Cruising Kitty - Social Lending

[TugTubPaul]

We are planning on leaving next October for a few years on the water. We are looking for good places to keep our funds while cruising. Of course we want to maximize our income while minimizing risks. Presently I am testing social lending at the lending club where returns seem to be in the 10% range. Are there any other ideas for the kitty?

[MarkJ]

Avoid it at all costs - those costs being your own wallet.



.

[Anders]

10% returns means it is risky.
I suggest that you ask your question at
Bogleheads :: Index

[David M]

10%? You might want to re-evaluate the risk. That kind of return is usually accompanied with a higher risk than the more guaranteed financial instruments.

What guarantees are there that these people have not already spent your money? Bernie Madehoff's returns looked good at one time as well.

The big question is, do these people get audited by a credible auditing firm? Just because these people seem grass roots does not mean they can be trusted. You need some sort of objective measure before you do that.

[idpnd]

P2P lending is fine apparently, they use the same credit rating procedures banks do, whilst cutting out said middleman's margin. Result: Higher interest for lenders, lower interest for borrowers.

[David M]

A ten percent return means that the borrowers are paying greater than a 10% interest rate. I would still be very cautious and not just assume they are legitimate before thoroughly investigating them. What APR do the borrowers pay by the way? That's a good question to find out.

[Euro Cruiser]

Paul, two thoughts for you:
-- put the funds you need for cruising during this period into an insured, liquid form and you will be buying 'cruising insurance'; one of the saddest sights we've seen were all the crews out cruising, having a ball, who had to return home after the 2000 web commerce meltdown occurred and then when 9/11 hit. They too wanted to 'keep their money working' but the alternative is to keep your cruising funds available to you, insulated from life's unfolding events
-- presumably given the duration of your cruising period, you will be in foreign waters; depending on where that is, you can consider converting USD funds into the currency(ies) you will need. A friend encouraged us, on arrival in Europe, to do this by shifting USD's to Euros; we wish we'd followed his advice for the next four years

Jack

[Intentional Drifter]

When prime is 3.25, mortgage rates around 5, what sort of person would be paying 11+?

Risky ones, that's who.

Such an investment might be a reasonable consideration for a small part of your portfolio that you dedicate to high risk/high return, with the understanding that it could disappear, and you can deal with the loss.

ID

[Tempest245]

IF it sounds too good to be true....it Probably is..

Also, what do you mean by " Testing" ..you've already invested some funds to see if the returns are real???

Their own prospectus states: (paraphrasing).... " These investments are highly speculative and as such bear a very high risk, any noteholder should be prepared to lose their entire investment."

Caveat Emptor!!

Besides sticking my money in a mattress right now, I might consider
Short or Intermediate Bond funds, Tax free municiples, CD laddering, Whole market index funds, Gold....Or, you can create your own portfolio of dividend paying stocks and untilities.....

[idpnd]

They do publish the default rates, obviously the higher rate of interest applies to higher risk groups. Generally the defaults are enforced by an external agency just like any bank loan.

[TugTubPaul]

Thanks for all the input.

[TugTubPaul]

Tempest,
Yes, i did put some money in lending club loans. The concept seems to be loan a little bit of money to a lot of people. Its been about a year and the default rates are about what they claim.

[Reality Check]

The profile of most Multi Level investments and high return rates of securities for Scam artist is to use new money from investors to pay back some small investors to entice them to become bigger investors.

Looks like a offer you can refuse.

[osirissail]

Let's see, Madorf, and a host of other pyramid schemes and you can see where these "too good to be true" investments end up. Not even the "biggest of brothers" regulatory agencies can spot such schemes until the investors have lost everything.
- - The advice to separate out your "money needed for cruising" from any excess money is very good. Put it in good Certificates of Deposit timed to be available periodically as you need more cash to continue cruising.
- - The excess money can be put in more speculative investments where you can hope to make "a bundle" and at the same time realize that it can also "evaporate" overnight. Its the "nothing ventured, nothing gained" philosophy.
- - Subject to your nationality, off-shore investments and converting to other currencies than dollars, can get significantly larger rates of interest and at the same time insulate against dollar variations - if done correctly. Lots of little and other countries are paying 10% on savings in their own currencies. There is some mathematics involved in determining asset conservation across different world currencies. Bottom line, you can work for a wage and try to save it as best as possible or make your money work for you which requires some savvy and hard mental labor on your part versus sweat labor.
- - The temptation to "get rich quick" is universal and the bread and butter of the scam artists. If they are offering 2X, 3X, 10X the local economy's normal return - you just may be really walking into the jaws of the shark.

[Andy R]

One of Cruisers Forum's sister sites is www.Early-Retirement.org. That's an excellent site where many members have the same issue. The founder of Early-Retirement (Dory 36) often moors in the intercostal and many of the other members are either sailing or out and about in their RVs.

To answer your question, we would need more information like your expected cost of living, total funds available to live off of (or a percentage there of), etc. If you need 10% to break even then that's one thing. If you need 3% then you have many more options.