Author Topic: Lending Club Portfolio Score  (Read 7164 times)

RomanLegend

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Re: Lending Club Portfolio Score
« Reply #15 on: February 08, 2018, 03:22:05 AM »

Taxable account
53.3/82 (winding down taxable account, sold most of the good notes on folio a while ago)

SEP IRA
53.3/82  (winding down IRA, sold most of the good notes on folio a while ago)

ROTH IRA
53.5/82  (stopped reinvesting recently, didn't sell notes on folio)

These are pretty good numbers.  Do you have a large volume of notes in each?

Note totals:

1836 (394 Issued/Current)
3968  (648 Issued/Current)
5577 (2401 Issued/Current)

Yea, that is a large volume.  What is your ANAR for each as well as loan distribution by percentage?

jd

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Re: Lending Club Portfolio Score
« Reply #16 on: February 08, 2018, 10:35:16 AM »
Quote
71 / 82 is the highest portfolio score I've seen yet.  Great job!  I'd be interested to see your loan distribution by grade.

My grade breakdown:

Grade   %
A        19.20%
B        34.40%
C        26.40%
D        16.00%
E        4.00%

Can you do the avg score by grade as well?  Thanks.


LC Picks grade   %
80                   0.79%
78                   1.57%
76                   6.30%
74                   14.96%
73                   2.36%
72                   20.47%
71                   6.30%
70                   25.20%
68                   9.45%
67                   6.30%
66                   6.30%

Here you go
« Last Edit: February 08, 2018, 12:13:13 PM by jd »

kuhnrl30

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Re: Lending Club Portfolio Score
« Reply #17 on: February 08, 2018, 01:02:48 PM »
the higher the score of a note the less likely the loan is to default

How do you relate profitability with the default risk? In theory, the interest rate should already track with the default risk. Taking greater risk is rewarded with higher returns and conversely investing in lower default risk should have lower returns.  You may be able to arbitrate if you can beat LC's algorithm, but they've been getting better with time. 

Is your method an improvement on LC risk ratings? Or is the portfolio score giving a risk adjusted expected return?


I ask because I've toyed with doing something similar myself and I'm curious how you went about it.




RomanLegend

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Re: Lending Club Portfolio Score
« Reply #18 on: February 09, 2018, 08:10:20 PM »
the higher the score of a note the less likely the loan is to default

How do you relate profitability with the default risk? In theory, the interest rate should already track with the default risk. Taking greater risk is rewarded with higher returns and conversely investing in lower default risk should have lower returns.  You may be able to arbitrate if you can beat LC's algorithm, but they've been getting better with time. 

Is your method an improvement on LC risk ratings? Or is the portfolio score giving a risk adjusted expected return?


I ask because I've toyed with doing something similar myself and I'm curious how you went about it.

Yea, it was quite the evolution along a slow road to settle on the best strategy...

I agree that if LC was perfect the interest rate would track with the default rate.  By asking a lot of questions over the years to their customer service you realize that not all loans are treated equally.  They also have a vested interest to process as many loans as they can to the market so they can make their money in platform fees etc...  Speed reduces due diligence based on statistics. 

Given all of that, there are holes.  Initially, I thought it would be more.  But the algorithm spits out about 2-4% of all the loans on the market annually.  These are the loans that are represented by a score of 66+.  Loans with lower scores can still be viable investments but those loans have indicators that they carry a higher default risk than the higher scoring loans.  Once you are buying in the 66+ group you are more confident that you will have a lower default rate (<2% based on the amount of cash defaulted) and the performance of your portfolio now depends on the avg interest rates that you are purchasing (highest LCPicks score with the highest interest rate available).  I realized I could get my portfolio to my target ANAR I wanted much quicker/easier once I was more confident in what I was buying.  So I started with risk mitigation first and maximizing my interest rate second.

My personal account was the initial guinea pig account with all the learning inefficiencies in it and I have 372 loans with only 19 defaults. A second, very interesting finding was once I switched methods the loans that I had default were actually defaulting less than previous loans.  Aka, paying back 20 of the 25 vs 5 of the 25.  Makes a real difference in performance over time not to mention new/continued purchasing power of future loans.

Hope this helps.
« Last Edit: February 09, 2018, 08:14:07 PM by RomanLegend »

bkcarp00

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Re: Lending Club Portfolio Score
« Reply #19 on: February 12, 2018, 07:13:30 PM »
Got it. 45.1.
« Last Edit: February 12, 2018, 07:19:15 PM by bkcarp00 »

Lovinglifestyle

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Re: Lending Club Portfolio Score
« Reply #20 on: February 13, 2018, 01:30:17 PM »
When using the 1-Click Investing feature from the subscription plan, aren't quite a few of the picks 100% funded by the time even by the fastest time one can click?  Also, would 1-click be for each loan, or for the whole batch of filtered loans?  I couldn't find any of those details on the subscription page, while on the trial period.

Fred93

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Re: Lending Club Portfolio Score
« Reply #21 on: February 13, 2018, 04:52:08 PM »
So have a few of you created accounts and handed this guy your account key?  Tell me your experience... ie nothing bad happened?  You think he's safe?

nonattender

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Re: Lending Club Portfolio Score
« Reply #22 on: February 13, 2018, 06:31:00 PM »
Heh... I didn't think about that - *I* thought he found a nice way to figure out what everyone was targeting - and freeride off of them... :)

"Here, I'll grade your paper for you and make sure you got all the answers right and give you a nice shiny numeric score - before it's due."

A little nonsense now and then is relished by the wisest men.

Lovinglifestyle

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Re: Lending Club Portfolio Score
« Reply #23 on: February 13, 2018, 07:44:06 PM »
Nothing bad happened to me (so far, ;-))!  The "delete account completely" (sic) button is easy to find, fwiw.  What impressed me a lot is that the manual selection via LC, with my fastest finger, found one note that did not show up at all (out of 9 in the release net) on other sites, and was "closing" at my shopping cart take.  That's what made me ask the above question.  With a subscription, would there be a way to get that one that closed too fast (like in a second) for me?

Fred93

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Re: Lending Club Portfolio Score
« Reply #24 on: February 13, 2018, 10:48:49 PM »
Ok.  Decided to try it.  Took forever to calculate.  I get 49.7/82.  I have no idea what that means.  The rest of the web site is just lists of notes?  I don't get it.
 

jd

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Re: Lending Club Portfolio Score
« Reply #25 on: February 14, 2018, 10:00:30 AM »
So have a few of you created accounts and handed this guy your account key?  Tell me your experience... ie nothing bad happened?  You think he's safe?

I was using their service during the early testing.  I started buying notes in Sep 17 using LC picks rankings.  I've had many communications with them and have found them to be upfront. Their service has also done very well for me up to this point. I'll post my six month results later today. 

I'd be happy to answer any other specific questions in regards to my experience with them.
« Last Edit: February 14, 2018, 10:47:50 AM by jd »

jd

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Re: Lending Club Portfolio Score
« Reply #26 on: February 14, 2018, 10:49:24 AM »
Ok.  Decided to try it.  Took forever to calculate.  I get 49.7/82.  I have no idea what that means.  The rest of the web site is just lists of notes?  I don't get it.

I don't want to speak for LC picks but it is my understand that the closer you are to 66/82 (or higher) the better off your account is.

RomanLegend

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Re: Lending Club Portfolio Score
« Reply #27 on: February 14, 2018, 01:44:06 PM »
So have a few of you created accounts and handed this guy your account key?  Tell me your experience... ie nothing bad happened?  You think he's safe?

Fred,

We've thought about, and take security of this site very, very seriously.  After reviewing the security specs we decided to invest in heavier vault protection.  The biggest thing we did was create two separate vaults.  One stores passwords the other stores keys.  Another thing we did was make it virtually impossible to get to both.  This does not come with a small cost but we saw the value in the investment for the end users.

This is a good/fair question and should be asked to any company who is asking for your API key.

Hope that helps,

-Chris

RomanLegend

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Re: Lending Club Portfolio Score
« Reply #28 on: February 14, 2018, 01:48:14 PM »
When using the 1-Click Investing feature from the subscription plan, aren't quite a few of the picks 100% funded by the time even by the fastest time one can click?  Also, would 1-click be for each loan, or for the whole batch of filtered loans?  I couldn't find any of those details on the subscription page, while on the trial period.

Initially I was doing everything by hand and I would miss loans from time to time.  More than what I was willing to miss.  Since everything is automated now I miss much much less.  The emails come out sub-second with analysis completed.  So I react to that email ASAP when I have cash available.  Honestly, maybe one a month now.  Used to be 1 a week for me.

It is one click per loan as of right now.  Future enhancements will potentially include automated investing and bulk (multi-loan) purchasing.  As customers have been asking for both recently.

-Chris

RomanLegend

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Re: Lending Club Portfolio Score
« Reply #29 on: February 14, 2018, 01:59:09 PM »
Ok.  Decided to try it.  Took forever to calculate.  I get 49.7/82.  I have no idea what that means.  The rest of the web site is just lists of notes?  I don't get it.

I don't want to speak for LC picks but it is my understand that the closer you are to 66/82 (or higher) the better off your account is.

Thanks JD.  And yes, you are correct.  With the way we derived the scoring we've seen the ability to repeat a 9.75%-12.5% interest rate for users who purchase loans great than 66+ (see the attached chart for reference).  These are very nice returns however we do it while maintaining a ~2% default rate (based on cash, not number of loans).

The path forward is taking whatever 'x' score you have and getting it up to 66+.  A score lower than 66, to our scoring, means that you are more likely to have a higher rate of defaults than 2%.  That is over simplifying it a bit, but that is the basic premise.   

Some loans can have lower scoring and be perfectly good loans but to maintain a very low default rate you have to be a bit more conservative.

Hope that helps,

-Chris