Author Topic: Retirement planning - Prof Max then Loss Min?  (Read 4931 times)

lascott

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Retirement planning - Prof Max then Loss Min?
« on: March 30, 2014, 10:03:24 PM »
[To users/supporters of P2P-Picks,] I am new here but have read quite a few threads. I have not found this discussion/thoughts.

Anyone have the thought of using P2P Prof Max until about 3-5 years before retirement then switch to P2P Loss Min?!?

Yes, of course, P2P lending is just one 'asset class' in my retirement planning and portfolio.
« Last Edit: March 31, 2014, 01:40:22 AM by lascott »
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

brycemason

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Re: Retirement planning - Prof Max then Loss Min?
« Reply #1 on: March 31, 2014, 01:26:11 AM »
My apologies for being silent, but I simply cannot provide any personalization.

lascott

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Re: Retirement planning - Prof Max then Loss Min?
« Reply #2 on: March 31, 2014, 01:38:00 AM »
My apologies for being silent, but I simply cannot provide any personalization.
Bryce, no worries. It was a general question to all users of your service and not at you.  I fully understand your information is provided asis. I've been immersed in P2P research for a short while and realized it is just another financial topic I was oblivious to.  Seems to have worked out in my favor tho since the P2P world (tools, services, LC) and tax reporting (via LC) is much better in the past couple years.  Lot of interesting things around the world on this topic as well. I plan on staying with USA investing tho.

P2P as a modest income stream ("part time job") seems quite interesting and adding it to a well rounded retirement plan seems reasonable.

Before one retires they can take modest-risk since they typically they can work longer. After one retires (unless you want to go back to work) then being more conservative yet staying ahead of inflation and modest spending seems to be the key.  Hence my subject.
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

rawraw

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Re: Retirement planning - Prof Max then Loss Min?
« Reply #3 on: March 31, 2014, 09:53:59 AM »
Seems like a prudent strategy to me. 

SBryantMS

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Re: Retirement planning - Prof Max then Loss Min?
« Reply #4 on: April 20, 2014, 03:07:22 PM »
Have you viewed it from a perpetual annuity stand point. 

My goal is to have a Lending Club account that will payout $1,000 per month in perpetuity.   I estimate that I will need a $120,000 investment by retirement that is generating a 10% annual return to meet this goal.  As long as the overall portfolio return is 10% or more, does it really matter if the Prof Max or Loss Min is selected.

I have taken an approach of 80% Profit Max and a 20% Loss Min which is currently generating an 11.2% return after charge-offs. 

I am making four MAJOR assumptions: 
   1) that LC loan rates will generally rise/fall in line with the inflation rate
   2) that Lending Club will continue to manage the underwriting to match the risk with each loan grade
   3) that P2P Picks will continue to provide the selection criteria for loan selection
   4) that LC will remain open to retail investors.


Opinions?         

lascott

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Re: Retirement planning - Prof Max then Loss Min?
« Reply #5 on: April 20, 2014, 04:36:27 PM »
Have you viewed it from a perpetual annuity stand point. 

My goal is to have a Lending Club account that will payout $1,000 per month in perpetuity.   I estimate that I will need a $120,000 investment by retirement that is generating a 10% annual return to meet this goal.  As long as the overall portfolio return is 10% or more, does it really matter if the Prof Max or Loss Min is selected.

I have taken an approach of 80% Profit Max and a 20% Loss Min which is currently generating an 11.2% return after charge-offs.
I very MUCH like the way you are thinking about this as it is very much in line with my overall thoughts on using this as another leg in the retirement stool. Friends and I have discussed retiring at a reasonable age and perhaps doing some part time work to pay for misc things like property taxes (house paid off), addl vacations, etc. P2P seems like a way to have another part time job with being more automated and "self employeed".

Can I ask how long you have been doing LC and P2P-Picks to see that 11.2%?  Don't really know how you manage to get this: "80% Profit Max and a 20% Loss Min".  Are you manually using P2P-Picks? Picking 8 from P2P-PMax and 2 from P2P-LMin

Really a cool little ebook on this page about the stool analogy and practical advice. http://www.caniretireyet.com/can-i-retire-yet/  Retirement planning is like a hobby of mine that I've had for 20 years <grin>.

In regards to your $1000/mo and 10% ... I've done similar math.  I think you are on the money with thinking that 10% is the number and if you can earn 11% then you are safe.

Using this calculator and putting in -$1000 "deposits" shows 10.085% works.
http://www.free-online-calculator-use.com/savings-account-interest-calculator.html#calculator


BTW, a real annuity to get that $1000/mo sure requires a LOT more than $120,000!! http://www.immediateannuities.com/immediate-annuities/?sce=hc
« Last Edit: April 20, 2014, 09:47:37 PM by lascott »
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

rawraw

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Re: Retirement planning - Prof Max then Loss Min?
« Reply #6 on: April 20, 2014, 08:42:08 PM »
Have you viewed it from a perpetual annuity stand point. 

My goal is to have a Lending Club account that will payout $1,000 per month in perpetuity.   I estimate that I will need a $120,000 investment by retirement that is generating a 10% annual return to meet this goal.  As long as the overall portfolio return is 10% or more, does it really matter if the Prof Max or Loss Min is selected.

Opinions?       
Yes it does, because of the volatility.  Volatility (difference between PMax and Loss Min) matters a lot.

bobeubanks

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Re: Retirement planning - Prof Max then Loss Min?
« Reply #7 on: April 20, 2014, 09:38:30 PM »
BTW, a real annuity to get that $1000/mo sure requires a LOT more than $120,000!! http://www.immediateannuities.com/immediate-annuities/?sce=hc

When/if interest rates go up, annuities will not be as expensive as they are today. Of course annuities are quite a bit of a different beast than a lump of money in P2P loans, with different risks and flexibilities.

SBryantMS

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Re: Retirement planning - Prof Max then Loss Min?
« Reply #8 on: April 21, 2014, 09:45:34 AM »

Can I ask how long you have been doing LC and P2P-Picks to see that 11.2%?  Don't really know how you manage to get this: "80% Profit Max and a 20% Loss Min".  Are you manually using P2P-Picks? Picking 8 from P2P-PMax and 2 from P2P-LMin


I have been in LC since June, 2011.  I was very tentative during the first six months -- only investing $600 during that time frame.  I became a serious LC investor in Jan, 2012.  Very simply, I calculated the number of months till I reach 65 years old and divided that number into $120k.  I invest that amount monthly.  All notes are $25.

I used my own filters (back-tested at Lending-Stats) from 01/2012 to 04/2013 then converted completely to P2P-Picks in May, 2013.

I manually pick notes using the P2P website.  Since this is my hobby, I manage to get to at least one feeding time each day.  My selection criteria is very simple.  First, I select any LMin note of grade C and <= 10%.  Second, I select any PMax note of grade D and <= 10%.  Last, I select any PMax note of grade E and <= 10%.  I have been using this process since May, 2013. Based on cash and note availability, I have ended up with the 80/20 split.  I do not try and maintain this balance - strictly note availability based on the purchase order above.  Some days I get nothing -- some days I run out of cash.  I rarely have more than $250 cash in my account.

Last comment -- I thought I had good tight filters before P2P-Picks came along.  P2P-Picks is performing ~1.5% better than my personal filters.  So now I blindly accept the notes that P2P-Picks offers - I don't look at any note details anymore.  From reviewing my P2P notes, Bryce's model selects a lot of notes that would not have passed my old filters and my P2P-Picks portfolio generates a higher return.