Alternatives to Term Deposit?

[HelloU]

all risk is relative and subjective. of course there is risk in P2P. There is risk in EVERY investment.

There is pretty much nowhere that peeps can invest today and be a risk-free secured creditor ........... peeps just hide behind "too big to fail" cos they are risk adverse (and this often means also return adverse)
note: on the asx you are an unsecured creditor.

.... and for those about to tell me that bank deposits are guaranteed then answer me this - if the aussie govt had to bail out bank deposits cos something has gone very wrong with aussie banks, where do peeps think that the aussie govt is going to get that money if the entire economy has tanked badley? and if there is a bailout, could you remove the money from the bank account anyway (or is it just frozen inside the account but somehow guaranteed but untouchable? or maybe u could withdraw a maximum of $5 a week for the rest of your life) .....and if you could withdraw the guaranteed money, then where would you put that money if all the aussie banks had just collapsed?

another question, if you have invested in a asx listed coy that reports financials twice a year, then how much much do you actually know about the health of that company between those reports? (i do not include a guidance downgrade statement at 5 months into a 6 month period as being a well informed investor)

 

[Value Collector]

all risk is relative and subjective. of course there is risk in P2P. There is risk in EVERY investment.

There is pretty much nowhere that peeps can invest today and be a risk-free secured creditor ........... peeps just hide behind "too big to fail" cos they are risk adverse (and this often means also return adverse)
note: on the asx you are an unsecured creditor.

.... and for those about to tell me that bank deposits are guaranteed then answer me this - if the aussie govt had to bail out bank deposits cos something has gone very wrong with aussie banks, where do peeps think that the aussie govt is going to get that money if the entire economy has tanked badley? and if there is a bailout, could you remove the money from the bank account anyway (or is it just frozen inside the account but somehow guaranteed but untouchable? or maybe u could withdraw a maximum of $5 a week for the rest of your life) .....and if you could withdraw the guaranteed money, then where would you put that money if all the aussie banks had just collapsed?

another question, if you have invested in a asx listed coy that reports financials twice a year, then how much much do you actually know about the health of that company between those reports? (i do not include a guidance downgrade statement at 5 months into a 6 month period as being a well informed investor)

Yes, and I think the price you pay in the form of a low rate by accepting a the security of a government guaranteed deposit, it to high a price.

Where the small amount of added risk you take with rate setter style p2p is small but the benefits are large.

With rate setter, you have the protection of the provision fund, and can diversify across hundreds of loans.

 

[basilio]

I'm really taken with the P toP lending model. Seems to "make sense" and offer a better deal for investors and perhaps borrowers.
But I still have nagging, unresolved questions about how the finances work for the P-P business itself.

1) Do the businesses actually create credit or only loan actual funds that are deposited? The current banking system (as I understand it) creates new credit. So a deposit base of 20M can be used to underwrite $100-150m worth of loans. The banks get return from all the loaned funds. I don't believe the P-P systems have this opportunity which clearly restricts their profitability.

2) How does the P-P make a clear return ? I appreciate there is a margin spread but it looks like only a few percent and there will be establishment fees and possibly ongoing fees. But to my eyes those sums seem unlikely to generate sufficient return to pay the staff, managers, credit analysts let alone the guys who set it up to make some serious money. I know from research that Rate Setter is yet to make a profit in UK and therefore it's Oz offshoot.

I think a point of comparison would be Credit Unions. These are tightly run financial institutions with no payouts to shareholders and, I guess, modest pay packets for management. If they can't offer the returns P-P offer what is happening ?

I want to get involved but I ask myself "Is this too good to be true ?" and "How do they make their money ?"

 

[basilio]

Another alternative to Term Deposits ?

Solar power: how investing can help to change lives
Energise Africa offers a 5% return and allows you to help support low-income families
Fight the climate crisis and earn a return of 5% at the same time, plus enjoy a guarantee on your investment.

That’s the offer from an ethical investment scheme that allows people to put money into companies providing African families with access to clean, affordable solar energy.

It’s notable that this scheme is supported by UK aid money from the Department for International Development (DfID), and offers a guarantee, although this only covers the first £100 of capital invested and applies to first-time investors.

Energise Africa enables ordinary people to invest in bonds issued by solar companies, allowing them to provide “life-changing” solar home systems to low-income families in countries such as Kenya, Rwanda, the Democratic Republic of the Congo and Tanzania.
https://www.theguardian.com/money/2...a-solar-scheme-with-the-power-to-change-lives

 

[Zaxon]

If you wanted exposure to lending, there's another three routes that come to mind in addition to lending via P2P. You can buy bank shares, where the dividends are generated from lending. You could buy shares in the P2P lender itself, and earn the spread. And finally, you could buy bonds.

 

[HelloU]

I'm really taken with the P toP lending model. Seems to "make sense" and offer a better deal for investors and perhaps borrowers.
But I still have nagging, unresolved questions about how the finances work for the P-P business itself.

1) Do the businesses actually create credit or only loan actual funds that are deposited? The current banking system (as I understand it) creates new credit. So a deposit base of 20M can be used to underwrite $100-150m worth of loans. The banks get return from all the loaned funds. I don't believe the P-P systems have this opportunity which clearly restricts their profitability.

2) How does the P-P make a clear return ? I appreciate there is a margin spread but it looks like only a few percent and there will be establishment fees and possibly ongoing fees. But to my eyes those sums seem unlikely to generate sufficient return to pay the staff, managers, credit analysts let alone the guys who set it up to make some serious money. I know from research that Rate Setter is yet to make a profit in UK and therefore it's Oz offshoot.

I think a point of comparison would be Credit Unions. These are tightly run financial institutions with no payouts to shareholders and, I guess, modest pay packets for management. If they can't offer the returns P-P offer what is happening ?

I want to get involved but I ask myself "Is this too good to be true ?" and "How do they make their money ?"

may not help much but:
Australian Financial Services Licence 449176 and Australian Credit Licence 449176,
google will spit out some of the contractual tie-ups they have.

 

[Wyatt]

What are the views on LITs such as MXT & NBI, which offer nominal 5-6%/yr returns paid monthly. In my mind easy to liquidate when cash is required, but more expensive brokerage for larger positions puts a dent in returns.

There is probably a few more options in this space.

Nav for MXT seems to be very stable and I imagine will remain that way unless some loans go bad, whereas NBI's loans/bonds seem to be be listed or fluctuate in price depending on which way the wind is blowing. Been in both a few times with the intention to park some $ for a decent period, but have sold out within weeks/months as capital gains + Div seemed too good to ignore.

With dropping interest rates, it would seem to be very low risk if bought near Nav. I guess if interest rates were going up the reverse may apply

 

[ducati916]

1. Yes, and I think the price you pay in the form of a low rate by accepting a the security of a government guaranteed deposit, it to high a price.

2. Where the small amount of added risk you take with rate setter style p2p is small but the benefits are large.

3. With rate setter, you have the protection of the provision fund, and can diversify across hundreds of loans.

1. When investing in 'debt', then the return on your capital is far less important than the return of your capital.

2. The difference in risk is not small, it is significant. The increase in return I doubt comes anywhere close to compensating the investor.

3. That 'provision fund' is dependent upon future payments. That [in a downturn] is no protection at all.

jog on
duc

 

[Bill M]

I have a small part of my portfolio (approx 2%) in Ratesetter and I am happy to take on the risk for the 8 % return. I draw all my interest payments out every Month and use it as part of my retirement income. I am happy with the product and the risk/return that I receive.

 

[Garpal Gumnut]

NABHA

I've bought them along the way for below $70 and below $80.

Better than a term deposit and for some reason some silly buggers keep on buying them although there are better income securities about.

They are now $91.43

gg

 

[just_jay]

What does the the 3 or 5 year income plan mean?

e.g. Does it mean you are committed to that length of time for the investment and you cannot withdraw the original investment until such time expires?

 

[Garpal Gumnut]

NABHA

I've bought them along the way for below $70 and below $80.

Better than a term deposit and for some reason some silly buggers keep on buying them although there are better income securities about.

They are now $91.43

gg

NABHA closed at $91.799

gg

 

[sptrawler]

Yes, and I think the price you pay in the form of a low rate by accepting a the security of a government guaranteed deposit, it to high a price.

Where the small amount of added risk you take with rate setter style p2p is small but the benefits are large.

With rate setter, you have the protection of the provision fund, and can diversify across hundreds of loans.

Just as an aside, are you in anyway connected to the management of rate setter? It just appears you have an in depth knowledge of their model and structure. Not that it matters one way or the other, an investment is a personal risk/ return excercise and everyone should do their own research.

 

[HelloU]

NABHA closed at $91.799

gg

there was a big price rise in February ...do u recall what happened ?

(it suddenly outperforms products such as cba perls and i am tying to understand why that happened for my learning)

(19452 but whatevs)

 

[Frankieplus]

I was wondering about your opinions on where you'd put your spare cash? I am a conservative type saver and FD had been the best option for me for the past years

My advisor recently recommended a fund for me. The Vanguard Conservative Index Fund. (wholesale). I'm in the same situation as yourself as I'm looking for better than the bank but am also conservative for this particular packet of cash.

-Frank

 

[Garpal Gumnut]

there was a big price rise in February ...do u recall what happened ?

(it suddenly outperforms products such as cba perls and i am tying to understand why that happened for my learning)

(19452 but whatevs)

I believe there was a rumour they were to be redeemed for $100.

I bought them at $83-84.

btw When NAB goes bust NABHA are ahead of all others in the wind-up queue.

gg

 

[Garpal Gumnut]

My advisor recently recommended a fund for me. The Vanguard Conservative Index Fund. (wholesale). I'm in the same situation as yourself as I'm looking for better than the bank but am also conservative for this particular packet of cash.

-Frank

First thing is @Frankieplus is to avoid advisors. If someone sells you bananas are they interested in your health or selling bananas.

Second is read the Storm Financial thread on this forum.

Stay happy and well.

gg

 

[Value Collector]

Just as an aside, are you in anyway connected to the management of rate setter? It just appears you have an in depth knowledge of their model and structure. Not that it matters one way or the other, an investment is a personal risk/ return excercise and everyone should do their own research.

I am not connected to Rate setter in anyway except for being a lender on their platform.

Everything I know about Rate Setter is either explained on their website, or was explained to me on investor webinars or the Investor Drinks nights last Xmas.

But I have over $600k invested on Rate Setter, so it’s been in my interest to sus it out.

 

[Value Collector]

What does the the 3 or 5 year income plan mean?

e.g. Does it mean you are committed to that length of time for the investment and you cannot withdraw the original investment until such time expires?

Are you talking about Rate Setter?

If so,

You can choose either 3 or 5 year loans.

Principle and interest payments are paid out to you each month for the duration of the loan, so each month he loan is reducing in size.

You can withdraw your funds early , they will sell your loan to another investor, and you pay a 1.5% penalty, plus what ever difference there is in market rate of interest.

Also sometimes the borrower pays the loan off early, or makes extra payments so they money is returned faster.

 

[Frankieplus]

Everything I know about Rate Setter is either explained on their website, or was explained to me on investor webinars or the Investor Drinks nights last Xmas.

I have some money to invest. Are you happy with Rate Setter? Is it possible to lose your money?


-Frank