4 ms·

I think some of the claims are a bit over-stated. For instance, I agree that the mortgage loan process is silly but it is heavily supported by government agenc

by bko 11y ago

I think some of the claims are a bit over-stated. For instance, I agree that the mortgage loan process is silly but it is heavily supported by government agencies Fannie and Freddie, and that likely won't go away. Sure, technology and the law will soon allow you to borrow directly through a peer to peer model, but do you think anyone really would lend you money for a 30 year mortgage for less than 4%? There may be a market for less credit worthy borrowers that have trouble getting a mortgage now, but politicians would surely crack down on that. Sofi, which lends to very low credit risk students has been very successful, but that's because there is some room in the rate which you would pay going through Stafford loans (around 6-8%) so that makes sense. So there a student can get a rate lower than the one-size-fits-all rate of Stafford loans but I think that rate is too low for mortgages to allow for a more competitive private market. There may be some room to better assess credit risk for private student loans, but considering that 85% of student loans are public [0] and there is a lot of regulatory uncertainty regarding Consumer Protection legislation, I think that opportunity is limited. In terms of investment advice, low cost ETFs already exist and are pretty amazing for what they do. You can invest in a broad index, albeit passively managed, at ~15 basis points (0.10%). I don't know anyone who is willing to fall over themselves to manage your money for less. [0] http://www.huffingtonpost.com/mobileweb/2012/04/24/obamas-student-loan-push-guide_n_1450288.html http://www.huffingtonpost.com/mobileweb/2012/04/24/obamas-st...

Falkon1313 11y ago
There's plenty of room at the lower end. Of course if you're already a millionaire, investing and loans are easy. But if you only have $100, they're not. Traditional investing and banking are designed to exclude the lower class/working class, to prey on them, and to be a losing game for them. Even if you can get by the minimum balance limits, when you have to pay a $10 fee to buy and a $10 fee to sell, you need to beat a 20% return just to break even on a $100 investment, let alone make a profit. But without the fees and the minimums millions more people could be investing a bit here and there and growing it. Predatory payday loans and rent-to-own businesses are enormous - even though they depend on exploiting people who really can't afford them. If there were a better alternative, millions of people might use it. With the middle class shrinking, the market is growing.
- bko 11y ago
  I agree that investing $100 in a stock isn't worth the time of a bank so the $10 fee they charge to purchase an ETF is high, but I think that would be the case for just about anyone because of the cost of even doing the book keeping, statements, etc. For instance, every ETF I invest in, I get the prospectus in the mail. That costs money to ship every year. They have to manage things like proxies voting as well. It's just not worth it to a bank. The $0.15 a year (15 bp of $100) in fees won't even coverage postage. Pay-day loans may appear sleazy but the companies that administer them don't have very high margins. There are risks to those loans and the small nature means that fixed costs are spread over a smaller base. You can review the financials of public companies in this space. EZCorp [0] and Cash America International [1] are in that space. Their last profit margins are 4.8% and -0.95%, respectively. Why are they so low? I don't know, but I don't claim to know enough about this market to make broad statements about exploitation or abuse. I just know that, like many markets in the US, there appear to be a low barrier to entry and competition eventually shrinks margins. Maybe you're right and they're doing some kind of financial trickery to appear as though they aren't making enormous profits, but if you believe that, by all means, enter the industry and change it from within. [0] http://money.cnn.com/quote/quote.html?symb=EZPW&source=story_quote_link http://money.cnn.com/quote/quote.html?symb=EZPW&source=story... [1] http://money.cnn.com/quote/quote.html?symb=CSH&source=story_quote_link http://money.cnn.com/quote/quote.html?symb=CSH&source=story_...
- deleted 11y ago
  [deleted]
- thinkmassive 11y ago
  There's an app called Robinhood[1] that allows you to trade for free. The purchase window is 24 hours, so I assume they short the stocks or otherwise leverage the daily fluctuations. For a legal way to gamble on the market for medium to long term, I find it intriguing. [1]https://www.robinhood.com/ https://www.robinhood.com/
- spacecowboy_lon 11y ago
  Is there no equivalent to Investment Trust in-house savings schemes in the USA? These are designed to allow small monthly investments cheaply ie £25/£50 per month.
ryan-c 11y ago
SoFi does mortgages now, seems like they started about a year ago. They seem to be willing to do a non-conforming 30 year fixed for pretty close to 4%.
bigger_cheese 11y ago
I'm not sure if they do the same in the US but here in Australia most banks do pre-approvals for home loans. It made the process dead simple for me. In my case I spent about 45 mins one afternoon in a meeting with mortgage officer. Came out with a document saying I was conditionally approved for a loan of up to $X which was good for six months. Then I went looking for a place. There is probably some room for streamlining the process but most people my age that I know tended to go through the same Pre-approval route I did. The bank does all the background checks, diligence and such while you are still looking for a place to purchase which seems sensible to me.

by bko 11y ago

Falkon1313 11y ago

There's plenty of room at the lower end. Of course if you're already a millionaire, investing and loans are easy. But if you only have $100, they're not. Traditional investing and banking are designed to exclude the lower class/working class, to prey on them, and to be a losing game for them. Even if you can get by the minimum balance limits, when you have to pay a $10 fee to buy and a $10 fee to sell, you need to beat a 20% return just to break even on a $100 investment, let alone make a profit. But without the fees and the minimums millions more people could be investing a bit here and there and growing it. Predatory payday loans and rent-to-own businesses are enormous - even though they depend on exploiting people who really can't afford them. If there were a better alternative, millions of people might use it. With the middle class shrinking, the market is growing.

bko 11y ago
I agree that investing $100 in a stock isn't worth the time of a bank so the $10 fee they charge to purchase an ETF is high, but I think that would be the case for just about anyone because of the cost of even doing the book keeping, statements, etc. For instance, every ETF I invest in, I get the prospectus in the mail. That costs money to ship every year. They have to manage things like proxies voting as well. It's just not worth it to a bank. The $0.15 a year (15 bp of $100) in fees won't even coverage postage. Pay-day loans may appear sleazy but the companies that administer them don't have very high margins. There are risks to those loans and the small nature means that fixed costs are spread over a smaller base. You can review the financials of public companies in this space. EZCorp [0] and Cash America International [1] are in that space. Their last profit margins are 4.8% and -0.95%, respectively. Why are they so low? I don't know, but I don't claim to know enough about this market to make broad statements about exploitation or abuse. I just know that, like many markets in the US, there appear to be a low barrier to entry and competition eventually shrinks margins. Maybe you're right and they're doing some kind of financial trickery to appear as though they aren't making enormous profits, but if you believe that, by all means, enter the industry and change it from within. [0] http://money.cnn.com/quote/quote.html?symb=EZPW&source=story_quote_link http://money.cnn.com/quote/quote.html?symb=EZPW&source=story... [1] http://money.cnn.com/quote/quote.html?symb=CSH&source=story_quote_link http://money.cnn.com/quote/quote.html?symb=CSH&source=story_...
deleted 11y ago
[deleted]
thinkmassive 11y ago
There's an app called Robinhood[1] that allows you to trade for free. The purchase window is 24 hours, so I assume they short the stocks or otherwise leverage the daily fluctuations. For a legal way to gamble on the market for medium to long term, I find it intriguing. [1]https://www.robinhood.com/ https://www.robinhood.com/
spacecowboy_lon 11y ago
Is there no equivalent to Investment Trust in-house savings schemes in the USA? These are designed to allow small monthly investments cheaply ie £25/£50 per month.

ryan-c 11y ago

SoFi does mortgages now, seems like they started about a year ago. They seem to be willing to do a non-conforming 30 year fixed for pretty close to 4%.

bigger_cheese 11y ago

I'm not sure if they do the same in the US but here in Australia most banks do pre-approvals for home loans. It made the process dead simple for me. In my case I spent about 45 mins one afternoon in a meeting with mortgage officer. Came out with a document saying I was conditionally approved for a loan of up to $X which was good for six months. Then I went looking for a place. There is probably some room for streamlining the process but most people my age that I know tended to go through the same Pre-approval route I did. The bank does all the background checks, diligence and such while you are still looking for a place to purchase which seems sensible to me.