What is a good investment in today's market? How do you judge the value of an asset? A high yield often means a high level of risk. The best investment is difficult to find and appraise.
The crowdfunding market is young, and like many infants, quite unruly. But the problems are being addressed – and the information essential to making an informed decision is rapidly becoming more and more reliable.
The yield on a loan varies according to the degree of risk assessed by our credit-analysis process. The algorithm and the oversight of the credit-analysis committee produce a fast-moving yet very efficient form of credit analysis that grades and processes loans in a short time frame. Money&Co. may not rate a borrower sufficiently highly to allow it to come to the platform – but the decision is made quickly. Broadly speaking, the higher the credit rating, the lower the yield.
The average gross return achieved by Money&Co. lenders in over three-and-half years is over 8 per cent.
A Process Guide To Innovative Finance ISA Investment
Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.
So here's our guide to the process:
We currently have one offering on site - an A-rated loan with a fixed-rate yield of 8 per cent, 43 per cent filled. As we say above, more are due on site soon.
The ISA allowance for 2018/19 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We're assuming a 7 per cent return, net of charges and free of tax here.
Once you have made your initial commitment, you might then consider diversifying - buying a spread of loans. To do this, you can go into the "loans for sale" market. All loans bought in this market also qualify for IFISA tax benefits.
Risk: Security, Access, Yield
Do consider not just the return, but the security and the ease of access to your investment.We write regularly about these three key factors. Here's an earlier article on security, access and yield.
If you haven't made a loan via Money&Co. before, please read the risk warnings and the FAQ section. You may also wish to consult a financial adviser before making an investment. Capital is at risk, once loaned.