Poll

What is your minimum annual acceptable rate of return, below which investing in LC is unattractive?

8+%
11 (25.6%)
7%
8 (18.6%)
6%
10 (23.3%)
5%
8 (18.6%)
4%
3 (7%)
3%
2 (4.7%)
2%
1 (2.3%)

Total Members Voted: 43

Voting closed: February 12, 2018, 12:36:52 PM

Author Topic: What is Your Minimum Acceptable Return  (Read 2420 times)

Rob L

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What is Your Minimum Acceptable Return
« on: January 13, 2018, 12:36:52 PM »
What is your minimum annual acceptable rate of return, below which investing in LC is unattractive?
Please vote in the poll above.
« Last Edit: January 13, 2018, 01:56:42 PM by Rob L »

Lovinglifestyle

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Re: What is Your Minimum Acceptable Return
« Reply #1 on: January 13, 2018, 01:43:45 PM »
Absent the guaranteed return OF my money (per Anabio), I need 10% to compensate for the work and time involved plus not over 3K capital loss/yr.

dbsb3233

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Re: What is Your Minimum Acceptable Return
« Reply #2 on: January 13, 2018, 06:20:06 PM »
Whatever it is, I'm already well below it!

I use P2P lending as a "safer" hedge to pair with my stock market investments, so I'm OK with modest gains.  I can live with 5% for that (2-3% after inflation), but of course hope for more.  But I'm actually LOSING money in my non-IRA LC account (-2% last year).  That's largely because I stopped reinvesting proceeds at the start of 2017 and am just draining the account as loan payments come in.

In my IRA, I'm still reinvesting proceeds, and running about +3.5% return.  Not very happy with that either but I'll give it another year and see if it turns up.


Fred93

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Re: What is Your Minimum Acceptable Return
« Reply #3 on: January 13, 2018, 06:31:16 PM »
Remember that the stock market has periods where you lose money also.

jd

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Re: What is Your Minimum Acceptable Return
« Reply #4 on: January 13, 2018, 09:25:46 PM »
8% plus is always a nice choice.

I'm currently at 12.02% NAR.  My account is young and not huge (over 100 notes).  When I get to the six month point I'll post some of the details. 
« Last Edit: January 13, 2018, 09:29:15 PM by jd »

apc3161

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Re: What is Your Minimum Acceptable Return
« Reply #5 on: January 14, 2018, 12:29:16 PM »
Around ~8% on average (i.e. 10%+ in good years)

Thought process:

1) Unfavorable tax situation (interest is taxed as regular income, losses are capital losses)
2) High yield bond index funds yield ~6%. I consider p2p riskier and as such need higher returns.
3) It's more work than an index fund. Not as easy to just "set and forget".

Of note, LC advertises 3-5%, as such they must think/hope that is okay for investors. I believe they are wrong and this will be proved, and investors will really start to pull money from their platform if they don't make it more investor friendly (at the expense of borrowers and shareholders)
« Last Edit: January 15, 2018, 09:09:00 AM by apc3161 »

dbsb3233

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Re: What is Your Minimum Acceptable Return
« Reply #6 on: January 15, 2018, 12:07:49 AM »
Remember that the stock market has periods where you lose money also.
Yes, although the point of a "safer" investment is to accept lower returns in exchange for little-to-no risk of losses.  -2% isn't too horrible, but if they got much more than that I might as well just have that money in the stock market where the upside is far greater than anything LC can touch.

But it's even more complicated than that with LC.  For one thing, the defaults being reported as capital gains (and subject to the $3000 annual cap) really becomes costly for non-IRA accounts.  And then there's the matter of the greatly varying returns across years that make it hard to go by just a single year's number.  The older the notes, the worse the returns. 1st year returns look great.  2nd year less so. 3rd year weak. And by the time you stop reinvesting to sunset the account, they're near zero or in the red.  So you practically have to average it all together to get the true return.

By the time my final notes are done and I close the account (2 more years), I suspect my overall annualized return will average about +3%.  Had I known that going in, I'd have invested the money somewhere else.

Edward Reid

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Re: What is Your Minimum Acceptable Return
« Reply #7 on: January 20, 2018, 09:56:20 AM »
No single number, because it's a trade-off between risk and return. I've picked a risk profile (accurately so far, but only so far) and I'm on about 8% ANAR with about 18 months average age. I'd be happy with a 4% return on that, because I think that would be better than I could get with other investments with similar risk. If I needed more safety, I'd be happy with a lower return. If it were pure play money, I wouldn't be happy with any level of return, because it wouldn't be as exciting as betting on horses.

Edward

JohnnyP

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Re: What is Your Minimum Acceptable Return
« Reply #8 on: January 20, 2018, 11:27:58 AM »
First, need to consider the time horizon. I figure on a 10 year time horizon for a couple reasons. One, these are minimum 3 year investments. This is not a short-term investment. Two, it is impossible to predict short term returns for stocks. It is more reasonable to predict a range in the longer term. I love Vanguards yearly prediction for 10 year returns. They do a great job. You can see it here:

https://personal.vanguard.com/pdf/ISGVEMO.pdf

In it, they estimate a 10-year return of 5.2% for global stocks and 2.6% for US bonds (not adjusted for inflation which is predicted to be 1.7%). If you want to understand why the low stock prediction, you will need to read the report. There are very good reasons for it.

I believe an LC portfolio of mostly B and C loans is less risky than global stocks. So I am happy with anything over about 4.2%. I believe this is achievable, so I am happy to invest in LendingClub notes.

rawraw

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Re: What is Your Minimum Acceptable Return
« Reply #9 on: January 21, 2018, 05:13:44 PM »
First, need to consider the time horizon. I figure on a 10 year time horizon for a couple reasons. One, these are minimum 3 year investments. This is not a short-term investment. Two, it is impossible to predict short term returns for stocks. It is more reasonable to predict a range in the longer term. I love Vanguards yearly prediction for 10 year returns. They do a great job. You can see it here:

https://personal.vanguard.com/pdf/ISGVEMO.pdf

In it, they estimate a 10-year return of 5.2% for global stocks and 2.6% for US bonds (not adjusted for inflation which is predicted to be 1.7%). If you want to understand why the low stock prediction, you will need to read the report. There are very good reasons for it.

I believe an LC portfolio of mostly B and C loans is less risky than global stocks. So I am happy with anything over about 4.2%. I believe this is achievable, so I am happy to invest in LendingClub notes.
glad to see someone approaching this question thoughtfully.

Jadedfalcons

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Re: What is Your Minimum Acceptable Return
« Reply #10 on: February 03, 2018, 11:42:54 PM »
Remember that the stock market has periods where you lose money also.

You don't lose money in the stock market until you sell your shares.  My shares may lose 15% in one year, but as long as I hold onto them, I'm golden when the market goes back up.

Whereas a loan that gets charged off is just charged off.  Doesn't matter if returns go up the following year if my loan is bad. 

Rob L

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Re: What is Your Minimum Acceptable Return
« Reply #11 on: February 11, 2018, 09:27:43 PM »
Hey, the voting closes tomorrow. The more the merrier.
It's anonymous and there's no requirement to post any why's or wherefore's of your vote.
Just punch a button; how hard is that?

Rob L

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Re: What is Your Minimum Acceptable Return
« Reply #12 on: February 12, 2018, 07:05:05 PM »
The votes are in and speak for themselves so take a look.

My vote was 6% (and always has been).
Simply 3% for the risk premium of dealing with a "new thing" (LC) and 3% minimal return (within an IRA).
My how times have changed.

IMHO most who participated will ultimately be disappointed with their returns, but I certainly hope not! Time will tell.

Thanks to all that voted !!!  :) :) :)

PS: Gee, I wonder if LC will see this ??
« Last Edit: February 12, 2018, 07:07:26 PM by Rob L »