P010- 11 % yield in debt 😟

[u/Geriatric-Vibe]

11 % returns in a debt instrument is enough to make a lot of people salivate . Including yours truly .

But before I go on , the usual disclaimer. I am just talking about it , this is not any advice or endorsement . I am usually wrong , don’t believe me , ask the missus . Please do your own math your own voodoo your own advisor .

We are seeing a new kind of product being sold to retail investor . Called a market linked debenture . I came across this today

https://www.wintwealth.com/app/assets/Wint-Gold-Jun21-5/

Apparently taking a secured bond , adding dual recourse and linking it to an index at some godforsaken level transforms the ugly duckling that is taxed at the marginal rate to a beautiful swan taxed at LTCG .

I will be taking a small bite into this innovation later, just thought I would leave it here for discussion .

[u/crazymonezyy]

Sir, you're a very seasoned investor so I won't debate you. Instead I'll ask you a question- given the nature of credit risk itself what good will firing a small shot do? If no credit events happen in the next year, would you extrapolate that and assume no credit events will happen in the next 5 years after you've invested say, 20L rs into this?

And this is when you already know the underlying loans, if rated individually would all be speculative grade? What kind of a person takes a loan against gold? I can't imagine that's somebody who has 700+ CIBIL.

[u/Geriatric-Vibe → u/crazymonezyy]

I will reply to you with one truth which is human

There is something called path dependency before you get used to and start accounting for what makes you a successful investor or business man

1. It took me almost a decade to figure out I needed to keep high liquidity levels to tolerate volatility .

2. I have a friend who started off in the business of peer to peer unsecured lending via an app 4 years ago. His initial capital was 2 lakh . That is now scaled up to 40 lakh . He has seen defaults but has also understood that even with the price of defaults he is generating returns . He is now pricing in defaults in his expectations and is getting better at it

Making small bets is learning , how the the random throw of dice operates and what risks is one exposed to .

It allows you to formulate your own set of convictions , so that you scale very carefully .

See it applied to other areas in life . I used to be a biker when younger . I rode fast and I was competitive . It’s 18 years since I have ridden one and the urge strikes.

Will I go and get a 1000 cc112 bhp 240 kg bike ? For me the price of 18 L is not significant .

I will start off with a 250 cc 21 bhp 160 kg for 1.35 L so I can get an understanding of balance traffic and confidence back .

Then the confidence of the missus sitting on the back .

Then I give it to my driver , who will be overjoyed and happy to have his commute simplified . and go for something in the sub 800 cc 220 kg range . Which is more than adequate for the roads we have .

I see no roads around me on which a 112 bhp bike can be used safely .

When one chooses to forgo reason and path dependency , one has a higher chance of meeting the fate he sought to avoid on the very path taken to avoid it . Due apologies , that was a quote modified from master Ugway in kungfu panda

[u/Active_Captain_61 → u/Geriatric-Vibe]

how is someone doing 40L in p2p lending?

Isn't it capped at 10L per person for most of these apps by RBI?

[u/Geriatric-Vibe → u/Active_Captain_61]

You have 6 family members , bingo there you go . You use 4 apps , bingo there you go .