Here I aim to summarise a few different types of investments, along with my thoughts. This is by no means a recommendation, merely information.

Peer to Peer lending

This is a pretty new form of both investing and lending, probably due to the advantage given by the web. Essentially you invest a pot of money (starting with pretty small amount compared to some investments), and that money is lent to a range of people or businesses. Some sites allow you to select your level of risk, which relates to the potential returns.

In it’s early days some early adopters were reporting 10%+ returns, however 2-5% seems pretty normal now. That’s still far better than leaving it in the bank, though unlike with banks, your investment is not protected should the platform fail. So far several have.

The FCA, who regulate investments, are taking an interest in peer to peer lending, and may well introduce some restrictions to protect investors who don’t understand the risk. They currently suggest investing no more than 10% of your investable funds.

The person or business borrowing the money get access to loans which banks may not provide, but at much better rates than pay day loans. While I’ not a fan of personal loans, this has to be a good thing if done correctly.

Several sites have closed down.

Ratesetter This is the one I use. They are currently offering 4% through the link here and a FREE £100! If you invest £1000 that’s a 14% return for a year. That’s why I went for it. I will probably roll it over in a few weeks, when I’ve had it a year. That way the £130 or so it’s made will also make a return. The power of compounding!

The Risk. The risk is that one or more of the people you have loaned to default on their loan. Most sites factor in a certain level of default (which presumably gets revised as they gain experience), however if you were unlucky you could have a higher level. As the sites say, you may get back less than you invest. This is the case with most investments. It’s up to you how you view the risk.

Zopa

Lending Circle

Commodities

This get really contentious. Several of the books I’ve been reading, including The Simple Path to Wealth advocate investing everything into the stock market, and letting compounding work for you. Commodities are not part of their portfolios. However in How to Own the World Andrew Craig strongly advocates holding some commodities, including gold.

Gold is particularly contentious. Some are naturally attracted to it; it did after all back up cash until last century. I have read that there is more demand for gold (which is used in some electronics) than supply, but I’ve also read the opposite.

People particularly hold gold in their portfolio (physically or by buying shares) to stabilise their portfolio. When the stock market gets wobbly people tend to buy some gold. Warren Buffett, who knows a bit about making money, points out that a room full of gold, left for 50 years, is still a room full of gold. Sadly it doesn’t reproduce. You are speculating on its value increasing. It has been for several years, but is lower than it has been.

Other commodities include oil, other precious metals. Individuals can also invest (often directly with producers) in whiskey and gin. Some invest in classic cars or art. All of these are really speculation rather than investing, as they don’t produce any income (though I would greatly enjoy a classic car collection!); you are gambling on an increase in value.

Still, if you’d invested a cool £million on a Maclaren F1 25 years ago, you could be sitting a £15 million profit, and you’ve had the use of the car for 25 years. That hasn’t worked for any of my (numerous) cars…

Bitcoin

Bitcoin is the first and best known ‘crypto currency’. Essentially these entirely digital currencies use a new technology called blockchain. Every Bitcoin transaction is logged in a global network of computers, which are rewarded for their har work by ‘mining’ Bitcoins. There are now several hundred competing crypto currencies. Anyone backing the next big one could get very, very rich.

Bitcoin can be used to purchase some good and services, however this is currently very limited (if you want to buy vapes online though you’re ok). It’s also the currency of the ‘dark web’ and extortion hackers, due to its anonymous nature. Governments are understandably nervous about crypto currencies, since they have no visibility if transaction, therefore cannot trace or tax them.

Facebook is currently talking about launching their own currency, which could give the company government-busting economic power.

Investing in Bitcoin

Buying Bitcoin is quite straightforward now, though there is a complication. Since you are essentially just buying an encryption key, you need to store it. You can use an online ‘wallet’ service to store it, however hundreds of millions of £s have been stolen from these. A British guy lost coins worth around £45million by throwing out his hard disk. That’d be really annoying.

One solution is the humble home printer…

Bitcoin is the first and best known ‘crypto currency’. Essentially these entirely digital currencies use a new technology called blockchain. Every Bitcoin transaction is logged in a global network of computers, which are rewarded for their har work by ‘mining’ Bitcoins. There are now several hundred competing crypto currencies. Anyone backing the next big one could get very, very rich.

Bitcoin hit the news around 2017 when the price shot up from 900 to 20000 USD. It didn’t last long, soon losing half its value.

Bitcoin can be used to purchase some good and services, however this is currently very limited (if you want to buy vapes online though you’re ok). It’s also the currency of the ‘dark web’ and extortion hackers, due to its anonymous nature. Governments are understandably nervous about crypto currencies, since they have no visibility if transaction, therefore cannot trace or tax them.

Facebook is currently talking about launching their own currency, which could give the company government-busting economic power.

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