
REITs will give you greater dividend yield than some funds for example and pay quarterly usually, but your investment itself may still fluctuate within that time period. risk vs reward as usual.
Dozens is weird, i looked at them before i believe they guarantee the bond amount up to 7 million because that’s all the money they have from vc funding to cover the bond amount plus interest. The bonds are also unregulated and not covered by the FSCS, but that may not bother you.
You could lose some of the £8000 in P2P. It’s fine if you want to risk it, but you should understand the risk you’re taking.
It only takes a few defaulted loans for you to have difficulty exiting and end up with a loss.
Have a good read of https://www.reddit.com/r/UKPersonalFinance/comments/bj4ciy/funding_circle_warning/ (including all the comments) to see what can happen in reality with P2P loans.
A REIT won’t have this same kind of risk. Instead you face random ups and downs in value. But it’s a time risk. Unlike a defaulted loan, where the money is probably just lost forever, if you’re looking at a market crash, you have the choice of just waiting for it to come back up again.
What’s appropriate for you depends on how hard a deadline your 6 months really is.
If you can’t afford to have less than £10k in 6 months time, stay away from investments and P2P loans. Just stick it in an FSCS protected cash savings account like Marcus.
A tiny bit more than £10k is better the a potentially large amount less than £10k.
Good advice.
To the OP - Rule #1 of investing is to never invest money you can’t afford to lose. So if you really can’t afford to lose any of your money and you know for a fact you must have the money in 6 months then puny interest no risk savings account is really your only option.
I have 6 months of my salary in a rainy day fund - which is currently Monzo Instant Access Investec Pot. Everything above that is going to the long-term investment options:
)So I don’t really care if I lose money short-term as I have a cushion of protection.
And I would advise you to behave in a similar manner - if you can’t afford to lose any money out of your £10,000, just stick it into one of the low % risk free instant access accounts. Anything above that will just be too risky.
It can take a while - potentially a long while - to get your money back out of P2P, unless you accept significant fees.
Funding Circle is quite good at it, you don’t pay any exit fees. It took 2 days to get 9,000 out of them last time by just selling my loan parts. The only loans you won’t be able to sell are those that are defaulted/being disputed etc. But since you lend like £10 per business it’s not that bad.
Funding Circle just charges you 1% a year, but there’s no other fees.
When things go well, I’m sure it’s great. But I don’t think you can rely on that when it’s important. The reddit thread I linked above has multiple people waiting around 40 days. Possibly longer.
That is correct, I was referring mostly to their fee structure, but, yes, if you have a bunch of loans with issues you can’t do anything with those, and they can be stuck in there for years.
There’s not a lot of good “no risk” opportunities for 10K and 6 Months period.
This seems incredibly risky to me, I’d be far more comfortable putting that money into the stock market via an index fund for 6 months if you want to accept more risk for a bit more gain than simple cash interest accounts. I do feel P2P is far more dangerous than stock investment, I’m not sure why you consider it safer?
I would not invest in Funding Circle or RateSetter which are very similar pooled risk products - which are highly dependent on their correct assessment of risk, when their incentives are completely misaligned with that - the more lending they can do, the more money they can make, so they have every incentive to overlook risk - it seems very unlikely to me you’ll get that rate, and defaults could significantly dent your earnings (or result in negative earnings). They are lending to businesses, not individuals, it’s risky, particularly if there is a downturn over the 6 month period, and crucially you may have money locked away that you can’t get to (due to defaults etc).
Exactly. This is the most important point which you should consider. How much does risk cost to you? How much would it cost you not to have 10k in exactly 6 months?
You haven’t specified what this is for, but if it is for example for a house downpayment which you have already committed to jointly with others, the cost of risk for you is very high. That’s not worth the few hundred extra you might make in 6 months.
If it’s for buying a new car say (doesn’t matter if you have to delay 6 months), I’d invest in an index tracker or bonds and accept more risk, against the possibility of not being able to proceed immediately.
Don’t lose money.
Just a quick update on withdrawal times.
I decided to withdraw most of my money in P2P, so am shutting down my Zopa, Lending Works and Funding Circle accounts.
My feeling is that another downturn is about to start and I could do without the lending exposure. Brexit makes my job a bit uncertain too, so probably better to have a bit more in cash about…
I’ve been going slowly to avoid any fees. I simply turned off reinvesting and have been withdrawing funds from the holding accounts. So far, I’ve managed to withdraw about 10% in a month - same on all three platforms. It seems extremely slow.
To try and move things along, I’ve had my loan parts on Funding Circle up for sale - but for more than a week now there’s been no real movement…
None of this is a big deal for me, as it was a scenario I have planned for. I don’t need the cash any time soon - it’s just that my risk aversion has increased for the above reasons.
Just to highlight that P2P is a very poor “short-term” investment option right now, as you’ll be hammered by fees if you really need to get your money quickly or may simply have to wait for buyers.
At the current rate of withdrawal, it will take me well into next year to empty these accounts.
Of course, it’s probable that things will speed up/slow down - but totally unpredictable.
Latest on Funding Circle
About time, Funding Circle are awful. Their entire spending seems to be sending the same letter 2-3 times per week to every UK company director. They make up about half of my mail.
