Reader:
Hi AK,
I am glad to chance upon your blog recently and is currentlu busy reading up on the various blog post which is quite informative.
I recently came across a website which was featured in (a popular personal finance blog) which indicates returns of investment up to 14% through P2P lending to SMEs.
I am in the process of checking if these are guaranteed returns which i highly doubt so.
Like to understand more of your view on this.
AK:
Hi,
You might be interested in this blog:
http://singaporeanstocksinvestor.blogspot.sg/2015/06/to-make-20-per-annum-we-could-lose-our.html
If we say junk bonds must offer higher coupons to attract lenders because they are risky (think risk of default), for example, Swiber offered a coupon in excess of 7%, what could a 14% coupon from a borrower mean?
Aiyoh, headache.
What to do?
Don't ask me.
Mr Keith Kueh was expecting Pacific Andes Resources Development Ltd to pay back the company’s bonds last year so he could finance his son’s college bill and his own retirement. Now it’s 18 months after the Singapore-listed fishing company didn’t honor some obligations and he hasn’t gotten his money yet. (Singapore) suffered an unprecedented S$1.35 billion of local note defaults since November 2015.
ReplyDeleteSource:
http://www.todayonline.com/business/rich-singapore-investors-stuck-local-bond-restructuring-drags
Swiber offered a coupon in excess of 7%, what could a 14% coupon from a borrower mean?
I had a foreign colleague who used to participate in "micro loans biz" --- he would be one of the "financiers" & getting 5% monthly coupons i.e. 60% annual coupons.
ReplyDeleteNow, what could a 60% coupon from borrowers mean? ;)
At 60% interest rates, the borrowers are probably in greater danger than the loan operators or "investors". And I'm not talking about small matters like home foreclosures or bankruptcy proceedings. :O
My ex-colleague knew the score and was fully prepared to lose all he put in. But he had the "satisfaction" of knowing that if he didn't get his money back, there would be blood & body parts spilled. He placed about 2% of his savings, and the coupons he got was enough to cover his monthly rental, utilities & handphone bills.
And no, this high-yield "bond" is not MAS approved.
Hi spur,
ReplyDeleteYour colleague is a small time gambler and I always say there is nothing wrong with gambling if we size it properly. If he should lose 2% of his net worth, it is not going to cripple him. ;p
However, for an average Joe losing his $50,000 life savings, it would be devastating. I see so many of these crowd funding outfits targeting the masses and some "investors" are already burnt. :(
Put some money into a P2P lending platform when I was young(er) - didn't even know how to read or interpret financial statements! Most of my p2p loans matured nicely - but one defaulted halfway so it was a good lesson (500 bucks tuition fee) on the risks of investing in unsecured products.
ReplyDeletebrina
Hi Brina,
ReplyDeleteThanks for sharing your experience. :)