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Investing in Times of Volatility: A Look at P2P Lending

stock market

2020 has brought on its fair share of volatility, as was evident with the coronavirus stock market crash in March, where the S&P 500 index fell by more than 30% after reaching record highs just the month before. This is a harsh reminder of just how volatile the stocks and shares market can be at times.

If you?re looking to diversify your portfolio with alternative investments that are less prone to volatility, P2P lending could be a viable alternative to add to your list of choices.

stock market

How Does P2P Lending Work?

Peer to Peer platforms offer quick, personal and accessible loans to individuals and business owners through an online platform. Additionally, P2P investors in the UK can make tax-free returns* on their investment as a result of the government?s IF-ISA arrangement.

This arrangement allows investors to invest up to ?20,000 within a tax year, without having to pay capital gains tax on returns accumulated during the course of this period.

A Viable Alternative in Volatile Times

Peer to Peer lending is a viable investment alternative in volatile times.  Look at how it performs relative to market volatility, as well as considering its direct involvement with the property market.

Providers continue to mitigate investor risk by maintaining high levels of due diligence on new loan approvals*. They also provide additional support for borrowers who may be struggling to meet payment deadlines.

P2P Investments and Volatility

P2P investments are less prone to volatility as a result of borrowers needing to service their loans regularly*. While the coronavirus pandemic may mean that payments are delayed, this won?t necessarily have a bearing on the investors? payout at the end of the day*. The same can?t be said for all types of investments.

Investments Secured by Property

P2P lending allows for investment into loans that are secured by property. If the borrower defaults, it will only take a few months for the P2P platform to sell the property in order to recover costs*.

Finding a provider that holds first legal charges (meaning they are first in line to take control of the property in case of a default) is a great way to get additional peace of mind**.

property market

Increased Support for the Property Market

It?s also useful to note that support for the general property market has remained steady, even amidst the pandemic.

The FCA has announced a three-month payment holiday for homeowners and landlords. The Bank of England has also cut its interest rates for mortgages to a historic low of 0.1%pa, providing additional short-term relief.

Stringent Credit Committees

P2P lending platforms have stringent credit committees to vet each loan before it is approved.  Platforms are covering all bases before approving new business loans to ensure that they are viable. This is another means of increasing investor confidence.

Additional Support for Borrowers

Peer to Peer platforms tend to offer a more personalised service than banks, working with borrowers to help them find suitable solutions in unpredictable times.

Additional support is typically available through the Collections team of any provider – they can help find an appropriate solution in case a borrower is struggling to meet payment deadlines***.

investment

Getting Curious About Other Investment Types

In times of uncertainty, and especially with the increased volatility of the stocks and shares market during the coronavirus pandemic, investors have a responsibility to get more curious about finding alternative options to continue growing and diversifying their portfolios.

As the key factors in this article suggest, P2P lending is one of the prospects worth keeping in mind during your decision making process.

*Capital is at risk.  HMRC Rules Apply. 

**Securing investments against UK property does not guarantee that your investments will be repaid and returns may be delayed.

***Failure to meet the repayment criteria of a loan could result in the security being repossessed

How Much Money You Can Save With A Home Warranty?

home products

A home warranty is a smart solution that will make every homeowner feel more peaceful. Important appliances and systems can fail anytime, which brings huge costs for you. A home warranty is here to have you protected from unexpected costs. If you haven?t obtained your plan, you might have to face costs that can range from a few hundred to a few thousand dollars. We know that it can save you a lot of money on costly repairs, but really how much?

Average repair costs

Unexpected malfunctions are very common. Without a home warranty, you will face high repair costs for your home systems and appliances. And you can?t postpone the repair for later. Imagine finding out that your fridge isn?t working. For individual repair, you can pay around $600. If your fridge is too old and needs to be replaced, you will need to divide about $1,500 from your budget. If the dishwasher fails, then you will need around $200 for a repair or around $600 for replacement. But, the madness doesn?t stop here. You are expected to pay even more if crucial home systems fail. For example, a replacement for a water heater can cost as much as $850. If you find out that the furnace isn?t working, you can pay around $500 for a repair. If the system needs to be changed, then it can climb up to $6,000. 

We know that not every household has an emergency budget specially dedicated for home repairs. Another thing that you should have on your mind is the fact that a few appliances or systems can fail during the year. When you add the costs up, you will get to a high sum of money.?

The cost of a home warranty

The average cost for a home warranty plan ranges between $350 and $600 for a year, depending on the coverage. Basic plans will cost around $350, while advanced plans have extended coverage. Some will include the roof, spa, pool, or septic systems. These bring high costs for repairs, so it is better to have them included in your home warranty plan. Having the costs for individual repairs in mind, this is a feasible option.

The best home warranty plan for you is the one that offers proper coverage. Keep in mind that a plan that covers only cheap appliances is not feasible. Check and compare different plans to find the most convenient one for you.?

 Keep in mind that each service call is starting from $75. Despite paying the yearly or monthly fee, you will pay for each service call too. But when you do the math, it is feasible. Even if you include the service call, you will save money for the whole year. Another thing that you should have in mind is that you can experience a few fails of different appliances and systems during the year. When you sum it all up, a home warranty will definitely pay off. 

Is Now the Time to Start Putting Your Money Back into a Savings Account?

Save money

After a steep drop in interest rates following the 2008 financial crisis, Canada?s high-interest savings accounts have finally become a viable option for investors looking to safely store and build their wealth in the short to medium term. Prior to the adoption of more competitive rates, it was next to impossible to find a savings account provider offering interest rates above the measly 0.8% to 1% range. Now, you can rest easy knowing that Canada saving accounts offer 2.3% interest!

While it?s true that a savings account won?t net you the same returns as a well structured investment portfolio, you need to remember that the money you put in your savings account is outperforming inflation at no risk to your capital ? you simply can?t say the same thing about money that?s tied up in volatile equity markets.??

Four Things to Consider Before Putting Your Money in the Market

Projecting and visualizing risk helps you make informed, high-performance financial management decisions. At this point in time, we believe that there are four key market-related risk considerations you need to be aware of if you?re currently trying to decide between putting your money in a savings account or investing in the stock market.??

1. A Tiring Bull Run? 

As it stands, the Canadian bull market, informally represented by the benchmark S&P/TSX Composite Index, is the longest and best performing bull market in the history of Canadian financial markets.?

Nevertheless, no bull market lasts indefinitely and, despite several years of unprecedented stock market returns, there are now well-founded fears that the current bull market is nearing its end. On the domestic front, the factors underpinning a potential pullback in the bull market include:

  • External business and trade reliance: Most of the companies that make up the S&P/TSX Composite Index are heavily dependent on an ostensibly strong but deceptively fragile U.S. economy. 
  • Looming fears of a housing market correction: Despite ongoing affordability concerns, Canada?s real estate market continues to be characterized by low inventory, flagging optimism, and sky-high valuations. 

With such a high level of household debt, even minor shifts in the U.S. trade balance or domestic property market could cause major falls across the broader stock market, potentially triggering widespread capital flight and significant value depreciation in the S&P TSX Composite Index.       

Now, before you jump in and say it, we know that there?s always someone predicting the demise of a bull market. However, in this case, the sheer number of economic slowdown indicators is assuredly more than enough evidence to begin reducing your exposure to volatile asset classes, especially stocks and derivative instruments.?

2. Instability in China and the Lingering Grip of the Coronavirus Saga 

Despite encouraging yet unconfirmed reports of a treatment breakthrough, the novel coronavirus is expected to continue wreaking havoc on global markets. In a business cycle where market sentiment is already tenuous, China?s decision to temporarily shutter key factories has caused turmoil in the global economy, sending shockwaves through European, Indo-Pacific, and North American stock markets.?

In particular, because of the way global production networks are structured, the disruption in China?s manufacturing and global technology supply chains will likely have a lingering impact on the volatility of North American equity markets. As of the time of writing, 28,349 cases of coronavirus have been confirmed, with 5 known cases in Canada.???

3. Trade War Proliferation

Using conservative calculations, the trade war between the U.S. and China has caused tariffs to be placed on a staggering $550 billion in trade, mostly in the manufacturing and agricultural sectors. Despite a promising amelioration in trade war dialogue, investors remain braced against further dips in the U.S.-China trade relationship.?

So far, Canada has escaped the worst of the trade war fallout. Nevertheless, if trade tensions begin to re-escalate, the subsequent uptick in destabilising trade actions, be it U.S. tariff conditions or Chinese currency devaluations, will surely ripple into the Canadian stock market.??

4. A Threatening U.S. Election Outcome? 

President Trump?s impeachment trial may be done and dusted, but the turbulent and seemingly haphazard status of U.S. foreign and trade policy is expected to continue to cast a long shadow over the performance of neighboring equity markets.?

Given the level of political polarization and class division currently plaguing the U.S., some commentators have put forward believable scenarios for an outbreak of widespread political violence during and/or following the 2020 U.S. presidential election. If such a scenario comes to pass, even partially, it will very likely trigger a severe pullback in North American stock markets.?

The Bottom Line 

Unfortunately, the economic issues discussed in this article are not the only potential threats faced by global equity markets. Other pressures on the Canadian stock market include Brexit-induced economic anxiety amongst key EU partners, an all-time-high global debt bubble, and increasingly volatile geopolitical risks in the Middle East and Indo-Pacific.

If you search for a trend amongst this laundry list of market-related risks, what ends up emerging is a veritable powder keg of factors primed to seriously hamstring the Canadian stock market. Given the extent of the underlying risks to your capital, it?s highly advisable to consider reducing your portfolio?s stock exposure and redirecting the funds to a high-interest savings account. In addition to being a risk-free way of storing funds, piling your money into a savings account will also ensure that you have cash on hand to invest in undervalued assets when Canadian stocks eventually enter a bear market. 

How to Start Investing in Real Estate

real estate

Do you wish to invest in real estate but lack the knowledge needed to begin the process? Billionaire Andrew Carnegie is famously quoted as saying that 90 percent of millionaires got their fortunes from investing in real estate. It?s no secret that investing in real estate is a viable way to generate wealth. If you are interested in profiting from real estate investing, the following tips will help you get started.

real estate

Research Your Local Market

The main objective is to locate properties that are priced below the value of the market and are in need of repairs. In the real estate industry, they refer to these properties as ?handyman specials.?

Determine Funding Options

If you are looking to invest, you are unable to get approved for a conventional loan. If you are not going to purchase the property with your own cash, you will have to find what is referred to as a ?hard money lender.? Hard money lenders typically charge higher interest rates and have shorter pay-back terms. Use a mortgage estimator to figure out what your potential monthly payments will be.

In regards to the down payment, ten percent is usually the lowest down payment that you will pay as an investor. There are times when you will find a seller that will allow you to purchase a property with no money down.

Enter Into a Purchase Agreement

Once you figure out your funding solution, you are ready to enter into a purchase agreement for the subject property. Once you and the seller agree upon terms and a sales price, you can execute the sales contract with your signatures. The next phase in the process is the appraisal and title search.

Appraisal and Title Work

The appraisal determines if the property is indeed worth the price it is being sold for?or the after-repair value (ARV). An appraiser is paid to visit the property and conduct a thorough evaluation. The appraisal report is based primarily on the condition of the property, and the comparison of similar properties recently sold in the area.?

A title search is performed by a real estate attorney or a title company (depending on the state). The title search assures that the property is free of encumbrances and solely owned by the seller.

Closing

Once the property is appraised and the title work is completed, the attorney or title company will schedule the closing. At the closing, you will sign the closing documentation and receive the keys to your new home. After taking possession of the property, dedicate your nights and weekends to rehabbing the home.

Conclusion

Now that you have a more profound understanding of the real estate investment process, you can proceed with confidence. You now possess the information needed to begin your life as a real estate investor. Once you successfully complete your first deal, you can repeat the process. By multiplying your efforts, you will be able to quickly begin generating wealth as a real estate investor.

Potential Threats to Global Business Financing

The resolution of the United Kingdom to exit the European Union was just one of the major political decisions that will have global effects. The trade wars between the United States and China have also created unrest, but there are environmental, economic, and political concerns in countries across the globe that are impacting global economics. The global market is an open network of import and export for countries all over the world, but these exchanges will only be as strong as the international finance and banking industry that sustains them. There are challenges within every industry, but here are some of the more pressing issues that will face international businesses within the realm of finance.

Company Structuring

Global operations usually require a team of individuals that understand the international market, as well as the trends, practices, and regulations of the country in which you hope to grow. Your business structure should be able to become multinational, perhaps with a division that is specifically in charge of global exchanges.  If you are going to put an office on the ground in a foreign, you need a financial partner that works with both local and international clients. For those who are taking advantage of the oil discoveries and investment potential in Guyana, the Guyana Bank for Trade and Industry Limited has both local and international experience with currency exchange, investment funds, and traditional savings accounts. Your business structure should be supported by the local market where you plan to do business but also the investments you are going to make in overseas transactions.

Regulatory Concerns

Your company may be in compliance with United States tax regulations and licensing fees, but overseas markets have a new set of laws and regulations to contend with. The tariffs and legal fees associated with approval to conduct business can be steep, and one misstep (even out of ignorance) could cost your company some serious cash. Not only do you have to worry about the fines for any breaches, but you may also be left with products in warehouses or goods that are refused entry due to regulatory non-compliance. Though the global economy is moving toward more secure and efficient digital transactions, the regulatory landscape between countries can be a headache for those who don?t have the right people in place. On the other hand, some countries are governed or influenced by those who have questionable ethics, and you need to be aware of the bribery and questionable financial requests that might follow your request to do business.

Pricing Strategies

The way you establish your pricing in the United States is similar to how the process works overseas, but there could be more variables included in the decision. Your direct competitors on the local market are a good starting point, but you need a long-term pricing strategy that accounts for the additional distribution challenges, increased overhead, multinational marketing plans, and any taxes or fees you have to pay. What you may consider a low price could still be outrageous compared to the local currency exchange and average wages, but you also have to account for how the exchange affects your suppliers or local operating costs.

Tax Compliance

If you thought U.S. tax structures were confusing to navigate, consider the different rates, systems, and compliance requirements that accompany doing business in foreign countries. Where you choose to locate your business will affect your tax liabilities, and doing your homework can help you avoid overpaying on taxes. Know where tax treaties between countries exist to eliminate paying twice the taxes on a single transaction. International accounting practices often make tax efficiency a priority, with some companies relocating their headquarters to countries or locations that are known to offer ?business-friendly? corporate tax policies.

Acceptable Payment Methods

With the internet giving e-commerce unlimited potential, it has become easier for businesses of all types to sell their products overseas. The challenge for these businesses is establishing acceptable payment methods that offer secure processing. The protection of personal and financial information is a priority for digital transactions, and there are several globally-recognized payment options that provide this security. Many sites and sellers are moving toward cryptocurrency, such as Bitcoin, for the increased purchase security and the lack of fees associated with transfers or transactions. Your ability to pay vendors overseas may also be challenging, especially if your traditional payment methods aren?t accepted. The currency exchange rate could also be damaging to your bottom line, as your profit and expenses could rise and fall with economic and currency fluctuations. Best practices include paying suppliers and managing production costs through the same currency that you are selling in.

Preparing to enter a global sales market requires navigating the competition, the paperwork, and the cultural trends or practices that may impact consumer habits. Your company, no matter how strong it is on U.S. soil, can be severely impacted by a lack of awareness and understanding with global finance and banking practices.