Author Topic: Buying most 'popular' or most quickly funded notes as a strategy?  (Read 7171 times)

msink

  • Newbie
  • *
  • Posts: 5
    • View Profile
    • Email
Newbie here.  I read an article basically saying that all the 'good' notes were gone in seconds, and most people would never even know they existed, and are left with scraps. So my thought, and going along with theirs, why not buy into loans that are funding at the fastest rate and/or getting the most $ investment per second?  Basically, instead of trying to write a filter, just identify what the rest of the world is eating up, and have a piece of it myself, and let everyone else's filter become mine too. (but only if a lot of investors or a few investor withs lots of money find it desirable)  I'm talking about looking at the amount funded every second, and making a buy decision within 10, or less seconds.  Ive already looked at snapshots of all new loans for the first minute, second by second, and it's pretty easy to identify the 'popular' loans. Requires using the API.  Do people do this, or is this crazy? 

Also, how do some notes lose investors so quickly? (amount funded drops) I don't see an option to undo or reverse a buy.

Screen shot of 88 notes plotted every second by amount funded. 4-5 clearly rise to the top within seconds.
« Last Edit: April 06, 2016, 06:42:01 PM by msink »

AnilG

  • Hero Member
  • *****
  • Posts: 1109
    • View Profile
    • PeerCube
Re: Buying most 'popular' or most quickly funded notes as a strategy?
« Reply #1 on: April 06, 2016, 07:05:07 PM »
You might want to use % funded in place of amount funded in your chart. The requested loan amount is not same for all loans. So what rising in your chart is just the loans requesting high amount. Without knowing the number of lenders, it is difficult to put too much weightage on amount funded. An individual lender could potentially be responsible for large amount of funding. Also, first few seconds of funding are most likely automated systems and not human intelligence. There is no wisdom of the crowd here.

If you continuously keep hammering LC API every seconds, sooner than later your IP will get throttled and potentially banned. You can lock loans in shopping cart if you are lending through Browse Loans on LC website, later if you don't want the loan you can release those loans. That is why you see amount funded dropping or some loans re-appearing again.

A couple years ago I did some analysis. My conclusion was that loans funded in first 5 minutes tend to perform worse than others. Things might have changed since then. Mad Rush at Lending Club Loan Release Time: Part I https://www.peercube.com/blog/post/mad-rush-at-lending-club-loan-release-time-part-i

IMO, fast funding doesn't equate to smart lending.

Also, how do some notes lose investors so quickly? (amount funded drops) I don't see an option to undo or reverse a buy.

Screen shot of 88 notes plotted every second by amount funded. 4-5 clearly rise to the top within seconds.
---
Anil Gupta
PeerCube Thoughts blog https://www.peercube.com/blog
PeerCube https://www.peercube.com

Fred

  • Hero Member
  • *****
  • Posts: 1421
    • View Profile
Re: Buying most 'popular' or most quickly funded notes as a strategy?
« Reply #2 on: April 06, 2016, 10:40:20 PM »
Do people do this, or is this crazy? 

I agree with Anil, this is crazy.

Fred93

  • Hero Member
  • *****
  • Posts: 2221
    • View Profile
Re: Buying most 'popular' or most quickly funded notes as a strategy?
« Reply #3 on: April 06, 2016, 10:51:15 PM »
Do people do this, or is this crazy? 

I agree with Anil, this is crazy.

Yep.  Crazy.

jennrod12

  • Full Member
  • ***
  • Posts: 134
    • View Profile
    • Email
Re: Buying most 'popular' or most quickly funded notes as a strategy?
« Reply #4 on: April 07, 2016, 11:24:00 AM »
I would only recommend considering this if you are sure that your investment goals are the same as those of the people purchasing the fast-moving notes.   ;)

Jenn

Rob L

  • Hero Member
  • *****
  • Posts: 2108
    • View Profile
Re: Buying most 'popular' or most quickly funded notes as a strategy?
« Reply #5 on: April 07, 2016, 04:36:03 PM »
FWIW I'm not recommending the idea. I'm very skeptical but ...
It hasn't always and universally been accepted as a bad idea.
From the current Lending Robot website "Who We Are" timeline https://www.lendingrobot.com/#/about-us/:

Quote
October 2013

Emmanuel and Gilad realize that the “feeding frenzy” of professional users that snap loans in seconds can be used as expert guidance, and create “popularity based” investment rules.


LR may still offer its customers the ability to purchase notes based on the concept. I dunno ...
If they do you might want to check them out. If they don't then presumably they have decided it no longer works.


Fred93

  • Hero Member
  • *****
  • Posts: 2221
    • View Profile
Re: Buying most 'popular' or most quickly funded notes as a strategy?
« Reply #6 on: April 07, 2016, 04:46:53 PM »
FWIW I'm not recommending the idea. I'm very skeptical but ...
It hasn't always and universally been accepted as a bad idea.

Throughout all of recorded history, many really very bad ideas have been so.  If you think an idea has to be "universally accepted as bad" before you won't do it, then you are at the very least highly suggestible, and at worst a lemming, and a danger to everyone around you.

Just because some guys go running over a cliff doesn't mean you should do it.

Someone said above that it depends on whether the "investment goals" of the leader lemmings is the same as yours.  Seems wrong.  It depends on whether they are likely to achieve an excellent outcome that you would like to copy.  It is quite possible that these people you are about to copy are complete idiots.

I might be inclined to try to copy someone I believe is a world-class investment success (say Warren Buffett), but I do not copy anonymous people whose performance I know nothing about. 

I don't know where this strange strange idea comes from that just because somebody buys "first" that he must be the excellent investor who should be copied. 

msink

  • Newbie
  • *
  • Posts: 5
    • View Profile
    • Email
Re: Buying most 'popular' or most quickly funded notes as a strategy?
« Reply #7 on: April 07, 2016, 04:50:25 PM »
You might want to use % funded in place of amount funded in your chart. The requested loan amount is not same for all loans. So what rising in your chart is just the loans requesting high amount.

That's how I originally did it.  It was based on % funded, and which loans were hitting the 100% mark the quickest, but then I figured it was flawed.  Because what I really wanted to know was which loans people/filters liked the most.  If I used % funded, then large loans look less appealing, even though they are getting the same amount of interest and investment from others, so I switched to amount funded.

Without knowing the number of lenders, it is difficult to put too much weightage on amount funded. An individual lender could potentially be responsible for large amount of funding.

Yes, and I had noticed that the number of investors field is NULL during this time.  Im not sure what what point LC starts sending that info back, but I emailed and asked if they would start including that number so that i COULD determine what was going on.  No response.

Also, first few seconds of funding are most likely automated systems and not human intelligence. There is no wisdom of the crowd here.

Absolutely correct on the automated, but I don't see an issue with that.  From what I had heard, and why I enrolled with BlueVestment, or any other automated system, was to be able to compete.  Don't most people use automated investing?  I got the idea that reading every single loan was too time consuming.  Therefore, most investing is done via filters, and then possibly automated.  People spend a LOT of time on their filters, sharing, using the ones that come with other services.  I ASSUME there has already been lots of thought put into them, and that's why they are being used, and why these loans are being bought.  There is a lot of analysis behind the buying, just because it's automated I wouldn't think should discount the idea.

If you continuously keep hammering LC API every seconds, sooner than later your IP will get throttled and potentially banned.

Do you have any data to back this up?  I read that LC limits you to 1 request per second.  Prosper is 20 per second.  I ask because banning an IP wouldn't work, you'd have to ban/throttle the account associated with the API key that was being used.

You can lock loans in shopping cart if you are lending through Browse Loans on LC website, later if you don't want the loan you can release those loans. That is why you see amount funded dropping or some loans re-appearing again.

Interesting...sounds like that's not an option using the API.

A couple years ago I did some analysis. My conclusion was that loans funded in first 5 minutes tend to perform worse than others. Things might have changed since then. Mad Rush at Lending Club Loan Release Time: Part I https://www.peercube.com/blog/post/mad-rush-at-lending-club-loan-release-time-part-i
IMO, fast funding doesn't equate to smart lending.

Wow... that's a very interesting post I need to digest.  Is there a part II, that analyzed the returns?  When you say 'perform worse' what are you comparing it to?  Since most I suspect are E,F G, notes, we'd have to compare the to similar notes, right? Not ALL notes that would also include A,B,C's. 

Anil, thank you very much for the reply and info here!

Mark

Also, how do some notes lose investors so quickly? (amount funded drops) I don't see an option to undo or reverse a buy.

Screen shot of 88 notes plotted every second by amount funded. 4-5 clearly rise to the top within seconds.
[/quote]
« Last Edit: April 07, 2016, 04:54:17 PM by msink »

msink

  • Newbie
  • *
  • Posts: 5
    • View Profile
    • Email
Re: Buying most 'popular' or most quickly funded notes as a strategy?
« Reply #8 on: April 07, 2016, 05:01:51 PM »
I don't know where this strange strange idea comes from that just because somebody buys "first" that he must be the excellent investor who should be copied.

That's not the idea, it's not about being first.  It's about 100's or 1000's of people putting time and effort into finding good notes to invest in, and then setting up a filter to locate them, and THEN buying those notes.   When you have 1000 people who all agree that based on their criteria, these 4 notes out of 100 are worth buying, maybe it means something.  After all, when I look at the ones that are at the bottom of my list, they indeed look like crap.  So, no filters looked for them, and no one wanted them, hence, no investment.  For the folks who are members of sites like BlueVestment, their filters will be executed when new notes are published, and notes will be purchased based on all the thinking behind all the filters.  Those notes floating to the top may or may not be worth buying.  But it's not they went first, its that they received the most amount of interest from everyone combined.   

Fred93

  • Hero Member
  • *****
  • Posts: 2221
    • View Profile
Re: Buying most 'popular' or most quickly funded notes as a strategy?
« Reply #9 on: April 07, 2016, 05:13:37 PM »
I don't know where this strange strange idea comes from that just because somebody buys "first" that he must be the excellent investor who should be copied.

That's not the idea, it's not about being first.  It's about 100's or 1000's of people putting time and effort into finding good notes to invest in, and then setting up a filter to locate them, and THEN buying those notes.   When you have 1000 people who all agree that based on their criteria, these 4 notes out of 100 are worth buying, maybe it means something.

I don't invest based on such flimsy criteria as "maybe it means something".

Maybe it means nothing.  It seems perfectly possible to me that these 100's are idiots.  Most of the human race is innumerate, and has no idea what their return on investment is.  The concept that these 100's of people are numerate, studious, and smarter than you seems just nuts to me.  It might be true, but I'd want some proof before putting my money behind such a notion.  Seems just as plausible that these are the loans to be avoided at all costs.

In practice, the loans that go quickly are the highest interest rate loans, in other words the riskiest ones.  I believe that it is likely this is simply because a great many people look at only the interest rate, and have no mental machinery which would allow them to assess the risk.  These are the people who learned nothing from high school algebra, ie most of humanity.

jz451

  • Full Member
  • ***
  • Posts: 118
    • View Profile
Re: Buying most 'popular' or most quickly funded notes as a strategy?
« Reply #10 on: April 07, 2016, 05:53:55 PM »
I only see three ways to go about this. One is to just invest based on the loan grade and prefered loan length, two is to take time to research filters, or three is to in whole or partially invest using Folio since you get a better idea of how loans are performing. In the end it's a moot point to worry about funding time unless more data is published.

jheizer

  • Sr. Member
  • ****
  • Posts: 480
    • View Profile
    • LC Tools
Re: Buying most 'popular' or most quickly funded notes as a strategy?
« Reply #11 on: April 07, 2016, 06:04:54 PM »
I'll standing front of the firing squad and say I did this a little bit, but not 100% blindly.  I have a base filter that all notes run through.  It picks the top say 10% of the loans.  From there I have (way too many) filters that run by grade, or term, too much available cash and other looser filters enable, etc. 

I don't remember the exact specifics off hand, but it took the base filtered set of loans and if they were at least 75% funded in the first 20 seconds or 5 calls to the notes list, then I'd buy them.  I had no prior experience in lending, credit modeling, etc.  My filters were so tight and over fit at times that deploying cash was a hard thing to do.  This was a way of attempting to improve upon the CDE homeowner, no inquires, etc base filters that all sites and articles direct you to start with.  It was something as an API user I could do but most people can't.  It also gave me a place to start to understand why I didn't already buy these and why I may want to in the future.  Yes I could have just recorded them, but at one a day or so I wasn't too worried.

So I wasn't blindly doing it, but still relying on a bit of a follow the crowd method.  For what it's worth they have performed ok.  Only 2 our of 120 have defaulted and looking at them the only things that would have stopped me from buy is one's DTI is a bit higher than I like and the other was a renter.  They are some of my oldest loans and the defaults are pretty much in line with my other filters it seems.  16 have fully paid.  Wish I could get average age per portfolio in the web UI. Too lazy to excel it right now.

Stupid, maybe.  But at least slightly cautious stupid I guess.
Replacement to P2P Quant's Percentile Tool http://lc.geekminute.com

rawraw

  • Hero Member
  • *****
  • Posts: 2790
    • View Profile
Re: Buying most 'popular' or most quickly funded notes as a strategy?
« Reply #12 on: April 07, 2016, 08:11:43 PM »
Didn't Anil do a paper showing that quickly funded notes underperformed?

lascott

  • Hero Member
  • *****
  • Posts: 1432
    • View Profile
    • Appreciate my post and want to try LendingRobot? URL below
Re: Buying most 'popular' or most quickly funded notes as a strategy?
« Reply #13 on: April 07, 2016, 11:12:45 PM »
Didn't Anil do a paper showing that quickly funded notes underperformed?
He responded above with it: http://www.lendacademy.com/forum/index.php?topic=3741.msg33505#msg33505
Tools I use: (main) BlueVestment: https://www.bluevestment.com/app/pricing + https://www.interestradar.com/ , (others) Lending Robot referral link: https://www.lendingrobot.com/ref/scott473/  & Peercube referral code: DFVA9Y

Fred

  • Hero Member
  • *****
  • Posts: 1421
    • View Profile
Re: Buying most 'popular' or most quickly funded notes as a strategy?
« Reply #14 on: April 07, 2016, 11:55:59 PM »
It was something as an API user I could do but most people can't.

I suspected this was a main reason for OP to consider this strategy -- if I can do it fast (and others can't), why not?

Speed should not be the primary criterion on investing.

If speed is not an issue, would you still invest in the same note?  Specifically, would you buy the note in Folio at 0% discount?

« Last Edit: April 07, 2016, 11:59:32 PM by Fred »