P2P vs Stock Market? Both?


  • Community Manager

    Reviewing the language many of us here at CrowdFund Talks are using to describe P2P;

    Here's a handful of positive, neutral or negative phrases:

    • Reliable & alternative stream of income
    • Passive income
    • Diversification
    • Efficient (means of) investment
    • Requires less knowledge (financial jargon, etc.)
    • High risk-adjusted returns vis-a-vis risk-free rate of returns
    • Low risk tolerance
    • Absence of market risk, way lower than stock market risk
    • Platform trustworthiness is important
    • Unsecured
    • No idea what would happen during a recession
    • Some slowly growing confidence, some slowly diluting their proportion of investments in P2P

    Do comment below if there's anything my small eyes have missed out!

    Given this, how do you think P2P investing matches up to investing in the stock market? Or do you think P2P would be the rising, preferred way to invest moving forward?

    Sharing an excerpt of a (familiar) comment from a UK-based P2P investor:

    I have similar amounts in P2P and Various stock market investments. Over the past 6 months ,particularly last few weeks there has been a 20% diffence in their returns. My carefully managed and highly diversified P2P investments have returned >15% after defaults being assumed 100% loss .

    My capital has NEVER reduced over several years in P2P. Although still up over 5 years in stock markets the return is at least half that of P2P.

    With Brexit and Donald Trump the current environment is not one that suits stocks and shares.

    I personally find the slow relentless constant positive returns from P2P to be relatively reassuring.

    And another familiar-sounding opinion coming from the opposition:

    Stock market goes up and down, but in the long term it will go up (don't invest if you disagree with this).

    How about you? Do you plan to achieve greater progress via these instruments, and how, whichever is better?



  • As far as the relatively low default rates prevail, I believe P2P even has the potential to beat stock market returns sometimes. They should go hand in hand though,
    d i v e r s f i c a t i o n.

    Hands-off approach in P2P investing also buys us more time to research more and make better investing decisions for our other instruments ;)



  • The amount of information and level of transparency is 'perceived' to be much lower in P2P compared to the stock market. ie. factsheets are not consistent across platforms and there is no high bar for information to be accurate

    Regulation on the stock market is much higher than vs P2P.

    Scrutiny (by regulators, investors or due diligence/investigators like Muddy Waters) on the stock market is much higher than vs P2P

    Slippage or entry and exit cost are much lower on the stock market vs P2P (In a crisis, the stock market can likely be exited, even with a haircut. For the P2P there may not be any possible short-term exit)



  • Totally agree with @DC .
    P2P is still very much a newbie compared to the established stock market. There is a long way to catch up.



  • I see P2P being a great entry investment vehicle. Investing in stock requires more time, effort and knowledge. Not everyone has the inclination to be such an active investor. So I think P2P is great for students, fresh grads and the general population who aren't as adept in the intricacies of the stock market and other more complex instruments, while slowly learning about diversification and building an appetite for risk... especially with forums like these where they can learn more from other savvy investors like you guys!

    Let's also not forget that at the end of the day, we are helping SMEs and the economy! Purpose-driven investing, while hopefully making a good return out of it.



  • IMHO, there are no preferred method of investment. As an investor we should always look at where can we diversify our funds and to do a rebalancing of portfolio to either reduces the exposures or to increase the opportunities.

    Every financial instruments has their cycles. Whenever the stock markets are not doing well, the money will goes to commodities and Vice versa.

    P2P may also faces with its own cycle eventually. The current cycle could not be determined yet as it is still a new instrument. I will highly suspect that it would behavior more like a fixed income instruments since it has a principal, interest, interest income and a pd rate as well.

    It could beat the stock market except on exceptional bull markets.


 

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