$10,000 Beat-the-Benchmark Experiment Update – May 2013

Here’s a condensed May 2013 update for my Beat the Market Experiment, a series of three portfolios started on November 1st, 2012:

  1. $10,000 Passive Benchmark Portfolio that would serve as both a performance benchmark and an real-world, low-cost portfolio that would be easy to replicate and maintain for DIY investors.
  2. $10,000 Beat-the-Benchmark Speculative Portfolio that would simply represent the attempts of an “average guy” who is not a financial professional and gets his news from mainstream sources to get the best overall returns possible.
  3. $10,000 P2P Consumer Lending Speculative Portfolio – Split evenly between LendingClub and Prosper, this portfolio is designed to test out the alternative investment class of person-to-person loans. The goal is again to beat the benchmark by setting a target return of 8-10% net of defaults.

Executive summary. Six months have gone by since this experiment started, and the passive portfolio has ridden a hot stock market nearly the entire time. My speculative portfolio is catching back up a bit after my Apple holdings stumbled, while the P2P lending portfolio is still too young to make any firm conclusions. The details are below:

$10,000 Benchmark Portfolio. I put $10,000 into index funds at TD Ameritrade due to their 100 commission-free ETF program that includes free trades on the best low-cost, index ETFs from Vanguard and iShares. The portfolio was based loosely on a David Swensen model portfolio. Screenshot:


(click to enlarge)

Total portfolio value (5/1/13): $11,191.03 (+8.1% YTD return)

$10,000 Speculative Portfolio. Many people speculate with their money, buying and selling stocks now and then, but they rarely track their performance even though they may brag about their winners. Honest tracking is the primary reason for this “no-rules, just make money” account. I dropped $10,000 into a TradeKing account for this portfolio due to their low-cost $4.95 trade structure, free tax-management gain/loss software, and free dividend reinvestment. Screenshot:


(click to enlarge)

Total portfolio value (5/1/13): $10,480.87 (+4.6% YTD return)

$10,000 Prosper and LendingClub Portfolio. For this one, I started with $10,000 split evenly between Prosper Lending and Lending Club, and went to work lending other people money and earning interest with an 8% target net return. So it’s also a race-within-a-race to see which option offers the best returns.

The LendingClub portfolio now has 210 current and active loans, 11 loans that were paid off early, and several in funding. Two of the active loans are currently between 31-120 days late, which to be conservative I am going to write off completely ($48).


(click to enlarge)

LendingClub.com account value: $5,210 (includes principal + accrued interest, minus 30+ day lates, after fees)

My Prosper portfolio now has 221 current and active loans, 16 loans that were paid off early, and 3 in funding. 4 of the active loans are between 1-30 days late. One loan is over 30 days late, which to be conservative I am going to write off completely ($24).


(click to enlarge)

Prosper.com account value: $5,224 (includes principal, accrued interest, minus 30+ day lates, after fees)

Total portfolio value (5/1/13): $10,434

Comments

  1. Michael says:

    I wonder if the tax complications with Prosper/Lending Club are worth it. I put a few grand into Prosper when it first came out and when I got the tax forms from that 1st year, it was enough tax work to scare me away from it in the future.

    Do you view the tax time hassles with these P2P lending services worth the hassle for the return?

  2. I talked about Prosper and LendingClub taxes here:

    http://www.mymoneyblog.com/len.....-1099.html

    They are more trouble than a normal brokerage statement, but not horrible in my opinion. (Unless you have a bunch of tiny tax lots from dividend reinvestment and then I’d rather deal with P2P loans.)

  3. How long do you plan on running the comparison Jonathan? With an investment mix of both 36/60 month notes, are you planning on running the experiment until at least the end of maturity for one, if not both of them?

  4. Justin says:

    I think this experiment would be more practical if you were contributing a certain amount of money to each account monthly. Without that, the market conditions around the starting point will play a very large factor in the results of this experiment….

    Also, most savers are continually saving money and would need a place to put that money.

  5. Honestly, I’m getting a little bored of the portfolios, I might just try and sell everything at the 1 year mark and see what I end up with. On the other hand, I’m mostly just trying to show whether LendingClub/Prosper are a legitimate alternative asset class so I might just keep it going for at least 3 years.

Speak Your Mind

*