Author Topic: Automated investing concern  (Read 5005 times)

gottodo1

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Automated investing concern
« on: October 10, 2014, 01:20:45 PM »
So, I have a great filter and I've started trying automated investing but apparently I've found something I'm concerned with. Automation breeds lower returns, I know that but recently on a loan id# 31286466 I noticed it had selected this loan and the monthly income is listed as 52,500... Ya there's no way to limit the max with automated investing but shouldn't there be some logic as to what reasonable income is and if it's obscenely high it should be verified? I've asked to be de-invested from this loan as I'm 99% certain this isn't correct and if this person isn't intelligent enough to fill in the application correctly, I don't want to invest in their loan.

I've seen a few other loans where I didn't believe the salary listed (14k/month for shipping clerk) but luckily those were all out of my requirement for other reasons.

Anyone else seen this or dealt with it?

SeanMCA

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Re: Automated investing concern
« Reply #1 on: October 10, 2014, 01:35:19 PM »
I will never use their automated investment tool. Great way to get shafted with the garbage.
I'm a merchant cash advance veteran exploring the p2p lending waters.

Fred93

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Re: Automated investing concern
« Reply #2 on: October 10, 2014, 02:50:55 PM »
I noticed it had selected this loan and the monthly income is listed as 52,500... Ya there's no way to limit the max with automated investing but shouldn't there be some logic as to what reasonable income is and if it's obscenely high it should be verified?

This is an example where 3rd party automation tools have greater flexibility.  I suspect the person has entered annual income when asked for monthly, or something like that.  I set a max on income for exactly this reason.

On the other hand, LC does verify higher stated incomes more frequently than lower incomes, so they probably catch some of these.  Did this loan issue, or is it still in work?

gottodo1

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Re: Automated investing concern
« Reply #3 on: October 10, 2014, 05:22:30 PM »
Looks like 77 other idiots had automated investing schemes that didn't catch this, it's under review. Borrower Member Loan 31286466

333 a piece for the average piece of this puzzle... atleast I only purchased $25.

Rob L

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Re: Automated investing concern
« Reply #4 on: October 10, 2014, 06:53:35 PM »
This is not the first time the exact problem has been discussed here.
My comment before, as now, is that basic computer science 101 teaches all user inputs must be validated.
Call it a reasonableness check, sanity check, etc.  Not to do so is irresponsible on LC's part. These are smart folks so they must be doing this; right?
Now if LC's front end asks "do you really mean $630,000 per year?" and the user answers yes, that's an entirely different matter.
Maybe the borrower means it. Plenty of folks make that per year and I haven't looked into the other numbers in the loan app for a cross check.

Dennis

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Re: Automated investing concern
« Reply #5 on: October 12, 2014, 02:55:48 AM »
I attempted automation several months ago.  I tried it for only a couple of days or so, then quit.  I would get too many notes that fell outside my parameters, even though they fit the filters I chose perfectly.  For example, I don't invest in notes where the payment exceeds 10% of borrowers monthly income.  As far as I know, there's no way to filter for that.  So I ended up with notes that I didn't want (notes far in excess of that 10%), and there was/is no way to unselect a note once purchased.  That was the end of it for me.

I've been with Prosper and LC for just over 3 years now, purchased a total of 3,461 notes between 3 accounts, and with the exception of maybe a dozen or so of them (when I tried automation), I've hand picked them all.  It's a lot of work, requires a lot of time, and I'm not sure I'm getting any better results than anyone else, but it works for me. 

brother7

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Re: Automated investing concern
« Reply #6 on: October 12, 2014, 01:48:13 PM »
I don't invest in notes where the payment exceeds 10% of borrowers monthly income.  As far as I know, there's no way to filter for that.
LC's filters are somewhat limited. 3rd party filtering tools are more robust. For example, Peercube allows you to filter based on calculated Loan Attributes Ratios, one of which is "Monthly Payment / Monthly Income". I believe other 3rd party tools also allow for calculated filter criteria like this.

Emmanuel

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Re: Automated investing concern
« Reply #7 on: October 12, 2014, 02:17:15 PM »
3rd party filtering tools are more robust. For example, Peercube allows you to filter based on calculated Loan Attributes Ratios, one of which is "Monthly Payment / Monthly Income". I believe other 3rd party tools also allow for calculated filter criteria like this.

LendingRobot does offer that criterions as well, it's called 'Loan Payment / Income' and is free for up to $10,000 invested.

Fred

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Re: Automated investing concern
« Reply #8 on: October 12, 2014, 11:08:29 PM »
Looks like 77 other idiots had automated investing schemes that didn't catch this, it's under review. Borrower Member Loan 31286466

333 a piece for the average piece of this puzzle... atleast I only purchased $25.

https://www.lendingclub.com/browse/loanDetail.action?loan_id=31286466

Let's see if LC catches this error during the "review" and cancels the loan.

Fortunately, I am not one of the lucky investors; it would suck if this goes through.

twigster

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Re: Automated investing concern
« Reply #9 on: October 13, 2014, 11:12:53 AM »
I just did a screen on nickelsteamroller filling in only annual income parameters (for all dates).

Those with 500,000 - 7,446,395 annual incomes had returns of 8.85% (almost certainly typos).
Those with 0 - 7,446,395 annual incomes had returns of 8.45% (all income ranges).

So maybe the typo prone borrowers aren't so bad?

rawraw

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Re: Automated investing concern
« Reply #10 on: October 13, 2014, 02:08:31 PM »
I just did a screen on nickelsteamroller filling in only annual income parameters (for all dates).

Those with 500,000 - 7,446,395 annual incomes had returns of 8.85% (almost certainly typos).
Those with 0 - 7,446,395 annual incomes had returns of 8.45% (all income ranges).

So maybe the typo prone borrowers aren't so bad?
Would you prefer having an accurate measurement of your risk or an unknown measurement of your risk?  Liar loans in the mortgage market didn't go bad until the economy got bad.   There is more to this than what the current income is -- be sure to keep in mind that consumer credit is going to move in cycles, and part of the strategy is trying to ensure that volatility in bad years doesn't eat into all the money you made in the good years.

PeerSocialLending

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Re: Automated investing concern
« Reply #11 on: October 13, 2014, 07:08:51 PM »
I don't invest in notes where the payment exceeds 10% of borrowers monthly income.  As far as I know, there's no way to filter for that.
LC's filters are somewhat limited. 3rd party filtering tools are more robust. For example, Peercube allows you to filter based on calculated Loan Attributes Ratios, one of which is "Monthly Payment / Monthly Income". I believe other 3rd party tools also allow for calculated filter criteria like this.

Nickel Steamroller has formula investing which allows for field and number manipulation with all of the operators. It isn't enabled by default, but it might be worth asking. I haven't played much with it, but it certainly would achieve what you're looking for. Looks something like this (no idea if these are the correct columns, but you get the idea):
-Ryan
p2p lending blogger @ www.peersociallending.com

twigster

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Re: Automated investing concern
« Reply #12 on: October 14, 2014, 02:00:06 AM »
Quote
Would you prefer having an accurate measurement of your risk or an unknown measurement of your risk?  Liar loans in the mortgage market didn't go bad until the economy got bad.
Good point, and I agree.  I still find it unexpected though that that group of loans performs well even in this economy, would expect that group to have lower performance.  I wonder if any of those in the greater than 500k bracket actually have that type of income?