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Old 01-25-2014, 10:17 PM   #21
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Does anyone have experience with this and would it be an alternative for a portion of ones bond allocation in the current environment?

Since I didn't see an answer to this portion of your question: you should ask yourself what the purpose of your bond allocation is in your portfolio. If it is to provide a lower risk portion, then p2p is not the right way to go.

I have a small amount of my portfolio allocated to Lending Club, but I look at it as an alternative risky asset class, not part of my bond allocation.

As others have said, there are significant known and unknown risks associated with this investment.
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Old 01-25-2014, 10:29 PM   #22
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6 mos in....11% return and I kinda like doing the process of selecting loans...only do $25 per loan and 88% A and B loans.

Good luck
Are you familiar with the seasoning process with consumer loans?
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Old 01-26-2014, 12:33 AM   #23
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6 mos in....11% return and I kinda like doing the process of selecting loans...only do $25 per loan and 88% A and B loans.



Good luck

I've seen several articles recommend no more than $25 per loan. But at that rate how do you get any reasonable amount of money invested? Even putting in just 5k would take 200 loans...
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Old 01-26-2014, 02:20 AM   #24
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I've been lending p2p for about eight years (since the beginning.) My returns from 2006-2009, as reported by Prosper, were -0.5% annualized. My returns from 2010-2014, as reported by Lending Club, are 14.04% annualized after accounting for the probability that currently late loans will eventually default. I have 1003 loans whose average age is 14.5 months.

IMO the big risk in p2p lending isn't recession. We've just been through possibly the worst recession I'll see in my lifetime, and my p2p portfolio roughly broke even--far better than stocks.

I think the real risk is the possible insolvency of the platforms (Lending Club and Prosper). If one should go under, there could be trouble for investors, although both have agreements with third-party banks who will (attempt to) service existing loans should the platforms be unable to.

For me p2p loans are a good portfolio diversifier. (They make up only about 3% of my investments, though I am working to increase that.) While stocks and bonds gyrate, my p2p loans just keep chugging along.

For retirees what's interesting about p2p is that in most years there is very little variation in return. That means sequence-of-return risk is less than with, say, stocks, and the safe withdrawal rate should be closer to the mean annual return of the asset class.

There are plenty of free, third-party tools that allow you to backtest loan-selection strategies against the hundreds of thousands of p2p loans that have been made since 2006. That's not a long history, but you have to start somewhere.

As far as the difficulty of selecting so many loans: I select loans manually, but with mechanical criteria. I'd estimate it takes me an average of 15 seconds to find each loan I invest in. So do the math, and you'll see how long it might take you to build a portfolio. On Lending Club no investor with at least 800 loans has ever lost money.
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Old 01-26-2014, 07:10 AM   #25
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I'v I also invest in the Fidelity Floating Rate High Income Fund (FFRHX) which is primarily bank loans and have an average return of 11.5% this past year without any of the defaults.
Above correct ? FFRHX Fidelity Floating Rate High Income Fund FFRHX Quote Price News
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