By now, I’ve now been investing with Lending Club for 15 months. I started with a $10,000 investment, and my portfolio is up to $11,756. Using the Lending Club algorithm for calculating Net Annualized Return (NAR), I’m sitting at 14.15%. If you recall from my last update in August, this is slightly down from 14.32% at that time, but not by much. Hopefully, this is a sign that my return rate is stabilizing at this high rate or return, although I’ll be the first to admit that this is probably overly optimistic. Here’s a snapshot from my Lending Club dashboard:
14% return is great, more than I could have hoped for. Then again, I still think it’s better than we should be hoping for – especially considering that there’s 1 loan in Default, and 13 additional loans that are at least a month late.
When I considered the late loans in my last update, I made some calculations under the extremely negative assumption that all of my late notes would eventually default. What’s interesting is that at that time, I had 9 late loans and 8 loans that were already charged off. Of those 9 late loans, only 4 of them actually defaulted, which works out to a 45% default rate on my late loans. This is actually pretty close to Lending Club’s estimate of 47% default rate on loans that are late by 31 days or more. I like when things work out like they’re supposed to.
Rather than doing similar magical hand waving to estimate my future results, I decided to try out Nickel Steamrollers fancy little Portfolio Analyzer tool to figure out my estimated future ROI (thanks for the pointer, Megan). I loaded my portfolio into the tool, and it spat out the results:
- Average Age: 280 days
- Weighted Return: 19.33%
- Estimated ROI: 13.34%
Not bad! I’ll take 13.34% as a long term return… Hell, I’d put my entire portfolio into this if it was guaranteed!
Some people have asked how I plan to manage my portfolio in the future. Will I just keep reinvesting profits, or will I start taking money out? The answer is both. For now, I plan to keep building the portfolio up to $15K by reinvesting my profits. Once I get to $15K, I’d like to make this investment a legitimate income producing machine by withdrawing excess cash above $15K each month. If I maintain a 12% NAR or better, then a $15K investment will result in $150/month of income. Not exactly high rolling, but it’s also a nice little buffer of cash flow for when I quit my full-time job.
A few months ago I also started investing with Prosper.com. Once I have my investments mature a little, I’ll start comparing results with Lending Club. So far, the results from Prosper are superior to Lending Club – but it’s way too early to call.
A few items for full disclosure:
1. If you sign up for LendingClub.com from this site, I get $25. This isn’t why I write these updates (I would write the same article regardless of this income), but I want to be open about it. If you’re one of the people that signed up after reading my results, I’d love to hear about your results!
2. While my personal results have been very good so far, there is still significant risk in this investment – as with any investment. Keep in mind that my $10K initial investment is still only 1% of my overall investment portfolio, so this is still a relatively small personal investment.