[JeromeS13]

The wife and I want to diversify our portfolio and we're looking at Peer to Peer lending with Lending Club. Does anyone have any first hand experience with the process? How many notes? What kind of mix/strategy? What are returns?

Thank you!

[pyroguy]

I’m not very familiar with that type of investment strategy. However, the financial advice I’ve been given is to invest in mutual funds. The 4 types of mutual funds advised to me by my financial advisor are growth, growth and income, aggressive growth, and international. 25% of your investments going in each category will diversify your portfolio to account for changes in the market and help you ride out and big swings in the market. The important thing is to not panic if/when the market takes a down swing but to let the market correct itself. I know not exactly the answer you were looking for, but hopefully it helps some.

[JeromeS13]

Originally Posted by pyroguy

I’m not very familiar with that type of investment strategy. However, the financial advice I’ve been given is to invest in mutual funds. The 4 types of mutual funds advised to me by my financial advisor are growth, growth and income, aggressive growth, and international. 25% of your investments going in each category will diversify your portfolio to account for changes in the market and help you ride out and big swings in the market. The important thing is to not panic if/when the market takes a down swing but to let the market correct itself. I know not exactly the answer you were looking for, but hopefully it helps some.

I appreciate the input. However, we already have a good spread of mutual funds, 401k, Thrift Savings Plan, and Roth IRAs. We're looking to add P2P on top of everything else.

[pyroguy]

Sounds good. If you've maxed out Roth IRA's, your 401k, and you're saving for any potential kid's college and you've paid off your house then what I was told to do afterwards was invest in real estate or continue into mutual funds on my own. From what I know of peer to peer lending is that the interest rate is less than investing in mutual funds and that's only if your loan gets paid back. There's a lot of people waiting to default on loans these days and you could end up with someone having taken your money.

[StreetRage320]

I have never tried P2P lending...for the past few years money has been so cheap I always felt my ROI would be better off in other areas. I currently have a maxed out 401k, invest heavily in a Vanguard growth fund VASGX, and two high end rental properties/investment properties. I (like you) was looking for my 4th pillar of diversification and chose specific stocks that I wanted to try. I know most would say that is a high risk choice, and yes it is, but I have the conservative investments that balance me out. I must say, there is indeed some pleasure that comes with buying and selling stocks.

The one area I am really focusing now is being sure to give back. I have never been to a funeral that discusses one's success in investing.

[Iron Lung Jimmy]

401K's, Roth IRA's, Traditional IRA's, etc. are just boxes, so to speak, into which you can put investments; they are not investments unto themselves. So having any or all of them does not automatically mean you are diversified, it depends what is in them. A person could have a half dozen retirement accounts all 100% invested in the same stock or mutual fund in which case they would have zero diversification.

My advice to anyone with a long term outlook would be to continuously dump all the money you can into an S&P index fund. Simple, low cost, and tax efficient. Then do not pay attention to what is going on with the stock market and do not keep looking at your account balance - that will keep you from panicking and taking money out.

No financial advisor will ever recommend that because, obviously, to do so would mean you do not need them any longer. But the fact is, to beat the S&P index on a long term basis is extremely difficult.

[JeromeS13]

I appreciate all of your input. However, I'm not looking for general investment advice. I'm looking for any personal experience that anyone may have with P2P lending specifically.

Thank you.

[Mr_Draco]

Never heard of P2P lending before so I was curious and looked around. From what I've seen the thought of P2P lending scares the hell out of me. Yes you can get 10% or more on return but your money is tied up for the term of the loan, typically 5 years, with no way to get it out. Lending Club, Prosper, and some other P2P sites report around a 1 in 3 default rate due to the fact that their customers are people with no or bad credit. So every time you lend money out, you run a 33% of them running away it and losing everything you put in.

[Vegas Bound]

I think they tried that in NY. Interest rates are pretty high and late payment penalties are pretty rough.

[0-120]

Do a three fund portfolio of low cost index funds. Done.

If you’re unsure, google “three fund portfolio”

Enjoy

[JeromeS13]

Originally Posted by Mr_Draco

Never heard of P2P lending before so I was curious and looked around. From what I've seen the thought of P2P lending scares the hell out of me. Yes you can get 10% or more on return but your money is tied up for the term of the loan, typically 5 years, with no way to get it out. Lending Club, Prosper, and some other P2P sites report around a 1 in 3 default rate due to the fact that their customers are people with no or bad credit. So every time you lend money out, you run a 33% of them running away it and losing everything you put in.

Do you have a reference for this information?

[JeromeS13]

Originally Posted by Vegas Bound

I think they tried that in NY. Interest rates are pretty high and late payment penalties are pretty rough.

I'm not looking to borrow. I'm looking at the investment side.

[StealthMan]

My advice: Stay away from P2P lending with companies like LendingClub. They control the credit underwriting categories and I know some of the people in credit UW at LC and they haven't mastered the credit scorecard yet - nor has their credit scorecard been 'recession tested'. So your putting a lot of faith into loans performing at the credit loss level that LC is determining, which may be (and has been) much higher than modeled. If you look at actual returns it is much lower with actual losses factored in (vs modeled losses) and you have no ability to facilitate recoveries on losses as that is handled by LC as well.

So unless you just want to put some 'play' money into P2P lending to see what it does and have some fun with it - I wouldn't put P2P on your list of serious money investment options.

Good luck!