Author Topic: New to LC - Need advice on deploying 250k  (Read 20507 times)

Fred

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Re: New to LC - Need advice on deploying 250k
« Reply #30 on: September 12, 2014, 01:12:10 AM »
An individual loan charges off with a probability of approximately 0.2 ...

Bryce, your charge-off probability seems awfully high.

Below is from LC latest 10-Q:
http://www.sec.gov/Archives/edgar/data/1409970/000119312514310410/d749970d10q.htm



Perhaps you can share the difference in approach?

brycemason

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Re: New to LC - Need advice on deploying 250k
« Reply #31 on: September 12, 2014, 01:32:44 AM »
So change it to whatever you like. The point is the same, and in fact the variability reduces with a lower p because the variance of a binary RV is maximized at 0.5.

Fred

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Re: New to LC - Need advice on deploying 250k
« Reply #32 on: September 12, 2014, 02:14:59 AM »
So change it to whatever you like. The point is the same, and in fact the variability reduces with a lower p because the variance of a binary RV is maximized at 0.5.

If the "point" is to maximize profit (or minimize loss), you can't simply change the charge-off probability willy-nilly!

rawraw

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Re: New to LC - Need advice on deploying 250k
« Reply #33 on: September 12, 2014, 07:01:04 AM »

brycemason

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Re: New to LC - Need advice on deploying 250k
« Reply #34 on: September 12, 2014, 09:14:59 AM »
I suspect Fred and I would rather team up and destroy a few pints.

Rob L

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Re: New to LC - Need advice on deploying 250k
« Reply #35 on: September 12, 2014, 09:56:56 AM »
Hello All!

I'm new to LC and need advice on deploying 250k. I've had my account active since Friday. Itís been challenging finding quality notes! I back tested a few filters on NRS and Interest Radar. I set Interest Radar to auto invest, but I seem to get more notes by manually executing right at 6am, 10am, 2pm, and 6pm. Do 3rd party sites using API not get data at the same time its posted to LC? Does anyone have any recommendations for API/Auto investing? I'd like to keep the notes at $200 increments to maintain marketability on Folio. Also, does anyone have a good strategy for buying notes on folio?

Thank you everyone in advance!

Nathan

I haven't seen that you've provided your risk tolerance for this investment. We need to know that.
If you haven't done it, read the LC prospectus to get an idea of the risk factors involved. They even say you could actually lose money.
The most obvious risk factor is changes to our economy (changes in interest rates, recession, inflation, etc.). Anything that affects the borrower's ability to pay.
These loans are relatively long term investments (3yr & 5 yr) and who knows what will happen over these periods.
You might think if the time comes you could sell via Folio to minimize this risk, but that's a pretty narrow door and it's likely the exit would be very crowded.

LC attempts to underwrite loans to provide investors higher returns for investing in riskier loans.
On a risk adjusted basis investor returns "should" increase for each sub-grade from A1 upward through G5.
Only time will tell whether or not the additional compensation provided for the riskier loans will more or less adequately compensate the investor for this risk.
One additional caveat is that the unlikely possibility of total loss of investment is not zero. Fraud, computer hacking, Act of God, etc. You should consider this.

So, what do you want to do?
Swing for the fences by taking maximum risk in the attempt to achieve maximum returns?
Try for a base hit, taking middle of the road risk and achieving similar returns?
Take minimal risk and accept minimal returns?

We have investors here that span the full spectrum of risk tolerance that may provide additional suggestions.
Given an answer I'll take a shot at a recommendation or two.

Half Right

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Re: New to LC - Need advice on deploying 250k
« Reply #36 on: September 12, 2014, 01:44:28 PM »
If you are an Accredited Investor call LC Advisors and deploy the entire $250k in a fund. If they accept you and take your money they will have it totally invested for you immediately since you will become a partnership member. In addition you don't have to worry about constant reinvesting or any other headaches. However I believe you may have to cough up more money to get started. Either way good luck.

DanB

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Re: New to LC - Need advice on deploying 250k
« Reply #37 on: September 12, 2014, 02:02:29 PM »
If you are an Accredited Investor call LC Advisors and deploy the entire $250k in a fund. If they accept you and take your money they will have it totally invested for you immediately since you will become a partnership member. In addition you don't have to worry about constant reinvesting or any other headaches. However I believe you may have to cough up more money to get started. Either way good luck.


And on top of that, your money will also be better protected against platform risk since the notes you invest in will be covered through the BRV that is not available to us retail investors.................a topic that I encourage all retail investors to keep revisiting as often as they can until such time that this injustice is addressed.

Cries

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Re: New to LC - Need advice on deploying 250k
« Reply #38 on: September 12, 2014, 02:36:34 PM »
Nate,

As someone who recently went through the process of liquidating about $60k of notes from an IRA - I highly recommend you stick to $25s only. 

I also highly recommend you think through how much you wanna allocate here.  You will likely be stuck with the investment FAR LONGER than you originally anticipate, if you plan to sell the notes.  They are nowhere near as liquid as you may expect. 

Also, please consider that your liquidity may dry up suddenly, if you are investing via IRA.  With lendingclub being a public equity, they will have much more regulatory scrutiny - and could be very motivated to finally pull the plug on IRA note trading.  This is a massive risk (and for me, it requires a massive premium to current yields).

hoggy1

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Re: New to LC - Need advice on deploying 250k
« Reply #39 on: September 12, 2014, 06:15:44 PM »
If you are an Accredited Investor call LC Advisors and deploy the entire $250k in a fund. If they accept you and take your money they will have it totally invested for you immediately since you will become a partnership member. In addition you don't have to worry about constant reinvesting or any other headaches. However I believe you may have to cough up more money to get started. Either way good luck.


And on top of that, your money will also be better protected against platform risk since the notes you invest in will be covered through the BRV that is not available to us retail investors.................a topic that I encourage all retail investors to keep revisiting as often as they can until such time that this injustice is addressed.

Where do you guys learn all this stuff? I never heard of "deploying in a fund" or "partnership members" and I am an accredited investor? And what in the world is a BRV? Once again I get that dreaded fealing I DKS from Shinola.
« Last Edit: September 12, 2014, 07:49:54 PM by hoggy1 »
Steve

core

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Re: New to LC - Need advice on deploying 250k
« Reply #40 on: September 12, 2014, 07:13:59 PM »
You will likely be stuck with the investment FAR LONGER than you originally anticipate, if you plan to sell the notes.  They are nowhere near as liquid as you may expect. 

They are extremely liquid.  It is sellers' price expectations that are unrealistic.  People don't seem to grasp the fact that a current note might only be worth -20% even though it's never even been 16+ days late.  They sit there trying to sell that same note for -1.00% for weeks/months and wonder why it doesn't sell.  These type of notes trade thousands of times per day at so I'd call that liquidity.  If you don't like where the market is then ok, don't sell.  But market being away from where you want it to be doesn't mean there is a lack of liquidity.  And you've already lost the money on a MTM basis, by the way.  Maybe you'll make it back closer to maturity as payments come in.  Maybe you won't.

But I do agree with the advice to stick with the smaller value notes if you anticipate selling.  Others here may say it makes no difference.  It may not, for _good_ notes.  However there are quite a few "gamblers" on Folio who are looking for a good deal and will buy late notes hoping they go current.  They often pay more than they are worth.  These folks might be new users trying something new, and eventually go bust.  There's a never ending supply of these people so it doesn't matter if they go broke.  Regardless of the reason these people engage in this, you will not find too many $500-a-pop gamblers.  And you're not going to trick anyone into buying a $2k note because those who are buying them generally aren't brand new to Folio.  Limit the subset of people who can buy your notes and you also limit your ability to unload them.

I am an accredited investor?

If you have to ask... :)

And what in the world is a BRV?

Bankruptcy remote vehicle.  As it stands, if Lending Club goes bankrupt you could lose your entire investment even if the borrowers keep paying.  The BRV is to protect the investor.  Prosper has one.  Lending Club does not.

You might want to read one of Peter's related posts on Prosper's setup.

hoggy1

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Re: New to LC - Need advice on deploying 250k
« Reply #41 on: September 12, 2014, 08:28:12 PM »
Thanks Core,

Makes perfect sense once you know what they are. I did a quick google on BRV when I first saw the response and nothing on the first page was relevant. I thought Web Bank issued the note and LC just purchased the revenue stream?

Steve
Steve

Randawl

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Re: New to LC - Need advice on deploying 250k
« Reply #42 on: September 12, 2014, 09:04:25 PM »
Where do you guys learn all this stuff? I never heard of "deploying in a fund" or "partnership members" and I am an accredited investor? And what in the world is a BRV? Once again I get that dreaded fealing I DKS from Shinola.

A lot of the information is (at least in part) is in the prospectus.  Also, many of the topics have at some point been discussed (albeit some only briefly) but are deep in the forum archives.

Fred

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Re: New to LC - Need advice on deploying 250k
« Reply #43 on: September 12, 2014, 09:23:04 PM »
I suspect Fred and I would rather team up and destroy a few pints.

Yes, Bryce, let's do this.  You're in SoCal, right?  I'll send you an invite.

Fred

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Re: New to LC - Need advice on deploying 250k
« Reply #44 on: September 12, 2014, 09:41:09 PM »
Where do you guys learn all this stuff? I never heard of "deploying in a fund" or "partnership members" ...

From LC forms 10-K, 10-Q, etc., filed to SEC:
http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=00014099700

I am an accredited investor?

http://www.sec.gov/answers/accred.htm