Here’s the September 2013 update for my Beat the Market Experiment, a series of three portfolios started on November 1st, 2012:
- $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.
- $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.
- $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.
As requested, I updated the scale to zoom in on the comparison chart.
Summary. 10 months into this experiment, the Benchmark and Speculative portfolios have suddenly pulled neck-and-neck, with less than $25 separating them ($11,060 vs $11,083). Both US and Emerging Markets stock indexes have dropped recently, while my Apple shares have risen in anticipation of new product launches before the holiday season. Both P2P portfolios are still paying out competitive interest although late loans continue to pop up. Values given are as of September 1, 2013.
$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 most popular low-cost, index ETFs from Vanguard and iShares. With no minimum balance requirement, no maintenance fees, and no annual fees, I haven’t paid a single fee yet on this account. The portfolio was based loosely on a David Swensen model portfolio. Portfolio value is $11,060. Screenshot of holdings below:
$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, regular 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. Portfolio value is $11,083. Screenshot of holdings:
$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. Thus, this is also a race-within-a-race to see which of the two offers the best returns.
The LendingClub portfolio now has 227 current and active loans, 23 loans that were paid off early, and none in funding. Actually, it was hard to find new loans to invest last month. Three loans are between 1-30 days late. Two of the loans ($42) are between 31-120 days late, which I will assume to be unrecoverable. Two of the loans have been charged off ($48, one A-rated and one C-rated). ~$555 in uninvested cash. I will ignore accrued interest. Adjusted total is $5,317.
My Prosper portfolio now has 232 current and active loans, 24 loans that were paid off early, and the rest in funding. Four loans are between 1-30 days late. Six are over 30 days late, which to be conservative I am going to write off completely (~$126 in remaining principal). Three have been charged-off ($71, all A-rated too!). ~$299 in uninvested cash. Adjusted total is $5,289.