Whereas a bank might pay you 4 per cent on your deposits and charge borrowers 19.95 per cent, the middle man in this case, Harmoney, makes its money by taking 1.25 per cent to run the platform.
As an investor I decide who to give my investment money to, and I find this endlessly fascinating. As someone who has never borrowed for anything other than a house, I am horrified at some of the requests and find my usually emotionally intelligent self turning into a caricature of Mike Hosking on steroids. One man had me interested in his story about needing to consolidate his loans - until he tacked on the words "and a holiday would be nice too". And another newly retired man with no savings "needed" to borrow to upgrade his boat as his wife was finding it difficult getting on board the small one he currently owned.
My tiny investment is spread across 80 borrowers, which does lessen the risk. On paper the loans I have chosen are earning 22.51 per cent, but there is some smoke and mirrors when it comes to this figure.
More importantly, the interest rate screams "too good to be true", which I'm fully aware of. My starting point with this investment is that I fully expect to take a financial haircut or worse. Some of my capital has been written off already because the borrowers haven't paid. I'm still comfortably in the black thanks to the monthly interest payments coming in from other borrowers.
The defaulters will be chased by debt collection agencies. But Harmoney doesn't have a lot of skin in the game when it comes to choosing to write off my capital. I also worry that come recession, a lot of borrowers will default. On the up side, my money isn't sitting in Harmoney's coffers, and if the company was to fail, global financial services business Pepper Group is contracted to step in and wind the platform up for investors.
As for my octogenarian mother's pet investments, one of her great interests in life is her equities. Annual reports and any Business Herald articles about the companies she owns a stake in are devoured. She can afford to own one or two pet investments for interest sake only.
When fish oil manufacturer SeaDragon went through a reverse listing, buying up a failed company that she held shares in, she made a small investment. She now follows the company with avid interest. "I never take supplements, but a lot of people do," she says. SeaDragon is yet to make her monetarily rich, but adds a certain wealth to her life. Its shares have been selling for between 1c and 4c for the past two years.
Another pet share of my mother's is Restaurant Brands. It's more than just interest, because it hasn't been doing too badly in the past few years, and sends her various free vouchers. Her reason for owning it, however, is: "I'm madly keen on fast food, and it is an interest I share with my grandson." Both generations are excited at the news that Taco Bell might be on its way here to join the Restaurant Brands stable.
Massey University economics lecturer Jeff Stangl is a bit like my mother in that one of his pet investments is a failed company that has risen from the ashes - in this case more than once. "Some years ago I invested in relatively obscure IT company Kaypro, destined to rival Apple. Or so they thought. The company, and my shares, ultimately went into liquidation and were snapped up by a mining company, which in due course also went into liquidation.
"The liquidated mining concern's primary asset seems to have been big holes in the ground. It would seem that the big holes filled with water and were part of a larger aquifer system." Considering the drought in California, Stangl is hoping that water is the new Apple of investment.
Peter Neilson, chief executive of the Financial Services Council, admits some beginner's luck with his pet investment - broodmares.
After a long negotiation with his wife, Neilson was allowed to spend $1000 to buy a mare in the early 1990s. The first mare, bought at auction, proved profitable. The foal she was carrying on purchase sold for $1500. Her second foal, sold for $1700, was Cuchulainn, the New Zealand champion jumper in 2004.
"For a novice breeder this is like dropping into your local dairy to buy the newspaper and leaving with your first ever Lotto ticket that wins the first division prize," Neilson says. Over the past 20 years the family has owned about 15 mares.
"I've sold two horses for more than $100,000 and had a lot of fun and built great friendships with other horse lovers, but only in recent years has it become more consistently profitable."
NZ Super Fund chief executive Adrian Orr's pet investment is Maori tourism venture The Kai Waho Experience. "This was started by a very old mate of mine and with exactly the kaupapa that is needed for the tribe and country," Orr says. "Visitors love the tucker, environment and korero."
The financial return from Orr's personal investment is ploughed back into the development and conservation of the land. "Tom, the boss, is awesome and he lets me play out there when needed, such as during the global financial crisis."
Henry Lynch, chief executive of Co-op Money and Insurance Council of New Zealand director, has been "investing" in aikido books and figurines for decades. Lynch practises riai aikido and has a copy of most books written on the subject. When he's holidaying overseas, Lynch drives his wife "nuts" by shopping for little figurines, which can cost anything from $5 each to $500 for the most desirable bronze figurines.
Lynch collects for the sheer love of it, and would never sell any of his books or figurines. The collection has appreciated in value, however. One book, The Power of Ki, by Koichi Tohei, which he bought in the 1980s for $50 could now be worth more than $1000.
A collector who will be sitting on capital gain, if he ever wanted to part with his beloved old school vinyl records, is Kirk Hope chief executive of the New Zealand Bankers' Association. "They have probably cost all up somewhere from $7000 to 10,000. There are some rare singles that might be worth maybe three times what I paid for them, and some other singles which may be hard to find."
