'Brexit-Induced Volatility Should Compel Investors To Consider P2P' - 4th Way
Our friends at Crowdfundinsider report that peer-to-peer (P2P) lending research firm 4thWay "has published a note touting the benefits of investing in P2P loans in contrast to more volatile equity investing. 4thWay says that Brexit induced market volatility should compel investors to consider investing in online loans."
"4thWay says it is simple for lenders (ie investors) to diversify across thousands of investments – loans – as opposed to a typical stock investor who diversifies across hundreds of shares through share funds. Additionally, lenders are frequently in a better place in the queue compared to equity investors when recovering losses is involved, in case a company struggles or fails."
Just Partial, Or Selective?
That's commentary with which we broadly agree. But a cursory glance at 4th Way's comparison table of P2P lenders raises some important questions. First, how does 4th Way choose which platforms to analyse? Second, why are some of the longest-established and the biggest platforms not rated? Does 4th Way need more manpower? Or are there other reasons for this partial – or should we say selective? - analysis? We attach the comparison table, and leave it to you to form your own judgement.
A Process Guide To Innovative Finance ISA Investment
All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income.Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.So here's our guide to the process:
Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
Step 3: Buy loans in the loan market. Once you've put cash in your account it will sit there - and it won't earn interest until you've bought a piece of a loan. It's this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans - all loans on the Money&Co. site can be held in an IFISA - and your money will start earning tax-free interest.
The ISA allowance for 2018/19 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We're assuming a 7 per cent return, net of charges and free of tax here.Once you have made your initial commitment, you might then consider diversifying - buying a spread of loans. To do this, you can go into the "loans for sale" market. All loans bought in this market also qualify for IFISA tax benefits.