Author Topic: How much is too much to invest in LC? and is it worth the effort?  (Read 24940 times)

GeorgeWaters

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How much is too much to invest in LC? and is it worth the effort?
« on: September 10, 2013, 09:42:47 AM »
i've read a bunch about LC, opened my account, deposited funds, but the more i read the more i'm concerned about the amount of effort required to keep funds invested and getting a decent return while also ensuring liquidity.

in other words, most things i read people only invest $1k to $5k at most.  but what if you have $10k, or $20k, or more? 

with early payoffs and the folio note exchange for liquidity, it just reads like  ALOT of work to keep funds invested while having a way to sell notes to get money out if needed...

what are people's thoughts on effort, folio, and investing larger amounts of money on LC?

thx!

cfb

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Re: How much is too much to invest in LC? and is it worth the effort?
« Reply #1 on: September 10, 2013, 10:04:34 AM »
My opinion is that it was plausible to invest 5 figures until the past year or so, then it became too difficult to buy enough notes to make it worthwhile and profitable.

Your choices would be to:

 - Buy in very slowly, taking a year or more to get your funds fully invested
 - Choose lower interest rates and lower returns for close to the same risk
 - Buying notes on the secondary market.  Where you're basically paying a commission to someone else who bought the note for resale purposes, or you're paying another kind of premium, or the seller knows something that you don't, or the seller misprices their notes to fair or below market.  All those things set off my spidey sense.
 - Buy very large loan fragments and get less diversification

I have >50k invested right now.  Took me quite a while and the things I did to shorten up the investment (buying A5-C5 notes, using the 'autoinvest' tool, etc) reduced my returns and/or exposed me to notes with higher defaults.  If I were to try to do that today, I'd have to buy very large loan fragments and it'd be a great deal of work.  Still would take a long time.

rlv99

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Re: How much is too much to invest in LC? and is it worth the effort?
« Reply #2 on: September 10, 2013, 10:31:38 AM »
I have >50k invested right now.  Took me quite a while and the things I did to shorten up the investment (buying A5-C5 notes, using the 'autoinvest' tool, etc) reduced my returns and/or exposed me to notes with higher defaults.  If I were to try to do that today, I'd have to buy very large loan fragments and it'd be a great deal of work.  Still would take a long time.

My experience is quite different.  Bought my first loans in April, 2013.  Now have >25k issued.  Only buy $25., 3 yr., C-G rated loans(although I will buy a B5 when the pickings are slim).  I auto-invest through Interest Radar, however I outperform IR by picking "manually".   I would move a six-figure IRA to LC if I was more comfortable with their payment posting and collection procedures. 

Just picked-up 7 at the 9est release today.

99greenballoons

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Re: How much is too much to invest in LC? and is it worth the effort?
« Reply #3 on: September 10, 2013, 10:33:02 AM »
It's worth noting that even if you take the easy route and invest in notes that aren't snapped up within the first few minutes, you can still beat the paltry interest offered by a savings account.  Compared to the easy days of LC, times are tough.  Compared to other investment options, there's still a ton of opportunity.

If you're doing things manually, use historical data to come up with filters and save them in your LC account.  Don't make them too strict -- you probably want >=3000 returned by historical data.  Learn the times of day that LC releases new notes, load the filter select all and invest.  Works even better if you have a few non-overlapping filters to cycle through.  Should be able to invest $500-1000 a day this way, though it'll take longer if you can only get to it evenings and weekends.

Of course, there are services that do this for you, too (for a price).  Or you can write your own, if you have the inclination.

(Note: My experience was with July / early August 2013.  If it's changed drastically in a month, I'm sure someone will correct me.  I was able to purchase $20k of $25 notes in a month an a half, some manually in this manner and some automated.  While I haven't been invested long enough to figure my true default rate, I don't think I'll have reason to be upset)

New Jersey Guy

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Re: How much is too much to invest in LC? and is it worth the effort?
« Reply #4 on: September 10, 2013, 10:38:26 AM »
"Buy very large loan fragments and get less diversification"

I gotta give CFB's answer a big +1.  He covered all the bases.

I think a lot of it has to do with how fast you want to get your money vested.  Like CFB said, the conservative approach of investing $25,000 at $25/note would take a lot of time.

You could cut your time in half by purchasing at $50/note.

Personally, if I ran into $50K today, I'd be looking at $100 per note.  And that would still take time.  However a 500 note portfolio of A5 to C5 notes (like CFB suggested) would be well diversified.
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Peter

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Re: How much is too much to invest in LC? and is it worth the effort?
« Reply #5 on: September 10, 2013, 10:42:14 AM »
I have over $100K invested in Lending Club and have been investing since 2009. Investing in Lending Club could be a 40-hour a week job or you could spend just a few minutes a week - it is up to you. Now, if you want to squeeze every last fraction of a percentage point of return out of your investment then you can spent a great deal of time. Many people here invest four times a day when loans are added, put notes for sale on Folio every day and monitor every note they have very closely. I don't do that.

If you want a good return on your investment (and by good I mean in the 6-8% range long term) then you can still put your money to work here with little effort - just invest in the loans that LC has on their platform whenever you happen to login. But if you want 10% or more you need to be more selective as others have suggested. It is up to you to decide if the extra effort is worth it. Most of the regular contributors here believe it is.
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LonghornSF

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Re: How much is too much to invest in LC? and is it worth the effort?
« Reply #6 on: September 10, 2013, 11:35:55 PM »
I have 30k in LC now in C-G loans and will be adding another 25k shortly. It's very feasible to invest 5 figures in LC but you need to use automated investing. If you want to hand pick through loans it will take you a long time to become fully invested.

Fred

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Re: How much is too much to invest in LC? and is it worth the effort?
« Reply #7 on: September 11, 2013, 12:22:40 AM »
I have a six-figure LC account that I have been building since last year.  I started out with Excel and manual orders; however, I developed my own model & automation earlier this year, which helped cut my investing time a lot. My notes are mostly in $50 each in D-G grades.

I now spend more time reading & posting in this Forum than analyzing & investing in loans. 

GeorgeWaters

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Re: How much is too much to invest in LC? and is it worth the effort?
« Reply #8 on: September 11, 2013, 04:46:00 PM »
what has everyone's experience using folio to post/sell notes been like?

core

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Re: How much is too much to invest in LC? and is it worth the effort?
« Reply #9 on: September 11, 2013, 08:34:16 PM »
what has everyone's experience using folio to post/sell notes been like?

I am assuming you are asking this from the perspective of being able to liquidate if need be, given the wording of original post.  You can get out in 1 day flat if you need to -- the only question is how much of a hit do you want to take.  If you had a small financial emergency and didn't need 100% of your funds out quickly, I would think you'd be able to liquidate a hefty percentage of your portfolio without taking a loss at all.  With the market being what it is these days, you can blindly post them all for 1% markup (to cover your fees) and see a lot of them get sold in less than a day.  Of course this is a good way to get rid of all the winners and keep the losers.

DutchNurse

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Re: How much is too much to invest in LC? and is it worth the effort?
« Reply #10 on: September 11, 2013, 09:03:07 PM »
Damn I have to get looking into these automation platforms the more I hear about these :/

I hate the idea of having six figures here and having to spend all day on this...

Randawl

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Re: How much is too much to invest in LC? and is it worth the effort?
« Reply #11 on: September 11, 2013, 11:50:46 PM »
Investing in P2P loans is quite scalable.  Don't limit yourself to $25 fractions if you have more than $10,000 to invest.  Once a reasonable level of diversification is achieved, switching to $50, $75, $100, or larger fractions as appropriate significantly cuts down on the time investment side of things.  If you have a six figure portfolio, it is not unreasonable to invest in $250 or larger fractions.

investforfreedom

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Re: How much is too much to invest in LC? and is it worth the effort?
« Reply #12 on: September 12, 2013, 02:42:05 AM »
This is just my take on this--as far as effort is concerned.  I first ask myself: What would be the highest returns I could get by passively investing in the familiar asset classes: stocks, bonds, real estate (including REITs), and commodities?  SPY has returned about 7-8% for the past ten years, whereas REITs have done a bit better, nearly 10%.  For rental properties, it varies, depending on whether you are able to grab something on the cheap. Generally speaking, 10-11% is considered quite decent.  (But being a landlord is at least a part-time job.  It is definitely not as passive as dollar-cost averaging into your index funds.) 

To convince myself to sit in front of the computer 4 times a day and spend hours looking through dozens of listings, I will have to be able to crank out returns that exceed 11%, that is, what I could otherwise achieve by investing passively in the asset classes mentioned above.  In fact, I have a couple of managed funds that have already given me 12-13% over the past ten years.  So, if I don't get over 12%, I don't see the value of doing this manually.  In other words, think of opportunity costs.  And, needless to say, the smaller your account is, the less it is justified for you to spend all this time just trying to squeeze a couple of hundred bucks more a year.   

My two cents' worth.
« Last Edit: September 12, 2013, 02:44:05 AM by investforfreedom »

cfb

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Re: How much is too much to invest in LC? and is it worth the effort?
« Reply #13 on: September 12, 2013, 10:50:20 AM »
I took a similar tack.  Looked at buying some rental properties and evaluated the headaches and potential returns, and decided that LC was less work and with potentially similar returns.  Amazingly, giving money to strangers on the internet looked better to me than letting strangers live in my house and wondering what would be the next arc in california real estate...

I think if you have more than ~10% of your total invested you're getting yourself into a bad spot.  Basically the default tsunami's will come from another real estate crash, in the states where it crashes, or after a serious economic downturn like the one we just had.

I also suspect that like with stocks and bonds, there is a point of oversaturation in diversification where it does make sense to invest more in your best note ideas than $25 rather than dilute yourself with lower interest notes or ones with small warts.  LC has said 800 gave you enough to not lose money (at least until recently) and I've had around 2500.  I suspect anything over 1000-1200 gives you limited diversification benefit.

investforfreedom

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Re: How much is too much to invest in LC? and is it worth the effort?
« Reply #14 on: September 12, 2013, 03:03:00 PM »
Given the sluggish (job) growth in the U.S. economy, rising interest rates, and the uncertainty associated with QE tapering, I think there is room for investing in rental properties.  In the aftermath of the financial crash, more people are now renting.  What's more, whereas REITs are more sensitive to interest rates, rents are less so.  The general lack of correlation between rents and stock market makes it a legitimate asset class.  Admittedly, it requires a lot more spot-on work than dollar-cost averaging, and there are other risks involved.  At any rate, wealth is built in the long term through diversification across various asset classes. 

And I agree with you.  Just as you shouldn't dump all your money into stocks, gold, or anything, you shouldn't invest exclusively in real estate or rental properties. 

I took a similar tack.  Looked at buying some rental properties and evaluated the headaches and potential returns, and decided that LC was less work and with potentially similar returns.  Amazingly, giving money to strangers on the internet looked better to me than letting strangers live in my house and wondering what would be the next arc in california real estate...

I think if you have more than ~10% of your total invested you're getting yourself into a bad spot.  Basically the default tsunami's will come from another real estate crash, in the states where it crashes, or after a serious economic downturn like the one we just had.

« Last Edit: September 12, 2013, 03:06:13 PM by investforfreedom »