Australian (ASX) Stock Market Forum

Alternatives to Term Deposit?

Jump to new
Not at all
Just can’t see many smsf types on here taking that sort of risk
They would prefer to take the divides and credits and watch the share prices go south
 
Value Collector said:
Not sure what you mean, did I offend you some how? Most of my investments are dividend paying shares.

P2P lending doesn’t haven’t to be a replacement for investing in shares or earning dividends, it’s just another tool to have in your investor tool belt to use how you see fit.
.
Click to expand...
From what I have read and your input, it seems like a very good investment, for those with a bit of risk tolerance.
If Labor had attained Government and stopped the franking credits, I would certainly be putting a percentage in rate setters, luckily Labor lost their support base.
So all is well that ends well, but that can change anytime, so being aware of P2P lending as you say is another tool.
Thanks for the heads up.:xyxthumbs
 
Value Collector said:
1. I noticed the numbers you are looking at are in British pounds, I think you have been looking at the rate setter UK website, which is a different company.

2. I didn’t say RS is Zero risk, I said i believe it is low risk compared to the additional return it generates.

3. You would have to lose 6% of your capital every year, just to equal the low rate you get in a Term Deposit.

4. However, before you lose anything the provision fund has to have lost all its capital, the loan book in general could double its losses and it would be business as usual, it could then double it again for 12 months and it would still be business as usual, it would have to double it again for you to just match he regular Term deposit rate, from there you would start underperforming, but that’s a massive loss.

————————-

5. Think about it, the banks make billions of dollars making personal loans, they aren’t regularly going to the government and tapping he government guarantee.

So they are taking your term deposit at 2%, and lending it at 14% and making a huge profit.

RS just allows smaller invests to get a piece of that action by accepting a bit of that risk, and so far over the passed 4 years, their loss rate has been lower than the big banks.

————-

6. Of course loans rely on a person’s ability to pay, hence my whole paragraph on the solar panel loans, where I discussed solar panels being safer because they increase people’s disposable income by eliminating or reducing a significant bill
Click to expand...

1. Yes I was. That is not the point. The point is that it is an affiliated company and the policies are the same/similar. The point is, the coverage is very low.

2. The risk is too high for the low return. With fixed income, you do not measure the risk by the return. You measure it by the ability to pay. That is the error you are making.

3. Again, you do not measure your risk against a return, in this case a bank deposit. You measure it against an ability to pay.

4. The ability to pay must be measured against an adverse environment. Since 2009, there have been no financial shocks worthy of the name. There will be at some point. That is when this investment will be tested. It will either pass or fail.

5. But they are. That's exactly the point.

6. As has already been pointed out, savings made is not a measure of an ability to pay.


Here is the credit team:

Screen Shot 2019-07-10 at 7.20.43 AM.png

Really?

But they rely on this

Screen Shot 2019-07-10 at 7.22.08 AM.png

Now I have nothing against technology per se, but it needs to be employed correctly.

With a credit team of 11 some of whom are still wet behind the ears, you are seriously trying to tell me, in one of the most complicated areas of finance, that your risk is well managed, I am surprised.

Remember, in fixed income a lien is no protection at all. Ratesetter seem to make a big deal out of the dollar value of loans that have liens. This is a false form of risk management in fixed income. Even a mortgage, which legally is quite different, relies to a large extent on significant deposits to cushion the losses in forced sales.

I would agree with people who essentially say that they would treat it as a 'position' and nothing more. The current environment is a mess for those looking to earn/live off of investments. Who got us here, oh yes, the banks.

In the low interest environment, risk is higher across the board. It does make people reach for yield. That is generally an error when the proverbial hits the fan.

jog on
duc
 
Humid said:
Not at all
Just can’t see many smsf types on here taking that sort of risk
They would prefer to take the divides and credits and watch the share prices go south
Click to expand...

I don’t think the Rate Setter platform is higher risk than shares, I think it’s a different sort of risk, and can be used as diversification.
 
Value Collector said:
Are you talking about Rate Setter?

If so,

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.
Click to expand...

Assuming a 5 year loan rate setter at 8%, the 8% return ($$ value) you get diminishes each month as the principle gets smaller with each re-payment from the borrower. I assume that if you wish to reinvest the principle and interest that is repaid each month, it is a new 5 year term?
 
just_jay said:
Assuming a 5 year loan rate setter at 8%, the 8% return ($$ value) you get diminishes each month as the principle gets smaller with each re-payment from the borrower. I assume that if you wish to reinvest the principle and interest that is repaid each month, it is a new 5 year term?
Click to expand...

Hi Jay Jay,

Yes as the loan gets paid off he interest payments are smaller (even though the monthly payment is about the same).

You have several reinvestment options. You can choose to reinvest into new 5 year loans, 3 year loans or monthly loans, or one of the clean energy loans.

You can also choose to reinvest both principle and interest or just the capital.
 
ducati916 said:
1. Yes I was. That is not the point. The point is that it is an affiliated company and the policies are the same/similar. The point is, the coverage is very low.

2. The risk is too high for the low return. With fixed income, you do not measure the risk by the return. You measure it by the ability to pay. That is the error you are making.

3. Again, you do not measure your risk against a return, in this case a bank deposit. You measure it against an ability to pay.

4. The ability to pay must be measured against an adverse environment. Since 2009, there have been no financial shocks worthy of the name. There will be at some point. That is when this investment will be tested. It will either pass or fail.

5. But they are. That's exactly the point.

6. As has already been pointed out, savings made is not a measure of an ability to pay.


Here is the credit team:

View attachment 96062

Really?

But they rely on this

View attachment 96063

Now I have nothing against technology per se, but it needs to be employed correctly.

With a credit team of 11 some of whom are still wet behind the ears, you are seriously trying to tell me, in one of the most complicated areas of finance, that your risk is well managed, I am surprised.

Remember, in fixed income a lien is no protection at all. Ratesetter seem to make a big deal out of the dollar value of loans that have liens. This is a false form of risk management in fixed income. Even a mortgage, which legally is quite different, relies to a large extent on significant deposits to cushion the losses in forced sales.

I would agree with people who essentially say that they would treat it as a 'position' and nothing more. The current environment is a mess for those looking to earn/live off of investments. Who got us here, oh yes, the banks.

In the low interest environment, risk is higher across the board. It does make people reach for yield. That is generally an error when the proverbial hits the fan.

jog on
duc
Click to expand...

Hahaha, so we will add this to the list of investments I make you don’t agree with.

Do you at least understand that rate setters loan book is out performing all the major banks?

Again, as with the other one that lead to me making over 10times my initial investment, I will chalk it up to you not seeing the wood for the trees, I can’t be bothered entering into another discussion with you.

Best of luck to you though.
 
I did a simple calculation in Excel and came up with the following below.

I am comparing the return of an investment at the end of 5 years using rate setters 5 year 8% loan vs a online savings account of 3% return with a bank/ADI.


Initial investment: $100,000

Assumption for rate setter 5 year loan @ 8%
Rate setter monthly re-payment from borrower: $1666
The principle and interest received each month is then reinvested in rate setters 1 month rolling loan at 3% (or you can withdraw the funds to place in an ADI if you so wish, given interest rates are the same). The calculations are based on a diminishing principle as the loan is paid out. If the loan and principle is reinvested each month in a new 5 year loan, the returns would be much higher, but it technically becomes a never ending fixed deposit. It is 1.5% max penalty if you withdraw your funds before the term expires.

Rate setter total interest earned: $30313 (30.3%)


Assumption for online saving account @ 3%
Principle and interest is reinvested monthly for 5 years.

Online savings account interest earning: $16452 (16.4%)

Hope this helps anyone who is curious about the numbers. It didnt click for me until much later that the 8% return with rate setters is not quite the same as 8% interest in a savings type account.
 
just_jay said:
I did a simple calculation in Excel and came up with the following below.

I am comparing the return of an investment at the end of 5 years using rate setters 5 year 8% loan vs a online savings account of 3% return with a bank/ADI.


Initial investment: $100,000

Assumption for rate setter 5 year loan @ 8%
Rate setter monthly re-payment from borrower: $1666
The principle and interest received each month is then reinvested in rate setters 1 month rolling loan at 3% (or you can withdraw the funds to place in an ADI if you so wish, given interest rates are the same). The calculations are based on a diminishing principle as the loan is paid out. If the loan and principle is reinvested each month in a new 5 year loan, the returns would be much higher, but it technically becomes a never ending fixed deposit. It is 1.5% max penalty if you withdraw your funds before the term expires.

Rate setter total interest earned: $30313 (30.3%)


Assumption for online saving account @ 3%
Principle and interest is reinvested monthly for 5 years.

Online savings account interest earning: $16452 (16.4%)

Hope this helps anyone who is curious about the numbers. It didnt click for me until much later that the 8% return with rate setters is not quite the same as 8% interest in a savings type account.
Click to expand...

You can optimize rate setter better than that.

————
If you wanted to limit your investment to 5years,

For the first 2 years have it reinvesting into 3 year loans, at the 3 year mark switch all loans to reinvest in monthly loans.

Then by the 5 year mark all capital will be in a monthly rolling loan.

————-

But you would be better off rolling it into 5 year loans for the full 5 years, then take the 1.5% hit on exit.

Or,

Just roll it into 5year loans, and eventually one day in he future use it as an annuity to live off over 5 years having it paying into your every spending amount each week.
 
Value Collector said:
1. Hahaha, so we will add this to the list of investments I make you don’t agree with.

2. Do you at least understand that rate setters loan book is out performing all the major banks?

3. Again, as with the other one that lead to me making over 10times my initial investment, I will chalk it up to you not seeing the wood for the trees, I can’t be bothered entering into another discussion with you.

4. Best of luck to you though.
Click to expand...

1. That is the issue. You are not 'investing' per se, you are speculating. The tragedy is, you don't even recognise that fact.

2. For the moment I will accept that as fact.

3. Appealing to the logical fallacy of the 'White Coat', of course you are because when it actually falls to real analysis, you are not that well educated theoretically, thus make significant errors in application. That would be all well and good, save for the fact you have a penchant of giving investment advice predicated on the fact of 'look I made 10X' or 'I have $600K' in it. That is not analysis, that is simply bragging.

4. Thank you.

jog on
duc
 
just_jay said:
I did a simple calculation in Excel and came up with the following below.

I am comparing the return of an investment at the end of 5 years using rate setters 5 year 8% loan vs a online savings account of 3% return with a bank/ADI.


Initial investment: $100,000

Assumption for rate setter 5 year loan @ 8%
Rate setter monthly re-payment from borrower: $1666
The principle and interest received each month is then reinvested in rate setters 1 month rolling loan at 3% (or you can withdraw the funds to place in an ADI if you so wish, given interest rates are the same). The calculations are based on a diminishing principle as the loan is paid out. If the loan and principle is reinvested each month in a new 5 year loan, the returns would be much higher, but it technically becomes a never ending fixed deposit. It is 1.5% max penalty if you withdraw your funds before the term expires.

Rate setter total interest earned: $30313 (30.3%)


Assumption for online saving account @ 3%
Principle and interest is reinvested monthly for 5 years.

Online savings account interest earning: $16452 (16.4%)

Hope this helps anyone who is curious about the numbers. It didnt click for me until much later that the 8% return with rate setters is not quite the same as 8% interest in a savings type account.
Click to expand...

Good set of figures. However are there any online insured savings accounts returning 3% at the moment ?
 
I don't find anything that @Value Collector has ever said as bragging. More so, refreshingly honest. Over the years, he's given a lot of insight into his thought processes, his philosophies on investing, and his track record. I wish more people would open up a bit, since it gives context to their posts. For instance, there are people on this forum who are very dogmatic about their view point, and for all we know, are up to their eyeballs in debt, and have never made a successful investment or trade in their life. By given context about ourselves, both good and bad, we are more authentic and useful to the ASF community.
 
ducati916 said:
1. That is the issue. You are not 'investing' per se, you are speculating. The tragedy is, you don't even recognise that fact.

2. For the moment I will accept that as fact.

3. Appealing to the logical fallacy of the 'White Coat', of course you are because when it actually falls to real analysis, you are not that well educated theoretically, thus make significant errors in application. That would be all well and good, save for the fact you have a penchant of giving investment advice predicated on the fact of 'look I made 10X' or 'I have $600K' in it. That is not analysis, that is simply bragging.

4. Thank you.

jog on
duc
Click to expand...

Ok mate, as I said good luck to you, you just seem to focus on things that are often irrelevant.

These “significant errors in application” haven’t been showing up in my results for the past 20 years of investing, so I guess I must be the luckiest guy in the world.

You call it bragging, but I have been speaking about RS for weeks, and only showed the level of my account to show I that I wasn’t talking about it for the $75 bonus.

And I only spoke about making 10x because it was relevant to our conversation where you were saying active trading would out perform inactive investing.

But, yeah as I said, I don’t get any value from talking to you, I actually have you on ignore, so I only see your post rarely if I am not logged in, or some one else quotes it referencing me, or if I am silly enough to click the “show ignored post button”

So good luck, and good bye.
 
Zaxon said:
I don't find anything that @Value Collector has ever said as bragging. More so, refreshingly honest. Over the years, he's given a lot of insight into his thought processes, his philosophies on investing, and his track record. I wish more people would open up a bit, since it gives context to their posts. For instance, there are people on this forum who are very dogmatic about their view point, and for all we know, are up to their eyeballs in debt, and have never made a successful investment or trade in their life. By given context about ourselves, both good and bad, we are more authentic and useful to the ASF community.
Click to expand...

Value Collector's 10x return on Capilano was a great result and I don't regard telling the truth as bragging in this case.

The question is whether it was a lucky one off or revealed a system that could be exploited in other cases.

As takeovers of this kind don't occur all that often one may conclude that VC had a bit of luck that the takeover actually happened but he was clever enough to spot that it was a potential takeover target.

As a matter of interest VC, what do you think would have happened to the Capilano SP if the takeover didn't occur ?
 
Last edited:
SirRumpole said:
Value Collector's 10x return on Capilano was a great result and I don't regard telling the truth as bragging in this case.

The question is whether it was a lucky one off or revealed a system that could be exploited in other cases.

As takeovers of this kind don't occur all that often one may conclude that VC had a bit of luck that the takeover actually happened but he was clever enough to spot that it was a potential takeover target.

As a matter of interest VC, what do you think would have happened to the Capilano SP if the takeoverdidn't occur ?
Click to expand...

Capilano had already traded above take over price before, it’s highest price was about $23 about 18 months before the take over ended up going through at $21.

If the take over didn’t come, Like most stocks I think the share price would have fluctuated, and the company would have grown over time, and I would still have been a happy shareholder accepting a growing dividend.

I was proven right in my thinking long before the take over happened, dividends grew from 15cents per share to close to 50cents, and profits grew by a similar ratio.
 
SirRumpole said:
Value Collector's 10x return on Capilano was a great result and I don't regard telling the truth as bragging in this case.

The question is whether it was a lucky one off or revealed a system that could be exploited in other cases.

As takeovers of this kind don't occur all that often one may conclude that VC had a bit of luck that the takeover actually happened but he was clever enough to spot that it was a potential takeover target.

As a matter of interest VC, what do you think would have happened to the Capilano SP if the takeover didn't occur ?
Click to expand...

If you actually read the thread, which I think you did at the time, you may remember that CZZ's accounting was marginal at best and to the more jaded, simply misleading and manipulated.

An independent 'calculator' also confirmed that CZZ's accounting was being 'manipulated'.

On that basis, the [hidden] risk was far higher than was commonly perceived.

Anyway, the purpose was not to rehash the CZZ thread. The purpose was again to demonstrate that VC does not understand or more generously, care about the risk that he is running in Ratesetter.

The point highlighted was the Ratesetter 'Risk Management Team', who include in their team, fresh University grads. When theoretical finance meets reality, reality always wins.

Debt investing requires as part of your due diligence that the debt service has been tested in times of adversity. If it survives, that is a plus. Of course, next time may be different, but at least you have additional information on which to inform your decision.

Anyone placing funds in Ratesetter are 100% reliant on this 'Team'. You have no idea about the loan quality as you can never have access to that information. You have no idea about correlation, etc.

So until someone can answer those questions sensibly, the risk is very likely to be far higher than commonly perceived.

VC's analysis relies upon the 'White Coat' logical fallacy.

jog on
duc
 
Value Collector said:
But, yeah as I said, I don’t get any value from talking to you, I actually have you on ignore, so I only see your post rarely if I am not logged in, or some one else quotes it referencing me, or if I am silly enough to click the “show ignored post button”
Click to expand...

Of course you do.

jog on
duc
 
basilio said:
Good set of figures. However are there any online insured savings accounts returning 3% at the moment ?
Click to expand...

My bad. I had a quick look on Canstar and the ADI returning 3% was a 4mth promotion. Best rate I can find now is 2.6% with uBank with a $200 monthly deposit to earn the bonus interest.

This takes the return for a savings account ($100k investment) to $14113 vs $30313 for the rate setter 5 year loan term. As @Value Collector said, this amount will increase if you split the 5 year term into a 2+3yr term.
 
Top