P2P lending as a part of port folio

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Jimsad
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P2P lending as a part of port folio

Post by Jimsad » Mon Aug 19, 2019 6:00 am

I am thinking of investing in P2P lending with a small part of my portfolio (<8% )to add as a diversification to my 65:35 stock bond portfolio .
I see 4-7% returns advertised by leading club.
Is this a good idea ?

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Nate79
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Re: P2P lending as a part of port folio

Post by Nate79 » Mon Aug 19, 2019 6:05 am

Jimsad wrote:
Mon Aug 19, 2019 6:00 am
I am thinking of investing in P2P lending with a small part of my portfolio (<8% )to add as a diversification to my 65:35 stock bond portfolio .
I see 4-7% returns advertised by leading club.
Is this a good idea ?
The search bar is your friend as there are tons of threads on this subject, even a few in the last few weeks.

z3r0c00l
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Re: P2P lending as a part of port folio

Post by z3r0c00l » Mon Aug 19, 2019 6:13 am

Too little of an allocation to make a difference, and the returns from P2P have gotten worse and worse. The consensus is that the early days are over as are the chances to make a real buck at it. 4-7% is great until the fees and defaults hit, then you wind up in the 2-4% range and wonder why you didn't just put the money in bonds.

Jack FFR1846
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Re: P2P lending as a part of port folio

Post by Jack FFR1846 » Mon Aug 19, 2019 6:20 am

You're late here. Lots of us invested with lending club and between the internal issues and the optimistic way they report earnings, they've become quite toxic. Search for MrMoneyMustache's spread sheet on how he did. He stopped reporting when the negative returns got too embarrassing. I pulled out about 2 years ago, seeing things going south.
Bogle: Smart Beta is stupid

3funder
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Re: P2P lending as a part of port folio

Post by 3funder » Mon Aug 19, 2019 7:17 am

I wouldn't. Stocks and bonds are all you need.

runner3081
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Re: P2P lending as a part of port folio

Post by runner3081 » Mon Aug 19, 2019 9:15 am

Jack FFR1846 wrote:
Mon Aug 19, 2019 6:20 am
You're late here. Lots of us invested with lending club and between the internal issues and the optimistic way they report earnings, they've become quite toxic. Search for MrMoneyMustache's spread sheet on how he did. He stopped reporting when the negative returns got too embarrassing. I pulled out about 2 years ago, seeing things going south.
+1.

Unless something changes, you already missed out.

chrisjul
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Re: P2P lending as a part of port folio

Post by chrisjul » Mon Aug 19, 2019 9:58 am

Jimsad wrote:
Mon Aug 19, 2019 6:00 am
I am thinking of investing in P2P lending with a small part of my portfolio (<8% )to add as a diversification to my 65:35 stock bond portfolio .
I see 4-7% returns advertised by leading club.
Is this a good idea ?
You will find that many responses here are from people who have never invested in P2P but, nevertheless have strong opinions.

I have been investing in Lending Club for 4 years and am averaging over 5% (like your numbers suggest) after expenses, bad loans, etc.

I am happy with my investment, although I make all my own loans. You can "automate" and let them do the loans for you, based on your criteria.

Report back if you do invest.

Good luck.

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Jimsad
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Re: P2P lending as a part of port folio

Post by Jimsad » Mon Aug 19, 2019 4:38 pm

Thanks for your replies
Any preference between lending club or prosper or other ?
Or are they all the same ?

dcw213
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Re: P2P lending as a part of port folio

Post by dcw213 » Mon Aug 19, 2019 7:56 pm

I have dabbled and would not recommend. I have seen consistent practices that rub me the wrong way, like claiming transparency but bucking protocol to not disclose delinquency or default rates. For example, a platform I use made a big deal about listing all active loans to users. Whenever a loan went delinquent it was removed from the listing. I asked why and they gave a non answer. Also, in 2018 when rates for all loans increased the P2P rates remained static. Reduced the risk adjusted return quite a bit, but the demand was there. Quality of loans slipped. The disclosures regarding the processes and audits are inadequate in my opinion. Long story short, I expect these to be the first defaults in the next credit cycle. I would stay away.

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willthrill81
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Re: P2P lending as a part of port folio

Post by willthrill81 » Mon Aug 19, 2019 7:59 pm

Here's a post I wrote earlier this year on P2P lending.
willthrill81 wrote:
Wed Feb 27, 2019 1:13 am
I opened a small account with Lending Club in 2013. I used Nickel Steamroller, which was free at the time, to find a good set of selection criteria for high reward notes, and earned 9.5% returns, which I was very happy with. I then opened a larger account with them in the fall of 2016, and my returns using the exact same selection criteria as before have been much lower, just above 4%. It is certainly not worth the platform risk alone for those kinds of returns, never mind the illiquidity. This is the same kind of experience that I've heard from many. The P2P companies have lowered their standards for borrowers, and institutional investors have greatly eroded the returns.
Last month, I finally finished closing out my Lending Club accounts.

I'd buy EE bonds before buying any more P2P notes at this point. :wink:
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

chw
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Re: P2P lending as a part of port folio

Post by chw » Mon Aug 19, 2019 8:40 pm

Don’t do it. As another poster said- use the search bar for recent threads on the same topic. Just not worth the time or trouble for a lousy return, with risky companies issuing the notes.

If you must, look into a solid corporate hi yield bond fund (such as Vanguards) as an alternative.

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willthrill81
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Re: P2P lending as a part of port folio

Post by willthrill81 » Mon Aug 19, 2019 9:09 pm

chw wrote:
Mon Aug 19, 2019 8:40 pm
If you must, look into a solid corporate hi yield bond fund (such as Vanguards) as an alternative.
:thumbsup

I would certainly prefer junk bonds to P2P notes right now.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

rascott
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Re: P2P lending as a part of port folio

Post by rascott » Mon Aug 19, 2019 9:57 pm

willthrill81 wrote:
Mon Aug 19, 2019 9:09 pm
chw wrote:
Mon Aug 19, 2019 8:40 pm
If you must, look into a solid corporate hi yield bond fund (such as Vanguards) as an alternative.
:thumbsup

I would certainly prefer junk bonds to P2P notes right now.
I'd much prefer junk to P2P loans. People are making 4-5% on these things? In a great economy? Any downturn and that's money flushed.

dockidny
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Re: P2P lending as a part of port folio

Post by dockidny » Mon Aug 19, 2019 10:47 pm

I am also a Lending Club dabbler with a small initial investment of fun money. I pick my own loans using criteria that I have set up (filter by credit score, must be employed, no prior delinquencies or negative reports, then I look for the highest interest rates on what is left -- oh, and no misspellings in the profile!). I withdrew my initial investment amount a few years ago, so everything left I consider house money. Honestly, it's a little bit fun, but my returns have averaged about 5.6% before taxes and declining lately, so nothing spectacular. Tax reporting is annoying (embarrassing to give my accountant the 64-page long 1099-OID for these tiny little gains & losses). I wouldn't do it again and should probably pull out the small sum I have left, because it's a lot of hassle for little reward (but as I said, maybe just a tiny bit fun, so I keep doing it!)

The best return on Lending Club was the opportunity to participate in the IPO in 2014 -- it was my first (and so far still only) IPO experience. I sold the initial shares after a few days and made a tidy profit even though we were restricted to a small purchase. That was also kind of fun and interesting.

RL1013
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Re: P2P lending as a part of port folio

Post by RL1013 » Tue Aug 20, 2019 2:49 am

It is hard to liquidate. I am slowly offloading. 4-7% return only if we wait the whole period. Not as hands off as I thought. Management has proved that they are not trustworthy.

minimalistmarc
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Re: P2P lending as a part of port folio

Post by minimalistmarc » Tue Aug 20, 2019 2:57 am

I have dabbled heavily, outperforming equities some years and still would not recommend it.

I’m rebalancing most/all my loans into equities as they mature.

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