Author Topic: Surprised by P2P-Picks  (Read 9127 times)

BruiserB

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Surprised by P2P-Picks
« on: March 08, 2014, 05:42:57 PM »
I've been surprised by the loans that P2P-Picks is choosing.  Most of the Profit Maximizer loans chosen are C grade and often very small loan amounts.  Many in the $2000 to $6000 range.  These are loans that my other filtering criteria have largely ignored, and I would have never suspected them to be good choices.  I'm trusting the statistics and am looking forward to seeing how they perform relative to my other filters and manual choices.


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PeerSocialLending

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Re: Surprised by P2P-Picks
« Reply #1 on: March 09, 2014, 10:53:30 PM »
Bruiser, I've noticed the same thing. I have about ~150 notes from p2p-picks and I can't wait to see what my ROI ends up being as they mature.  I'm only at 5 months at the moment.

31 of my notes are for amounts less than or equal to $3000.

I have about the same number of loans >9900

I just uploaded this portfolio to NSR to take a closer look at these notes and found it pretty interesting.
-Ryan
p2p lending blogger @ www.peersociallending.com

Rob L

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Re: Surprised by P2P-Picks
« Reply #2 on: March 10, 2014, 01:43:33 PM »
I hadn't noticed the "lots of C notes" thing and took a look at the latest P2PP PMAX selections. P2PP breaks PMAX selections into 3 categories; Top 5, Top 10 and Top 25, which are the "best" 1%-5%, 6%-10% and 11%-25% of loans as evaluated by P2PP on a risk / reward basis.

The thing is that the picks are listed on the web site top 10 first, then top 25 and finally top 5 ("best") at the bottom. You do see lots of C notes at the top of the list since that's the Top 10 first. If you look at the bottom of the list at the Top 5's you will see fewer C notes.

Does this explain the "lots of C notes" thing, or was this already known and taken into account?

See: http://www.lendacademy.com/forum/index.php?topic=1865.msg15569#new

BruiserB

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Surprised by P2P-Picks
« Reply #3 on: March 10, 2014, 07:53:52 PM »
For "lots of C notes' I was referring to the top 25. 

I was surprised that C grade notes could make it into the top 25%.  Even some B notes make it. But I guess most of them are in the 12% range and if P2P is indeed picking those least likely to default, I will be very happy with that!


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brycemason

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Re: Surprised by P2P-Picks
« Reply #4 on: March 11, 2014, 01:26:14 AM »
The default risk of PMax selections is only implicitly included as a consideration for that model, in as much as it governs the expected return. If the interest rate is high enough it will get picked even if the probability is fairly risky. If one wanted to select loans with a high reward to risk ratio, I would need to develop a screen that removed some high expected returners that also happened to have higher risk (it would remove a lot of Fs, Es, and some Ds).

This is how I manage institutional money---being further selective (based on probability of default if the goal is maximizing returns or based on expected earnings if the goal is to keep losses low) given exactly how much needs to be deployed each month as well as a sort-of Sharpe ratio for their risk-free return. For the general public I just designed the products to focus on exactly 1 goal each and keep the volume very high to accommodate putting a bunch of money to work.
« Last Edit: March 11, 2014, 01:29:13 AM by brycemason »

brycemason

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Re: Surprised by P2P-Picks
« Reply #5 on: March 11, 2014, 01:30:07 AM »
Please also be sensitive to the Terms and Conditions that notes not to divulge even aggregate characteristics of the selections.

brycemason

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Re: Surprised by P2P-Picks
« Reply #6 on: March 11, 2014, 01:35:44 AM »
Also, I don't think we should be surprised that C notes are a big portion of the Top 25% of expected earners. Looking at the grade mix on LC's statistics page shows that only about 30% of loans in 2014 have been D-G. Trust me when I say that a lot of D-G loans are absolute stinkers that have no business being graded as such. Thus, plenty of higher quality C loans wind up being better bets than D & Es.

BruiserB

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Re: Surprised by P2P-Picks
« Reply #7 on: March 11, 2014, 10:13:17 AM »
Bryce,

Thanks for your responses.  My apologies if I've inadvertently divulged anything in violation of your terms and conditions.  My only intention was to point out that P2P-Picks has allowed me to pick up loans that the filters I was previously using would have never found.  In fact I have only been buying D-G loans for a while now (probably unwisely, as I have definitely ended up with a few of those stinkers). 

I can easily see how a portfolio of quality C notes can exceed the returns of D-G loans.  I'm looking forward to seeing how the notes I'm buying through your site perform vs what I had been doing!  Thanks for creating and maintaining your site.

 

Fred

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Re: Surprised by P2P-Picks
« Reply #8 on: March 12, 2014, 12:31:50 AM »
I'm looking forward to seeing how the notes I'm buying through your site perform vs what I had been doing!

Please post a follow-up; the audience is listening. :)

Fred

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Re: Surprised by P2P-Picks
« Reply #9 on: March 12, 2014, 12:38:05 AM »
...based on probability of default if the goal is maximizing returns or based on expected earnings if the goal is to keep losses low...

Nice!   I can see how this works, although I use a different approach for note picking.

brycemason

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Re: Surprised by P2P-Picks
« Reply #10 on: March 12, 2014, 12:40:59 AM »
I'm sure there are many ways to do it. I just use the method I could dream up given my training and brain power.

BruiserB

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Re: Surprised by P2P-Picks
« Reply #11 on: March 12, 2014, 09:20:22 AM »
I'm looking forward to seeing how the notes I'm buying through your site perform vs what I had been doing!

Please post a follow-up; the audience is listening. :)

Watch this space!  I'll be back in 18 months or so with an update on how things are going!  :-)

I just started using P2P picks last month, so will need to wait a while to get through the period of high defaults 10-14 months in!

After listening to Peter's podcast with Bryce I'm pretty optimistic that Bryce knows what he's doing!

brycemason

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Re: Surprised by P2P-Picks
« Reply #12 on: March 12, 2014, 09:28:38 PM »
My portfolio results need to be updated. I used an older model to invest but probably have 40% of money under the latest model in general use. LC changed the reporting greatly over each of the last few months so I kind of took a break sharing. Changes included discontinuing the interest accumulated, making a standard for discounting late notes, and I think there was one other big thing. My portfolio has been in reinvest mode for a long time. I buy and hold. Anyway, my average portfolio age is like 14.7 months so I'm starting to come out of the big waves of defaults. Interest rate average is 16.9% and climbing under the new model (the old one used to target a lot of Bs). Annualized return per LC is 9.0% using their standard methods and adjusting for impaired loans. I'm up on the top area of the "Understanding Your Returns" chart but hope to creep up a tad more over time. I feel this is an acceptable outcome given my intent to allow for thousands of people to follow my strategy and that I charge nothing.
« Last Edit: March 12, 2014, 09:30:46 PM by brycemason »

rawraw

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Re: Surprised by P2P-Picks
« Reply #13 on: March 13, 2014, 02:40:46 PM »
I charge nothing.
Is that ever going to change? I've tried putting in a real credit card to pay for the service but it only allows the dummy ones.

brycemason

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Re: Surprised by P2P-Picks
« Reply #14 on: March 13, 2014, 04:52:10 PM »
The legal status is complicated when you add compensation with investment advice. So, I don't think I'll ever charge anything for individuals. If companies want to contract with me for my work, that seems to be a much clearer and more obviously legal way to profit from this endeavor. I really should rip out all the billing stuff and just say it's free on the site, but I don't have much time right now.