Since my plan is to become a full-time investor (early retiree, capitalist, lazy bum, or whatever you choose to call it) I am constantly searching for new methods to stretch my capital as much as possible. For the past 10 years, I’ve kept 90% of my money in stocks – both individual and mutual funds. I’ve kept the remaining 10% in cash. That strategy has had reasonable results, although not stellar given the overall growth of the market since 2000.
Recently I’ve been investigating 4 new investment strategies:
- Real Estate
- High-Yield Dividend Stocks
- Peer-to-Peer Lending
Today I’m taking the plunge into peer-to-peer lending, by investing $5000 into a diversified lending portfolio at LendingClub.com. I will get into the details of why I feel comfortable with Lending Club in another post, for not I’m going to focus on describing my initial investment.
Lending Club offers a variety of ways to invest your money, ranging from AA-rated loans, where the returns range from 6-8% with very low risk to G-rated loans, where the returns sit around 22% but have a much higher risk of default. But what I really like about Lending Club is that it has a minimum Note purchase of only $25. This allowed me to take a small initial investment of $5000 and diversify the risk across over 100 Notes. Now, if I have a default or two, it will not be a big deal, I’ll still do better than most investment opportunities offer, like dividend stocks.
Because diversifying is so popular (and for good reason!), Lending Club makes it very easy to do this without having to spend hours on each inidividual note. They have created 3 packages: Low-risk, low-yield; medium-risk, medium-yield; high-risk, high-yield.
Since I’m risk-tolerant, I went ahead and put in $2500 into the medium risk and $2500 into the high-risk. Here is what it looks like:
and High Risk:
Over the course of the next several months, I’ll be documenting my Lending Club experiment on this blog. I’ll likely increase my investment to $10K soon, with some low-risk investments as well, so I can better break down performance across loan types.
If you are interested in getting started with Lending Club, click on the banner below. Using that link should give you an initial $50 bonus, which is something I was not aware of when I opened my account.
Good luck! And if you join, make sure to follow this blog so we can discuss performance results.