P2P Goal-Setting: Yield > x %?


  • Community Manager

    Hey guys!

    What is your personal measure of an ideal return rate / yield from P2P investing?

    What % yield are you aiming for and working towards?

    Porting this over from our success thread, we can simply set a target x% yield to work towards:

    Yield > x %

    You may also add other variables into the equation for a more precise one, like:

    1. (Yield - probability of default ) > x%
    2. (Yield - tax and fees) > x%

    E.g. for 1., set by @jomni, x = 5
    E.g. for 2., set by @wjchay, x = 8

     
    What's your x? Are they realistic or audacious enough?

    And if you've thought about it in detail, why and how are you working to that figure?


    Fresh to P2P investing? To get more context on this, you may find these threads helpful:
    P2P tips
    Success thread



  • Compared against FD (guaranteed) rates of 3 - 4% p.a., 20-yr avg unit trusts/stock market annualised returns of ~8% and MY banks avg NPL rate of >3% (hence P2P's risk should be double, 6%?), I think P2P net returns (after service fee ~2%) should be at least 14% p.a. to commensurate with the risks. 14% - 6% default risk = 8% p.a.



  • I aim at : 12% yield - 2% fees - 2-3% default = 7-8% p.a



  • I think taking into account the factor of probability of default is a good idea but not exactly doable if you invest across different platforms with different ways of calculating default rates?



  • Currently on gross yield of 12% hope to push it to around 13%



  • @maybewei said in P2P Goal-Setting: Yield > x %?:

    I think taking into account the factor of probability of default is a good idea but not exactly doable if you invest across different platforms with different ways of calculating default rates?

    Yes quite hard. I only do this for FS. In CM I look at who the invoices are billed to. Mostly big names (blacklisted some already).



  • @antoniomc27 said in P2P Goal-Setting: Yield > x %?:

    I aim at : 12% yield - 2% fees - 2-3% default = 7-8% p.a

    I also have similar goals. around 7-8% p.a



  • I would like to use bottom up approach when determine my P2P yield.

    This figures are only applicable in Malaysia. My so call risk free rate like FD is 3%, almost guaranteed return is like our Employee Provident Fund (EPF) and Amanah Saham Fund Series under Permodalan Nasional Berhad (PNB), which is ranging from 6% to 8% annually. So I will take 7% as the base nett return.

    Other assumption including the services fees which is charged at average 2% and current default rate which is 1%.

    So total expected yield is 7% + 2% + 1% = 10% gross yield. (Ideal for breakeven)

    However, I expect the default risk will grow to 2% in near future and I would like to have a safety factor of 2. 2% risk vs 2 % gain rule.

    Hence, I expect the gross return to be 7% + 2% + (2% x 2) = 13% gross yield.
    As of my current portfolio, 13% - 2% service fees - 1% default (my actual default rate is in-line with FS default rate) = 10% nett yield.

    The way I maintain the default rate to be minimum is to heavily diversify by using following diversification matrix.

    0_1544596064052_Rev1.jpg

    Another approach to protect my 10% nett yield is the compounding effect by taking the notes that offer equally monthly repayment schedule. Taking effective interest rate is 1.5 times the simple interest rate. = 10% x 1.5 = 15%.



  • I am looking at minimum net 10% yield p.a (eh hem, my personal wish) after fees,after tax and after default risks for the relatively higher risk that we are taking in giving out unsecured loans to the borrowers.

    For 7% or 8% yield, we can consider REIT which has significant lower risk than P2P.



  • @ktinvest said in P2P Goal-Setting: Yield > x %?:

    I am looking at minimum net 10% yield p.a (eh hem, my personal wish) after fees,after tax and after default risks for the relatively higher risk that we are taking in giving out unsecured loans to the borrowers.

    For 7% or 8% yield, we can consider REIT which has significant lower risk than P2P.

    Yes REITs are my benchmark. I have a lot of funds on these instruments.

    The 5% I mentioned may be outdated. As equity prices has decreased a lot, pushing REIT yields to 7-8%. It was 5-6% a few years ago.


 

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