RateSetter outperforms ASX and other major investment classes in 2018

by Andrew Jones

RateSetter’s peer-to-peer lending model launched in Australia to fill a gap in the investment market between traditional investment models. We saw an opportunity to offer investors a middle ground between low-risk, low-return investments such as bank deposits, and higher-risk investments such as shares.  By opening up the well-established asset class of consumer loans to everyday retail investors, which was previously reserved for banks and institutional investors, we are proud to now be consistently offering investors strong, stable returns, with what we believe is only a low level of risk.

We’ve looked back at 2018 to demonstrate how RateSetter is successfully helping people earn more money on their investments while enjoying peace of mind. The figures show how RateSetter’s platform outperformed other major asset classes throughout 2018 including savings, shares and property. 

Interest rates on savings accounts slumps

Bank savings accounts are one of the ‘safest’ ways to deal with your money but there’s a price to pay when it comes to gaining meaningful returns. In 2018 12 month term deposit accounts averaged returns of 2.20% whilst online savings accounts averaged returns of 0.93% p.a. With a 1.9% year-on-year (YoY) inflation rate reported at the end of October 2018 and a 2.1% YoY inflation rate forecast for the end of January 2019, on average Aussies are losing money by just keeping funds in a savings account.

The year the ASX would like to forget

Sure, even at the best of times the share market can be an unpredictable beast, but 2018 was a particularly unimpressive year. The ASX (All Ordinaries Total Return Index) fell 6.8% wiping as much as $120 billion off investors’ portfolios. In fact, in February 2018, $90bn was lost in two days! Of course, none of this was surprising considering 2018 brought us the Royal Commission into banking misconduct, the loss of 8,000 jobs at Telstra and a few other things like department store Myer posting a substantial loss.

To summarise, the ASX started the year with over 6000 points, peaking at 6,352 points in August, and closed the year in December 2018 at a disappointing 5600 points.

A nerve-racking 2018 for property investors

Australia’s property market used to be a safe bet for investors who previously enjoyed a few years of solid gains. But times have since changed. Home prices right across Australia slumped by an average of 4.8% in 2018 with the biggest falls seen in the Sydney and Melbourne markets. While Sydney’s property prices dropped by 8.9% last year, Melbourne’s falls of 7.0% were not too far behind. After poor performance in 2018, further declines expected in 2019 are likely to result in Australia’s sharpest downturn in property prices since our last recession

RateSetter 2018: Same year, a very different story

By connecting everyday Australian investors with creditworthy borrowers, RateSetter offers investors a regular and stable source of income.

By cutting the costs and inefficiencies of traditional financial institutions, investors can earn more attractive returns whilst borrowers can access fairer rates. In 2018, average returns delivered in RateSetter’s 5-year Income lending market was 9.1% p.a., more than 4 times higher than the bank savings interest rate, whilst the average return for the 3-year Income lending market was 7.6% p.a.

The chart below shows how RateSetter’s lending markets compared to the performance of other asset classes in 2018.

chart comparison

Note: Past performance is not an indicator of future performance. Capital is at risk when you lend with RateSetter. Your investment is not a deposit and does not have the benefit of protection under the Financial Claims Scheme as it may have if it were an amount deposited with an Australian ADI.

Online savings account: RBA; table F4 Retail deposit and investment rates; series ID FRDIRSAO10K (2018 monthly average)
12 month term deposit:  RBA; table F4 Retail deposit and investment rates; series ID FRDIRBTD10K1Y (2018 monthly average)
RateSetter lending markets (weighted average matched rates from 1 January 2018 - 31st December 2018): https://www.ratesetter.com.au/peer-to-peer-lending/statistics
ASX All-ords Total Return: https://au.spindices.com/indices/equity/all-ordinaries

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The information contained in the RateSetter blog does not constitute financial product advice and has been prepared as general information only without consideration for your particular investment objectives, financial circumstances or particular needs. As with all investments, before you decide to invest you should familiarise yourself with the key investment risks and read the Product Disclosure Statement.

No responsibility or liability is accepted by RateSetter or its related entities for any errors or omissions or misstatements however caused or arising. Any opinions, forecasts or recommendations reflect the judgment and assumptions of RateSetter and its representatives on the basis of information at the date of publication and may later change without notice.

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