Search Results for: lendingclub

$10,000 Beat-the-Benchmark Speculative Portfolio Update – March 2013

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Here’s the 2nd piece of the monthly updates for my Beat the Market Experiment, a set of three portfolios started on November 1st, 2012. Since this update is rather boring, let me provide an update on the overall experiment:

  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 Consumer Loan Speculative Portfolio – Split evenly between LendingClub and Prosper, this portfolio is designed to test out the alternative investment of peer-to-peer loans. The goal is again to beat the benchmark by setting a target return of 8-10% net of defaults.

$10,000 Beat-the-Benchmark Speculative Portfolio as of March 2, 2013. 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 am using a TradeKing account for this portfolio as I’ve had an account with them for a while and am comfortable with their low-cost $4.95 trade structure, free tax-management gain/loss software, and free dividend reinvestment. Here is a screenshot taken from my TradeKing home page 3/2/13 mid-day:

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$10,000 Benchmark Portfolio Update – March 2013

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Time again for a Beat the Market Experiment monthly update, for the first 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 of person-to-person loans. The goal is again to beat the benchmark by setting a target return of 8-10% net of defaults.

$10,000 Benchmark Portfolio as of March 2, 2013. My account is held 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. I funded it with $10,000 and bought all the ETFs required to be fully invested on 11/1/12. All trades were commission-free.

Here’s a screenshot from my account showing exact holdings and their market value on 3/2/13 mid-day:


(click to enlarge)

Here’s the asset allocation pie chart, tracked with a simple Google Docs spreadsheet:

No new trades over the past month as the allocations are still close to targets. Still no dividends or money market interest. Here is the target asset allocation:

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$10,000 Beat-the-Benchmark Speculative Portfolio Update – February 2013

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Here’s the 2nd piece of the monthly updates for my Beat the Market Experiment, a set 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 Consumer Loan Speculative Portfolio – Split evenly between LendingClub and Prosper, this portfolio is designed to test out the alternative investment of peer-to-peer loans. The goal is again to beat the benchmark by setting a target return of 8-10% net of defaults.

$10,000 Beat-the-Benchmark Speculative Portfolio as of February 1, 2013. 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 am using a TradeKing account for this portfolio as I’ve had an account with them for a while and am comfortable with their simple $4.95 trade structure and free tax-management gain/loss software. Here is a screenshot taken from my TradeKing home page after market close 1/31/13:


(click to enlarge)

New activity. Well, this certainly wasn’t a great month for my stock picks. I basically tripled-down on Apple prior to their earnings announcement in late January, betting that they would have record-breaking profits in the 4th quarter. Well, they did, but the stock went down anyway due to growth concerns. I’m still giving it until the end of 2013 to see this play out, although I may pare back the position. I think Steve Jobs left us one last surprise… or I might just lose a bunch of money on this highly un-diversified move.

I also sold my Emerging Markets ETF (DEM) at a slight profit and used the proceeds to buy 500 shares of Enphase Energy (ENPH) at $3.77. Enphase manufactures micro-inverters for solar photovoltaic systems, which converts DC to AC and also allows you to individually track the power output of each panel on your roof. I believe that residential solar PV will take off soon, as electricity prices continue to rise and equipment costs drop. (Low interest financing won’t hurt either.) However, betting on a specific solar installer like SolarCity (SCTY) or a solar panel manufacturer when there is so much competition seems even harder. In addition, I believe that Enphase is a good takeover target in the future.

Here’s a pie chart of my holdings, tracked with a simple Google Docs spreadsheet (2nd tab):

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$10,000 Benchmark Portfolio Update – February 2013

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Time again for a Beat the Market Experiment monthly update, for the first 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 of person-to-person loans. The goal is again to beat the benchmark by setting a target return of 8-10% net of defaults.

$10,000 Benchmark Portfolio as of February 1, 2013. My account is held 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. I funded it with $10,000 and bought all the ETFs required to be fully invested on 11/1/12. All trades were commission-free.

Here’s a screenshot from my account showing exact holdings and their market value as of 2/1/13 before market open:


(click to enlarge)

Here’s the asset allocation pie chart, tracked with a simple Google Docs spreadsheet:

No new trades over the past month as the allocations are still close to targets, no dividend distributions, no money market interest. Here is the target asset allocation:

[Read more...]

$10,000 Beat-the-Benchmark Speculative Portfolio Update – January 2013

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Here’s another piece of the monthly update for my Beat the Market Experiment, a set 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 Consumer Loan Speculative Portfolio – Split evenly between LendingClub and Prosper, this portfolio is designed to test out the alternative investment of peer-to-peer loans. The goal is again to beat the benchmark by setting a target return of 8-10% net of defaults.

$10,000 Beat-the-Benchmark Speculative Portfolio as of January 1, 2013. 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 am using a TradeKing account for this portfolio as I’ve had an account with them for a while and am comfortable with their simple $4.95 trade structure and free tax-management gain/loss software. Here is a screenshot taken from my TradeKing home page as of market close 12/31/12:


(click to enlarge)

[Read more...]

$10,000 Benchmark Portfolio Update – January 2013

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Time again for a Beat the Market Experiment monthly update, for the first 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 Consumer Loan Speculative Portfolio – Split evenly between LendingClub and Prosper, this portfolio is designed to test out the alternative investment of peer-to-peer loans. The goal is again to beat the benchmark by setting a target return of 8-10% net of defaults.

$10,000 Benchmark Portfolio as of January 1, 2013. I chose to open an account at TD Ameritrade due to their 100 commission-free ETF program, including the best low-cost, index ETFs from Vanguard and iShares. I funded it with $10,000 and bought all the ETFs required to be fully invested on 11/1/12. All trades were commission-free. My target asset allocation is below.

Due to simplicity and small portfolio size, for now I am going with 100% stocks and no bonds. This is meant to be appropriate for young investors, who should try to get a long horizon for stocks and can add more bonds later on. According to popular glide paths, a rule-of-thumb is having your age minus 20% in bonds. Here are the ETF components that represent each asset class:
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$10,000 Play Portfolio Update – December 2012

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As part of my Beat the Market Experiment, I started three portfolios on November 1st, 2012:

  1. $10,000 “Good Boy” Passive ETF Benchmark Portfolio that would serve as both a performance benchmark and an example portfolio that would be easy to build and maintain for DIY investors.
  2. $10,000 “Bad Boy” Beat-the-Benchmark 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 Consumer Loan Portfolio – Split evenly between LendingClub and Prosper, this portfolio of peer-to-peer loans will have a target return of 8-10% net with the goal of beating the Benchmark portfolio over the long run.

This is the monthly update for $10,000 Play Portfolio as of December 1, 2012. I have to admit upfront that I haven’t devoted much time into this portfolio. I am no wannabe-Warren Buffett, as he would read the financial statements and 10-Ks of any company before buying in. Still, I am serious about trying to beat the market, as this is my own hard-earned money I’m using. I am using a TradeKing account for this portfolio, and here is a screenshot as of close 11/30:


(click to enlarge)

Here’s a pie chart of my holdings:

Details below:

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$10,000 Benchmark Portfolio Update – December 2012

bench_tickers

As part of my Beat the Market Experiment, I started three portfolios on November 1st, 2012:

  1. $10,000 “Good Boy” Passive ETF Benchmark Portfolio that would serve as both a performance benchmark and an example portfolio that would be easy to build and maintain for DIY investors.
  2. $10,000 “Bad Boy” Beat-the-Benchmark 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 Consumer Loan Portfolio – Split evenly between LendingClub and Prosper, this portfolio of peer-to-peer loans will have a target return of 8-10% net with the goal of beating the Benchmark portfolio over the long run.

This is the monthly update for the $10,000 Benchmark Portfolio as of December 1, 2012. I opened an account at TD Ameritrade due to their 100 commission-free ETF program, including the best low-cost, index ETFs from Vanguard and iShares. I funded it with $10,000 and bought all the ETFs required to be fully invested on 11/1/12. Due to simplicity and small portfolio size, I am going with 100% stocks and no bonds. My target asset allocation is below.

Here are the ETF components that represent each asset class:

Here are my holdings and their market value as of the end of day 11/30/12 (full screenshot):

Here’s the asset allocation:

Total value of stocks: $9,982.21
Cash balance: $24.18
Total portfolio value: $10,006.39

Not too much to talk about this month, I bought everything in a matter of minutes with no commissions at all, and a month into the experiment our total return to date is a snoozefest 0.06%. The Play Portfolio update will be up tomorrow.

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Prosper: Best Search Filters for Automated Quick Invest

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(This post is for investors and lenders. If you need a loan or debt consolidation, check out my LendingClub vs. Prosper comparison for borrowers.)

As part of my new Beat-the-Market Experiment, I have dedicated $5,000 to Prosper. As a quick recap, Prosper.com securitizes person-to-person loans so that you can lend money to other people in $25 increments and earn interest. The idea is to replace banks and credit cards as the middlemen. Since their mid-2009 re-launch after SEC registration, there have been a full cycle of 3-year Prosper “2.0″ loans fully maturing with an average net return of over 8% annualized. However, this is still unsecured lending which means no car or home as collateral, and thus there is a risk of loss (which can be mitigated by diversifying in multiple loans).

Prosper looks at the credit history of prospective borrowers and charges them an interest rate based on a Prosper Rating of AA, A, B, C, D, E, or HR (high risk). (The ratings are relative; the minimum credit score is 640.) Now, if Prosper’s grading system was perfect, life would be simple. The interest rate charged would be high enough to cover any defaults plus a little extra for the added heartburn. Ideally, after defaults and fees are accounted for, perhaps AA loans would earn 6%, C loans would earn 8%, and E loans would earn 10%.

However, things aren’t quite that neat. Prosper publicly shares all its loan information, and smart folks have made tools to analyze that data. Currently, the best place to go is Prosper Stats. If you take all the loans, we see that AA loans have a net return (after estimating losses from late loans and actual losses from defaults) of ~6%, C loans had a net return of ~11%, but E loans only returned ~9%. Hmm. Look further and you’ll see other small inconsistencies. For example, loans to people with 2 or less open credit lines actually have a measly 3% net return, while loans to folks with 18+ open credit lines open have net annualized returns of over 11%?!

As a result, many investors avoid investing in Prosper loans blindly and instead use specific search filters. Indeed, Prosper makes it easy with their “Automated Quick Invest” service which automatically invests in loans that satisfy your custom search rules. There’s no need to spend time every day looking for loans. So, what are some possible criteria?

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Beat The Market Experiment: My Money Blog Play Portfolio Breakdown

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Update: Check out the monthly updates on this experiment.

Do you think you’re a below-average driver? Of course not. Everyone thinks they’re above-average. This is why I’m a big proponent of the “Core and Explore” or “Play” portfolio. You should set aside a small percentage of your portfolio and try your best to beat a passive benchmark. If you track things carefully, chances are that after a few years you’ll discover you really aren’t so good and hopefully end up settling into the slight-but-guaranteed outperformance of low-cost, passive investing. Or, you’ll find you’re meant to be a rich and successful hedge fund manager. Win-win!

I’ve been running a little side portfolio for years, but I haven’t been following my own advice about tracking my relative performance. I think it’s time. I’m taking $30,000 and using it for my “Beat the Market” experiment. This is less than 5% of my actual portfolio, which is still overwhelmingly in low-cost index funds rebalanced to a target asset allocation. I’ll track the balances monthly with actual screenshots starting today, November 1st, 2012. Here’s how I’m breaking it down.

$10,000 “Good Boy” Passive ETF Benchmark Portfolio

My real portfolio is held primarily at Vanguard and Fidelity but also includes non-index funds due to limited 401k choices. To create a separate benchmark, I opened a new account at TD Ameritrade as they offer 100 of the most popular ETFs commission-free, including the Vanguard and iShares ETFs that I use. My benchmark portfolio will be based on my usual target asset allocation, except fully-invested in 100% stocks (details coming). As the portfolio will consist of commission-free ETFs and there are no maintenance or service fees, the overall cost drag should be very, very low.

I will not make any deposits or withdrawals to this account, and will report the total balance on a monthly basis. I suppose I could also track after-tax efficiency, but that sounds like too much work and most people invest predominantly in 401k’s and IRAs anyway.


(I know, it has $15,000 in it right now, I already submitted a withdrawal request for $5,000.)

$10,000 “Bad Boy” Beat-the-Benchmark Portfolio

In this account, I’ll be able to buy whatever: individuals stocks, ETFs, options, and even short stocks as needed in my attempts to crush the Benchmark portfolio above. I liquidated the holdings in my existing TradeKing account and left $10,000 in there. This will serve as a low-cost, no-fee brokerage account with $4.95 trades and 65 cent options contracts. (TD Ameritrade standard pricing is $9.99 a trade.)

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Lending Club vs. Prosper Experiment: Which Has The Highest Returns?

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I’ve decided to invest $10,000 in Prosper and Lending Club to compare their performance as an investment. Putting $5,000 in each will allow me to invest in 200 loans at $25 a piece, so that each loan will only be 0.5% of each respective portfolio. The money has already been deposited:

Prosper Screenshot:

Lending Club Screenshot:

Prosper advertises returns of seasoned returns of 10.08%. Lending Club advertises rates of 5.81% to 9.43% depending on credit grade, but always with prime borrowers. I want to compare both absolute performance and the investing experience (ease of use, customer service, liquidity, etc.). However, I’m not sure exactly how I should run the experiment…

Background
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Prosper Borrower Promotion: 2nd Payment Waived Up To $300

Prosper Banner

Offer is back! Person-to-person loan site Prosper.com is having a another one-day promotion for borrowers who submit their loan listing on Friday, February 17th where they will actually make your entire 2nd loan payment (principal and interest) for you, up to $300.

* To be eligible for the offer, you (i) must post a loan listing on Prosper.com between 12:00 am PT and 11:59 pm PT on February 17, 2012; (ii) have to reach Verification Stage 3 within 1 week of posting the loan listing; (iii) cannot have posted a loan listing on Prosper.com within the past 30 days; and (iv) may not withdraw your loan listing. If you meet these criteria, Prosper will credit your second required loan payment up to $300. The credit will be posted to your account within 30 days of Prosper receiving your first payment. This promotion cannot be combined with any other promotional offer from Prosper.

Getting a rate quote is free, as their “soft pull” will not affect your credit score. If your loan does not find enough lenders to fund, then you can walk away with no obligation. If you do end up taking out a loan, then it will show up on your credit report. There are several ways you can use this offer.

The quick loan for profit. If you have an excellent credit score, you can get the AA loan rate of 5.65% for 1 year. Even if you don’t need it, take out a loan for about $3,500, and you would end up with a monthly payment of around $300. Your closing fee would be 0.5%, or $17.50. Your interest for a month at 5.65% would be less than $20. There is no pre-payment penalty, and your second payment is covered at $300. Just pay back the money they lent you after two months, and you’d be looking at over $250 in profit. You don’t need to risk any capital, just pay back the money they lend you and keep the profit. Decide quickly! Get your own rate quote at Prosper here.

Investor opportunity. As a result of the math above, there will be a mysterious surge in listings from AA borrowers for $3,500 loans today. If you like, you can invest in these notes today and tomorrow and earn some decent 4-5% interest for at least a couple months. Yes, there is still risk involved but my view is that people with AA credit scores are unlikely to default over only $3,500. I did this last time around, but didn’t have much money in my Prosper account. Sadly, still true this time. Just don’t be surprised if all your loans end up being paid off early!

Lowering your effective interest rate. If you don’t have an AA loan rating, you can use the free payment to lower your effective interest rate, especially if you pay off the loan early. For a $3,500 loan I got an A rating which meant either a 1-year loan at 6.08% or a 3-year loan at 9.99%. Your closing fee is 3.95% for A & B loans, which for a $3,500 loan that’s $138.25. So the free 2nd payment of up to $300 can knock that out completely and you can use the rest of the money to cover most of the first year’s interest.

(I went ahead and also got a free rate quote from LendingClub – their main competitor – but there all loans from $1,000 to $11,975 are only available with a 3-year term. With the loan rebate, I think Prosper would have had been the best 1-year rate anyway. However, my rate for the 3-year loan was only 6.78% APR (their highest A1 grade), which is much less than the Prosper APR. So it can pay to shop around.)

Bonus credit score. After getting the free rate quote, I was actually sent my credit score of 776 based on my Experian credit report. Prosper uses the Experian ScoreX Plus credit score, which has a range of 300 to 900. FICO range is 300 to 850. I assume this is due to new consumer laws that require them to send me my score if I’m not given the absolute best rate available. Not a bad side perk.