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It is important to lend to many borrowers. Lending Club recommends at least 100. That normalizes the risk. My returns have been consistently 9.5-10.5%, net of d
by 11thEarlOfMar 11y ago
It is important to lend to many borrowers. Lending Club recommends at least 100. That normalizes the risk. My returns have been consistently 9.5-10.5%, net of defaults.
I started with an experiment: $2,500 loaned $25 at a time to 100 borrowers. Lending Club forecasts the default rate based on their own credit rating. It went well and the actual return was about 1% higher than they forecast.
- briffle 11y agoI am literally doing the same thing right now, with my tax returns.. Anxious for the end of this month, when the first payments are due..
- Twirrim 11y ago>Anxious for the end of this month, when the first payments are due.. Anxious because you need the money, or just anxious because you don't know how it's going to go?
- CodeCube 11y agoTake my advice ... forget about it for a while, and check back in in a few months :) Generally speaking, first payments tend to come in ... it's not until later that lates and defaults happen ;)
- shostack 11y agoHow savvy with lending would you say one needs to be to see those sorts of returns with relatively controlled risk? Is Lending Club for Joe Investor?
- 11thEarlOfMar 11y agoThey have an option to automate the lending, so it is possible to get good returns as s novice. The automated feature spreads the dollars over many loans. However, this is really new as a way for retail investors to earn a return, so they really should get comfortable with its structure before putting money in.
- shostack 11y agoIn your opinion what are the considerations of this vs. say, a Vanguard bond fund?
- Infernal 11y agoYou say 9.5-10.5% net of defaults - have the non-defaulted loans all been repaid in full, and if not what portion of them are still outstanding?
- heliodor 11y agoI was lending on LendingClub back in 2008 and 2009, diversified among at least twenty or thirty loans. Result: -7% (default included). It's not all roses when the market is in a downturn.
- hkmurakami 11y agoInteresting. I don't know your exact timeframe, but that still beat the public stock market.
- maxdemarzi 11y agoThat "normalizes" the risk, but the real world risk is not gaussian. A .com bubble, 9/11, housing crisis, type of event will wipe you out... Seems like every decade we get a one in a million type of event...
- 11thEarlOfMar 11y agoA housing crisis type of event would increase the default rate substantially, but not to 100%. I'd expect that rather than a +10% return, I might see -10% to -20% return during the event. Many stocks dropped 40% - 60% during the crisis, so for my money, stocks are far riskier.