We launched RateSetter to help people earn more on their money, filling the gap between the safety, but low returns, of cash savings and the volatility of shares. Increasingly, investors are finding that RateSetter offers healthy, steady returns in exchange for accepting an element of risk.
Reflecting on 2018, it’s interesting to look at how these three asset classes – savings, shares and RateSetter – have performed.
Bank savings accounts promise safety, however there is a trade-off with returns. Bank of England data show that over the course of 2018 the average interest rate for instant-access savings accounts was 0.2%, well below the rate of inflation.
The performance of shares can be volatile, with the potential for significant gains but also the risk of large losses. The FTSE 100 started 2018 above 7,600. It fell to 6,900 in March before rising to 7,877 in May and then meandering down to close on 6,782 at the end of December – recording an overall fall of 12.5% over the year, the worst year of performance for a decade.
RateSetter allows people to invest directly in a diversified portfolio of loans, offering the potential for predictable returns in exchange for some risk. In 2018, the Rolling Market Rate averaged 3.1%, over ten times the average of instant-access savings accounts. The Rolling market offers fee-free access and investors have typically been able to access funds within one working day.
The chart below shows the change in the weekly FTSE 100 closing price since the start of 2018, alongside the Rolling market weekly average rate and Bank of England data on the average monthly interest rate on instant-access savings deposits over the course of 2018.