Author Topic: Platform -> Folio Rotation?  (Read 10215 times)

cjayb

  • Newbie
  • *
  • Posts: 12
    • View Profile
Platform -> Folio Rotation?
« on: May 24, 2013, 09:34:28 AM »
Hi all,

So I ended up selling about $10k worth of 60 month loans through folio in an effort to shorten my effective duration and buy more 36 month notes.

What I found interesting is that I was able to sell most of these loans with a 3%~ markup, effectively realizing a gain of 2% per note sold.

I'm wondering if it would be wise to set aside a percentage of the portfolio (maybe 10%) to engage in a sort of "rotation" where I purchase $25 notes on the platform and immediately put it up for sale on Folio for 2-3% higher than I purchased it for. I figure this would work best with the higher yielding 60 month notes because if you took a 20% 60 month note and put it up for a sale at a 3% premium the YTM would not be as impacted as much as if you did it with a 15% 36 month note.

If you are able to turn that section of the portfolio once a month you can realize 24% per year providing the strategy works flawlessly (which would amount to an overall +2.4% return on the entire portfolio).

Has anyone else tried something like this? What was your experience with it?

Fred

  • Hero Member
  • *****
  • Posts: 1421
    • View Profile
Re: Platform -> Folio Rotation?
« Reply #1 on: May 24, 2013, 09:54:47 AM »
This is where the term "high-frequency trading" applies to P2P lending.

New Jersey Guy

  • Hero Member
  • *****
  • Posts: 912
  • Hell Yea it's a Hemi!
    • View Profile
    • Email
Re: Platform -> Folio Rotation?
« Reply #2 on: May 24, 2013, 10:28:36 AM »
'Has anyone else tried something like this? What was your experience with it?"

I'm in New Jersey, so I can't purchase off the LC Platform.  But as a shopper off of the Folio platform, here is my 2-cents.  Your plan offers a low-reward return (as far as Capital Gains go), but also a very low risk.  I mean, what happens if nobody buys the notes?  You would just collect the interest like any other Buy/Hold note you own, right?  Secondly, there are other states besides NJ who rely on sellers to provide us with freshly issued notes and yes, we realize there is going to be a mark-up.  So there is a market.

I can tell you people do this.  It's not unusual for me to look at a list of notes all from the same loan, all for the same mark-up, and all listed at the exact same time.  This tells me it's the same seller who stocked up on notes with the intent of resale.

When I'm shopping for Buy/Hold notes on Folio, I'm always looking at the YTM after mark-up.  Therefore, I can tell you I'm not interested in A or B notes with a 3% mark-up as the final return isn't worth the risk.  Personally, I like C-D-E notes where my yield is 12% or higher (on a 60-month note).  I look at the yield first, then the mark-up.  So if I see a note with a 14% YTM and a mark-up of 3%, it's worth the 3% to buy it. 

I think the general consensus of this board is that C-D-E-F loans offer a better reward potential even though the risk is higher than A and B loans.  Personally, I would use Interest Radar to filter out high risk attributes and search for loans offering the least chance of default.  Granted, it wouldn't turn up a ton of notes, but at least you'd be offered the "Best of the Worst". 

One factor you may face is competition.  I shop off of Interest Radar, and IR will list notes in order starting with the smallest mark-up.  So, your loan might be 5th down the list behind sellers asking a mark-up of a mere .5% to 2.5%.  If I'm buying two notes, your note won't be one of them.  (However, my purchase will move your note up).  But, since you've already found success at a 3% mark-up, you know that it's your sweet spot, so stick to it.
Return over deposits:   66.82%
IRR:   86.54%
As of April 30, 2014

Fred

  • Hero Member
  • *****
  • Posts: 1421
    • View Profile
Re: Platform -> Folio Rotation?
« Reply #3 on: May 24, 2013, 10:45:34 AM »
Your plan offers a low-reward return (as far as Capital Gains go), .... 

Actually, you can realize a 2+% return monthly, which is not too shabby.  Not only do you get the interest of the first month -- which is the month with the highest interest -- you also get a 2% effective gain from the sale.

Agreed, that C-D-E-F grade 60-month loans are good candidates for this strategy.

New Jersey Guy

  • Hero Member
  • *****
  • Posts: 912
  • Hell Yea it's a Hemi!
    • View Profile
    • Email
Re: Platform -> Folio Rotation?
« Reply #4 on: May 24, 2013, 11:52:54 AM »
"Actually, you can realize a 2+% return monthly, which is not too shabby."

Fred, not quite 2%.   Well, yea, it would be if he turned over 100% of the notes he bought, but that's unlikely.  But like you said, he would collect interest on notes that go into the first month.

And then you need to ask- 2% of what?  2% on the small portfolio of notes he has for sale?  Or, 2% on his ENTIRE portfolio.

If you sold 30 notes for a $15 gain, that only comes out to .06% on a portfolio where you have $25,000 invested.

HOWEVER, if you separated 50 notes ($1250 invested) into a separate portfolio and sold the same 30 notes, that would net you a 1.2% gain for the month just on that $1250.  Plus, he'd collect interest (about $8) on the unsold notes.  That would net about 1.92% or an anticipated growth of 23% for the year.  Like you said, not too shabby!

Even if you appled the returns from these sales to a $25,000 portfolio, you can boost your annual return by about 3/4%
Return over deposits:   66.82%
IRR:   86.54%
As of April 30, 2014

cjayb

  • Newbie
  • *
  • Posts: 12
    • View Profile
Re: Platform -> Folio Rotation?
« Reply #5 on: May 24, 2013, 11:58:36 AM »

Even if you appled the returns from these sales to a $25,000 portfolio, you can boost your annual return by about 3/4%

That's the idea. Currently my entire portfolio is about 40k, I'd do this with about 4,000~ worth of notes. Roughly 10%.

I think I'm going to give it a shot and see what my turnover ratio looks like. If it's anything less than 1x per month, it's probably not worth the effort.

NJ Guy -- as somebody that uses Folio exclusively, would you give a negative bias to a note that was just issued and put on Folio? That is, if there was a brand new note vs. a note that has been kept current for 10 months, and both have the same YTM, all else equal I assume you would opt to purchase the mature note, correct?

New Jersey Guy

  • Hero Member
  • *****
  • Posts: 912
  • Hell Yea it's a Hemi!
    • View Profile
    • Email
Re: Platform -> Folio Rotation?
« Reply #6 on: May 24, 2013, 12:26:51 PM »
"NJ Guy -- as somebody that uses Folio exclusively, would you give a negative bias to a note that was just issued and put on Folio? That is, if there was a brand new note vs. a note that has been kept current for 10 months, and both have the same YTM, all else equal I assume you would opt to purchase the mature note, correct?"

Actually, I buy both!  It just depends on what kind of mood I'm in, how much available cash I have, and what kind of deals I can find on previously issued. 

I do like buying freshly issued notes, just like anybody else on this board.

Previously issued are different.  Not only do they have a track record to look at but as Fred stated, the largest interest payments have already been paid out.  So, I won't get any of that.  I have two different filters on IR for previously issued notes.  One is quite tight, the other a little more loose.  On my strict filter, the note must be squeaky clean as far as payment history.  If the YTM is still decent, I won't mind paying up to 2%.  It would have to be pure gold for me to pay 3%.

Notes that have had a grace period, a late payment, or any type of negative log entry I hesitate to pay a premium for, but rather look for a discount or maybe par value at most.  I usually have no problems finding notes like that so paying a mark-up is out of the question.

I don't have nearly the money that you do, but I do have split portfolios.  The notes I sell are much more distressed, but my reward factor is also much higher.  Currently, I have about 18% invested in distressed Buy/Sell notes, and 82% invested in Buy/Hold notes.  I can tell you the monthly returns I get on my distressed notes are far, far higher than the interest I make on my Buy/Holds.  So it does work if you find the right formula and put the extra effort into it.
Return over deposits:   66.82%
IRR:   86.54%
As of April 30, 2014

Joe6Luck

  • Jr. Member
  • **
  • Posts: 81
    • View Profile
Platform -> Folio Rotation?
« Reply #7 on: May 24, 2013, 12:49:18 PM »

That's the idea. Currently my entire portfolio is about 40k, I'd do this with about 4,000~ worth of notes. Roughly 10%.


Do you have a way to automatically sell such notes? If you sell $4000 each month with a 2% profit, that will be $80/ month. I am afraid that it might not be worth it if you need to spend, say, 10min per day or 5 hours per month on it (thinking about it, checking status, and manually setting it, etc.).
« Last Edit: May 24, 2013, 12:51:26 PM by Joe6Luck »

cjayb

  • Newbie
  • *
  • Posts: 12
    • View Profile
Re: Platform -> Folio Rotation?
« Reply #8 on: May 24, 2013, 12:52:07 PM »

That's the idea. Currently my entire portfolio is about 40k, I'd do this with about 4,000~ worth of notes. Roughly 10%.


Do you have a way to automatically sell such notes? If you sell $4000 each month with a 2% profit, that will be $80/ month. I am afraid that it might not be worth it if you need to spend 3 hours per month or 10min per day on it (thinking about it, checking status, and manually setting it, etc.).

Yep, I have the Tampermonkey script that lets me automatically sell my notes with at a x% premium/discount. I only have to put them up for sale, monitor the status, and renew listings that don't sell. Only takes a few seconds to do.

mitgib

  • Jr. Member
  • **
  • Posts: 73
    • View Profile
    • Hostigation High Resource Hosting
    • Email
Re: Platform -> Folio Rotation?
« Reply #9 on: May 24, 2013, 01:20:30 PM »
The only issue I see with supplying those Folio only investors is the cash lag of getting a note approved, so the ability to turn your inventory would be greatly reduced.  The lag is so great for me lately I haven't added new funds to LC since 3/28 and still trying to get that small deposit invested along with incoming principal/interest reinvested.  Other than this issue, it's a great idea, those investors in Folio only states need supply, someone has to fill it.

New Jersey Guy

  • Hero Member
  • *****
  • Posts: 912
  • Hell Yea it's a Hemi!
    • View Profile
    • Email
Re: Platform -> Folio Rotation?
« Reply #10 on: May 24, 2013, 01:26:55 PM »
"I am afraid that it might not be worth it if you need to spend, say, 10min per day or 5 hours per month on it (thinking about it, checking status, and manually setting it, etc.)."

This is absolutely true!  If you're going to start selling on Folio, it's hands on.  And the more distressed the notes, the more babysitting you need to do.

The difference is, I find it challenging, so I don't mind.  I enjoy the accomplishment.  In addition, the time I've spent doing this I learned a ton.
Return over deposits:   66.82%
IRR:   86.54%
As of April 30, 2014

Fred

  • Hero Member
  • *****
  • Posts: 1421
    • View Profile
Re: Platform -> Folio Rotation?
« Reply #11 on: May 24, 2013, 01:27:47 PM »
those investors in Folio only states need supply, someone has to fill it.

This is a charity responsibility that we need to take seriously.   :D

AmCap

  • Full Member
  • ***
  • Posts: 248
    • View Profile
    • Email
Re: Platform -> Folio Rotation?
« Reply #12 on: May 24, 2013, 05:48:19 PM »
those investors in Folio only states need supply, someone has to fill it.

This is a charity responsibility that we need to take seriously.   :D

Charity plus markup...

Zach

  • Administrator
  • Hero Member
  • *****
  • Posts: 622
    • View Profile
    • Email
Re: Platform -> Folio Rotation?
« Reply #13 on: May 24, 2013, 09:19:53 PM »

That's the idea. Currently my entire portfolio is about 40k, I'd do this with about 4,000~ worth of notes. Roughly 10%.


Do you have a way to automatically sell such notes? If you sell $4000 each month with a 2% profit, that will be $80/ month. I am afraid that it might not be worth it if you need to spend, say, 10min per day or 5 hours per month on it (thinking about it, checking status, and manually setting it, etc.).

Yes, Interestradar.com can do it for you. Its an excellent service, and I highly recommend you try it out.

faeriering

  • Full Member
  • ***
  • Posts: 135
    • View Profile
Re: Platform -> Folio Rotation?
« Reply #14 on: May 25, 2013, 11:26:38 AM »
I tried something like this a few months ago when SarahV had mentioned that she was specifically looking for newly issued notes on folio and was willing to pay a ~5% premium for them.

I found that for 25$ notes I did get many of them to flip, but the time involved with managing that number of notes was really not worth the payback for me.  Also I didn't enjoy it.