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Worthy Bonds, 3 Year 5% APY

TheBombingRange   |     |   99 posts since 2017

Surprised to see that when I sent them a message, the co-founder and CEO Sally Outlaw ( responded, or at least whoever runs her account for the messaging service they provide:

"Hi. Yes sorry for that confusion. Although we originally were going to charge a 1% early withdrawal fee, we decided against it and have not updated that site as we moved bond sales to The terms on that site are correct. 36 months, 5% and no penalty. Thanks for reaching out and let me know if you have any further questions! Thanks for your interest in Worthy!"

She continued:

"Yes bonds can be turned in anytime. No penalty. You have a choice of buying bonds directly whenever you like or via the round ups or both :-). Currently we are only doing direct bond purchases, the round up function will be launched in the spring."

CTM   |     |   113 posts since 2010
Have you read the full Offering disclosure filed with the SEC?

Look here:

When you see an offering for "Accredited Investors" (although Worthy has both Accredited and non-Accredited offerings) they are placing the risk of the investment squarely in your hands.

This offering is aimed at microscopic retail investors, as bonds normally trade in $ 1000, or larger, increments. These bonds are unrated.

There are many rated / traded securities with 5% or greater coupons, with A or better ratings available through your broker.

While Worthy may become a winner, I'd sit back and see what happens.
Kaight   |     |   342 posts since 2011
Spot on, CTM. I am very supportive of what you wrote. As an old bond guy I did well and never lost a cent with my bond investments, of many kinds, over the years. In all that time I NEVER bought an unrated bond. This was because I'm not crazy, and neither do I have the smarts to know on my own whether a bond will be dollar good.
Soutlaw   |     |   1 posts since 2018
@TheBombingRange...yes, that was really me responding to you, not someone running my account. I am a big believer in treating our customers right so I often jump on and answer inquires.Thanks for posting about us. @CTM and @Kaight - just wanted to explain why our bonds are not rated. In our case it is the simple fact that we are not a large industry player such as a Goldman Sachs or JP Morgan so we did not go through the extensive and expensive process of getting rated. We are a smaller, private issuer - most ventures our size do not go through the rating process. Our value proposition is pretty straightforward though - we use secured loans as the investment vehicle for our bond proceeds allowing all classes of investors to access the higher yielding private lending market. As mentioned above in an earlier comment, although the bonds have a 36 month term, they can be cashed in at any time for those with imminent liquidity needs, thereby serving more as an alternative to traditional money market products. Thanks for discussing what we do - it helps us learn what concerns purchasers may have and how we can better address them.
TheBombingRange   |     |   99 posts since 2017
Where would I be able to find those brokerages and bonds, for example? Again, very new to bonds.
ConfedrcyDunces   |     |   122 posts since 2016
A discount broker such as Ameritrade lists many corporate, cd, and municipal issues.

For the record, single A 20+ years corporates show a high current yield offered at 4.25%.
Cooldude   |     |   1 posts since 2018
Sorry, I realize I'm a few months behind on this.

While those online brokers are great for their low fees, I'm a fan of sitting down with a financial adviser you can trust. A 20 year corporate bond may look great at the 4.25%, but if interest rates rise, the value of that bond will drop, meaning that if you need to sell out of it before the 20 years is up, you're more than likely to do so at a loss.

Especially being new to bonds, there are all sorts of different ways that bonds work that you'd need to do a lot of research on in order to know that whatever bond you're looking for is the right fit. You could possibly run into trouble if you only look at a rating.
ConfedrcyDunces   |     |   122 posts since 2016
Cooldude, thanks for the obvious.

My response was to CTM, who commented "There are many rated / traded securities with 5% or greater coupons, with A or better ratings available through your broker. "

To let people know that was factually incorrect.
CTM   |     |   113 posts since 2010
CDunces, could you tell me and the rest of the readers, in detail, which part(s) of my original post were "factually incorrect"?
ConfedrcyDunces   |     |   122 posts since 2016
Obviously, you were wrong when you wrote "There are many rated / traded securities with 5% or greater coupons, with A or better ratings available through your broker."

Because "For the record, single A 20+ years corporates show a high current yield offered at 4.25%."

Not complicated, in any way.
alan1   |     |   321 posts since 2015
CTM was correct in writing there are many securities with 5% or greater _coupons_ that have A or better ratings. CTM did not make any claims concerning current yields.
CTM was not "wrong". The coupon rate might not be terribly important, but CTM did not make a factual error, as has been erroneously claimed.
ConfedrcyDunces   |     |   122 posts since 2016
Thank you Alan, a good friend indeed. CTM's comment was irrelevant, not wrong.

CTM, you may not have any experience with fixed income securities. I did not find "a" bond yielding 4.25%, I stated that is the maximum yield for a rated 20 year bond.

Alan is correct. If you had bought these bonds 15 years ago, instead of this decade, you might have earned a 5% yield.
CTM   |     |   113 posts since 2010
Thanks alan1! 
My question is who are the three people who gave CDunces' post a vote?

CDunces, as I suspected ...

In the manner of your reply to RJM on 04/14:

My dense friend. I did not suggest a corporate bond of any type.  Please carefully read the post. 
You decided to create that piece of misinformation and continue to use it. 
That you found an "A" rated 4.25% 20 year corporate on TD Ameritrade is meaningless.

In the manner of your reply to stcharles on 03/26:

Do you understand the full range of securities?  Google "types of securities".

For the other readers / posters, at the end of this post is a list of 81 securities - preferred stocks, ETNs (Exchange Traded Notes), ETD (Exchange Traded Debt) and possibly a few others. The symbols are in a format usable with Google Sheets and the =GoogleFinance("SYMBOL","PRICE") function.
With the exception of TVC and TVE, I believe all have (and had at the time of my original post) a "coupon" (face interest rate) or yield of at least 5% and all are rated at least "A" (A3/A-) by Moody’s or S&P. I culled these from a list of about 300 similar investment grade (Baa3/BBB-) securities that I monitor.

When TheBombingRange and Cooldude asked the question, these were the securities I was referencing.

The are available in small, retail investor sized denominations, typically $ 25, $ 50 and $ 100. They are listed and quoted on the major stock exchanges, although liquidity is limited in some issues.

For the record, I own a number of these issues, although not nearly enough to influence the market! ;-)

I have a fondness for the Gabelli preferred issues. These are preferreds issued by their closed-end funds. In these event of a true disaster, the holders of the closed-end fund shares are responsible for the dividends and liquidation value of the preferred shares.

Should you have any questions ...

List of security symbols in Google Sheets =GoogleFinance() function format:

TheBombingRange   |     |   99 posts since 2017
Thank you for this information. I didn't end up putting much into Worthy, though that may change. Haven't tested their liquidity so far, but that is important to me right now.
ConfedrcyDunces   |     |   122 posts since 2016
ELC - common stock Estee Lauder, yielding 1.1%

TVE - TVA bonds yielding 3.7%

Comparing preferred stock to CDs is an interesting way to waste time.
CTM   |     |   113 posts since 2010
CDunces ...

You were, in fact, able to find a typo in my last post.
ELC is a typo and a duplicate of ELJ.

Why you ignored the phrase "With the exception of TVC and TVE, " when describing the yield of the TVA PARRS securities is less clear.

Finally, no one on this thread, other than you, has attempted to make a comparison between CDs and any other type of security. This is another example of you creating a piece of misinformation and trying to pass it off as fact.
ConfedrcyDunces   |     |   122 posts since 2016
CTM, I think it would not be useful to actually read your verbose post.

Now you are talking about "coupon OR yield" nice switch but your original comment was about coupon and remains irrelevant.

The name of this site is Deposit Accounts and it focuses almost exclusively on CDs and a few zero duration alternatives. So by mentioning preferreds as an alternative, by definition you are comparing them to CDs or these Worthy things which have zero duration. Neither comparison is literate.
enduser   |     |   40 posts since 2015
It seems that they have lots of fine print. They used a light gray color to show it way at the bottom of the page. Buyer beware!

The bonds are 36 month term but you can withdraw your money at any time*.

*For withdrawals of more than $50,000, we may take up to 30 days to process the payment and remit the funds to your bank account.

Worthy is not a bank and investments in Worthy bonds are not bank deposits. They are not insured by the FDIC. Investing in Worthy bonds involves risk of loss. You should always carefully consider investments in any security and you should be comfortable with your understanding of the investment and its risks.

Worthy Peer Capital is not an investment adviser. This information is for educational purposes only and does not constitute investment or tax advice.
TheBombingRange   |     |   99 posts since 2017
For amounts less than $50k and without any sort of early withdrawal penalty, can't these bonds be used almost like a high-yield savings product? I understand that this doesn't seem to be in good faith for the purpose of bonds or this company, but what are the limitations of this? If a withdrawal has to be made for some amount of the money in these or other bonds, isn't that fully within the capabilities of this type of investment, while still keeping interest earned?
adyus   |     |   3 posts since 2018
Hi there. CTO of Worthy here.

Thank you for pointing out the fine print is hard to read. The light gray color was not malicious, just an aesthetic decision.

I'll make sure to make the color more readable today. If you have any additional questions, I'd be happy to answer.
JonInWherever   |     |   1 posts since 2018
I just wanted to throw out a few more bits of information on this, as I was looking in to it after finding this post. I asked about whether you are able to withdraw only interest, and was told no, although they are talking about paying out interest either semi-annually or annually. Right now, interest is only paid out when the bond term ends, or when you sell them back the bond. I also had it confirmed that (despite the SEC document wording), there is no penalty for selling back early. When I asked what stopped people using Worthy Bonds as a high yield savings, just depositing and withdrawing whenever, the response was "they are welcome to do that". I'd be interested to see if anyone has bitten the bullet and bought any bonds yet...
OrderlyChaos   |     |   11 posts since 2018
I've dipped my toe in. Takes 3 full days for transactions to be posted (via ACH) - in or out. Tested withdrawing 1 Bond ($10) after 2 weeks - no issues. Withdrawal included interest. Everything is very clearly defined and the SEC disclosure is clearly and well written. Obviously, the risk, as has been outlined above and in the disclosure, is fully yours.
rdudejr   |     |   1 posts since 2018
I bought $7,000 of these bonds using a Rocket Dollar account, so effectively holding them in a Solo 401(k). I had some of the reservations the others here did but at the end of the day, I get what they are doing and accept the liquidity and default risks. So I guess you could say I am a believer.
me1004   |     |   845 posts since 2010
There is not enough information at their Website to know much of anything about these bonds or this operation -- and that in and of itself is a BIG reason not to buy them.

In addition, on their face, the bonds look like they probably are pretty risky, as they deal in loans strictly to small businesses -- the smaller the business, the higher the risk.

And, this is not being presented as a mutual fund, it is not even being presented as Worthy doing anything other than managing the sale and, hopefully, being your agent to cash them in -- who can tell, so you have to presume that is all they do. So if those bonds go under, YOU are the one who will have to hire a lawyer and go after what you can manage to get in bankruptcy court. If this is not the situation, well, Worthy is not explaining anything else at their Website.

And let's face it, if you are getting 5%, Worthy must be taking maybe as much as 3% fee/commission, so the small business must be paying maybe 8% for the loan. 8% in the current interest climate should tell you these are high risk loans.

As for no early withdrawal penalty, these are bonds, not a CD, bonds can only be sold not withdrawn, it is not a withdrawal. But in a rising interest rate climate, bonds you hold will continually become worth less and less -- that is your early withdrawal penalty, when you can sell them only for less than their original principal; the only way you can get your return is by holding them until they mature, and hope they can be paid. I find it deceitful that Worthy is not pointing this out. And that this place wants to deceive you with talk of no early withdrawal penalty while not mentioning what happens with bonds, or anything about possible losses, should send up flags, they're looking for the little people, dupes to unload these bonds on -- no one else would buy them.

I went to their FAQ to find out anything it might tell about the rating on these bonds, but when I searched that, it gave me anything but the rating on these bonds. They are giving no information about that. Maybe that's because it would show them to be high risk, maybe something that would be called junk bonds. If they had a good rating, that would be something to highlight, and that they are not is strongly suggestive that the bonds are not well rated.

And you can't just match them against Fidelity's 3 year bonds -- unless you know they are of the same risk and rating as those bonds. Generally speaking, the higher return on a bond, the higher the risk. And the higher the risk, the less likely you are to actually get that return, or to even hold your principle.

So, absents a LOT more information, I would not recommend having anything to do with these bonds. All I see at that Website is deception.
Lkramarz   |     |   2 posts since 2013
I am glad to see an honest description of the issues with any bonds. The 5% bond coupon has no connection with your final return. You get 5% a year, but you could get back as little as 0% of your principal.
OrderlyChaos   |     |   11 posts since 2018
@me1004 While I fully agree that there is high-risk with these bonds and one as an individual is on the hook for everything, I find it fascinating reading through multitude of extremely bad and horrible stories (on this site) on how people cannot get their money back for months from the FDIC or NCUA insured banks. So I end up asking myself a question - what is the reality of the insured banks? I personally never had to experience what other people are going through or what happens when the bank folds - but I wonder if we all are having a veil draped in-front of our eyes with these Insured banks.
me1004   |     |   845 posts since 2010
Well, I'm not sure what you read about the FDIC and NCUA. But, normally that is not even an issue, they will immediately (over a weekend) sell the assets to another bank that takes them over immediately, and then business as usual on Monday, you can withdraw your money if you want to, almost always even the amounts over the FDIC level of insurance.

However, yes, the FDIC or NCUA will consider the records and they can't always find a buyer immediately. So yes, they have been known to deny anything over the insurance level. But you will not lose the insured amount, whereas in bonds you can lose everything.

Your money is generally available right away when the banks fail, the FDIC is very good about that. But even in the rare case that that is not the situation, you will get you insured amounts. In bonds, you could lose everything, and could wait years in bankruptcy court and spending on lawyers to even find out.
adyus   |     |   3 posts since 2018
Hi @me1004. CTO of Worthy here. That's a pretty thorough exploration of Worthy Bonds, but it misses one important fact, which our CEO @Soutlaw covered in another comment in this thread: these are not regular "bonds" in the traditional sense of the word.

We chose the word "bonds" since they're familiar to more investors, but another word would've been "notes". Either way, they are an alternative investment instrument vetted by the SEC, that doesn't follow the rules and ratings of a traditional bond. So they are neither A-rated, nor junk.

The bonds (i.e. the financial instrument) are recourse to Worthy, and the SEC specifically prohibits us from tying any single bond investment to a particular loan that Worthy makes to its borrowers, unlike other P2P lending platforms.

The only way the bonds would go under is if Worthy goes under. We are currently working on finding a custodian that would ensure that the loan repayments would continue to go directly to bond holders, even in the unfortunate event of Worthy going under. You are correct that we fund our operational costs via the spread between the loans we make and the 5% interest we return to our users.

There is no withdrawal (or sale) penalty whatsoever. While the wording may differ, any user is free to redeem, or sell, or withdraw their bonds at any time. The only "penalty" is the 4-6 business days it takes an ACH transaction to clear via our payments processor. Any interest accrued until the day of sale is added to the principal and transfered to the user's bank account. The only caveat is how we compute daily interest for each $10 bond individually, but I won't go into details (it deals with sub-cent amounts and rounding them up or down).

As mentioned before, our bonds don't have a rating because they're not the traditional bonds that institutions like Moody's would rate. You are right that there's no mention of ratings in our FAQs yet, but I will make sure to add an article addressing this, since it's something potential users should be informed about.

Your feedback here actually helps us a lot. While we have no intention of deceiving our users, we do need to balance the amount of information and detail we present on our landing pages for the average user with the need for more detailed explanations for savvier investors.
Tresbn00   |     |   1 posts since 2018
I rate the Worthy customer service highly. I received responses on Sundays and other friends have had contact late on Friday nights and Saturdays. I was unable to open an account due to their payment processor-Dwolla. No explanation as to why my application was declined. I have been at my job for 7 years, in the industry for 37 years, own my home, above average asset base, and below average liability level. Management does not appear to be involved with the day to day review of applicant declines. Worthy should have someone who reviews Dwolla declines.
adyus   |     |   3 posts since 2018
Hi @Tresbn00. Please reach out to [email protected] and I'll help you verify your account with Dwolla. I cannot tell who you are from your username here alone, but I'd be glad to help out via our support system.

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