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Lending Club Returns [February 2012]

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I use Lending Club as part of my passive investment strategy.

For more detail about my personal experience both borrowing and investing with Lending Club, read my Lending Club review.

Lending Club returns as of March 2012

An up-to-date look at my Lending Club investment account as of February of 2012:

NAR (Net Annualized Return): 9.33%

Interest received: $555.60

Amount invested: $2,056.34

Available cash: $3,683.36

Account total: $5,739.70

Overall I’m happy as a clam about investing in peer loans via Lending Club.

Who wouldn’t be happy earning nearly 10% on their money?

Here’s another investor testimonial from DFA reader Michael:

Matt,

I wanted to say thanks yet again. My regular Lending Club account is currently at 13.99% NAR. Just following the simple rules from your blog. Loved it so much that I’ve opened a Roth IRA with them as well. Received 2 of my first 6 payments. Already at 9.09% NAR.

I love it, so thanks!

~Michael

He’s beating my returns by quite a bit so perhaps I’ll get his advice on tweaking note filters to pick the best notes to invest in (you can filter out notes based on tons of different criteria).

Lending Club IRAs

Like Michael, you can also open IRAs with Lending Club and basically combine Lending Club’s predictable returns with the tax advantages of an Individual Retirement Account.

They offer Traditional IRA, Roth IRA, SEP IRA, or Simple IRA through Lending Club.

It’s easy to rollover your 401k or transfer funds from your current IRA, and there are no fees for opening or maintaining your account.

Read more about Lending Club IRAs if interested.

Peer lending outlook

Awhile back I stopped funding new notes because we needed the cash flow. A month ago we did a short sale of our home and moved out-of-state. During the 6 month short sale process, as a hedge against the unknown, we kept cash liquid.

Times have changed.

Now we’re earning more, have lower expenses, and much less debt. We still have student loan debt, so paying it off is our first priority. That said, we know it’s good to save and invest while repaying debt (whenever possible) – so, because our situation has stabilized we’re planning to start funding investments again soon.

I’ll use the available cash in my Lending Club account ($3,683.36) to begin funding new notes.

Invest in peer lending

If you like the idea of earning returns while helping people, read more about peer lending, then open an account – not the other way around. Never invest in things you know nothing about.

For a few tips and tricks on earning higher returns, read the article I wrote on finding good notes to invest in.

Start small, tweak your strategy continually, and watch your returns grow.

That’s what I do, and like Michael said, I love it!

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Passive Investment in Index Funds and Peer Lending

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Finding a sound place to invest in this tumultuous and unpredictable market is tough.

Other than investing in yourself, there are only two vehicles I recommend to people at this time.

Index funds and peer lending.

Passive investment in index funds

Index funds follow the trend of the index they’re a part of. An S&P 500 index fund follows the curve of that index. If it’s a NASDAQ index, it follows the pitch of the NASDAQ curve, etc.

If you are a savvy investor you don’t need my help, but if you’re like me – someone who doesn’t want to spend all day tracking investments – you’re probably looking for a hands off approach that pays solid returns.

I have two recommendations for investing in index funds.

1. Target retirement funds: Open an account with VanGuard (or your favorite brokerage firm), find your Target Fund based on your age and target retirement date, and invest in that fund.

2. Betterment: Open an account with Betterment and let them diversify between the best index funds and bonds for you, based on your risk assessment; it’s very hands off. (Betterment fees were recently slashed; read my full Betterment review for more info.)

My research and experience establishes these two options as the best, most passive investment strategies that yield solid returns.

Passive investment in peer lending

Peer lending connects individuals looking to borrow with those looking to invest.

It’s that simple, and is basically an alternative to borrowing from banks that allows individuals to invest in, and help, other individuals.

There are two main peer lending platforms I recommend: Lending Club and Prosper.

As an example: Bill carries a balance on four different credit cards totaling $15,000. Cindy has money to invest, is wary of the market, and likes to help people get out of debt. Peer lending connects them and provides a platform to borrow and loan money between individuals. Cindy signs up as a Lending Club investor and Bill signs up as a borrower. Bill lists his request for a loan and Cindy invests as much as she wants in his loan (along with many other investors). Once the funding is complete, Lending club sends Bill a check (or direct deposit) which Bill uses to pay off his cards. Bill then makes one monthly payment (principal and interest) to Lending Club who then applies it, in micro-payments, to each investor, every month.

It’s not totally passive because you have to choose the notes (loans) you want to invest in, but you get to invest without trying to predict how a tumultuous market will move.

It’s hands on in that you get to help fund things you believe in, but hands off enough so you don’t have to understand markets and make stock picks – you just have to pick borrowers you want to help, who have the ability to pay the money back. The peer lending platforms give you all their personal financial information so you can make an educated decision.

I have been both a peer lending borrower and investor using Lending Club.

I have been investing in peer loans through Lending Club for over two years now. To date my peer lending returns (NAR – Net Annualized Return) stand at 9.33%, which is really good compared to many investors stock market returns over the last few years.

Invest where you’re comfortable

If you’re unsure about an investment, don’t get involved.

If you don’t understand peer lending or index funds but want to invest, study them out – then make your decision.

Read more about Betterment. Read more about Vanguard Target Funds. Read more about Lending Club. Read more about Prosper.

Educate yourself and pick a passive investment strategy you’re comfortable with.

I recommend doing both index fund and peer lending investing – it’s what I do.

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photo credit: photologue_np

Thoughts On Spending and Saving Money

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Just a couple interesting things I’m investing in or saving money on lately.

Investing in the right shoes

I have weak ankles from years of playing full-court basketball.

Rather than isolate and weaken them further by wearing ankle braces, I’ve been looking for ways to strengthen them.

Enter barefoot trail running.

I hate blowing money on anything, but since I’m a proponent of investing in yourself (health, skills, etc.) I have no problem investing in a great pair of utility shoes that get me back to more natural movement while building ankle strength. That’s why I’m going out to buy these shoes as soon as I publish this article (did the research and love what I see).

I’m excited to see how these handle all the hiking and trail running I’ve been doing lately.

I’ll keep you posted.

MovNat.com – explore your true nature

MovNat.com is a website dedicated to something I have known to be right all along: natural exercise in lieu of gyms and a bunch of expensive equipment.

Much of it is done simply in shorts and bare feet (I’ll be doing it in my new shoes).

The MovNat website describes it as “an effective fitness system based entirely on using the full range of our natural human movement abilities such as walking, running, balancing, jumping, crawling, climbing, swimming, lifting, carrying, throwing, catching, and self-defense.  MovNat is for everyone, it is progressive and safe, and supports physical competency and conditioning for any area of life.”

They teach 13 basic movements that exist within 3 basic movement categories.

Simple, basic, natural, and inexpensive. I love it.

Owning vehicles

A few days back I made the announcement that we’re going down to one vehicle.

Originally we were going to sell both the 2000 Jeep Cherokee and the 2002 Grand Prix to purchase a used Pontiac Vibe.

We changed our minds.

Now we’re just going to sell the Grand Prix, keep the Jeep, and rent cars for long trips.

Keeping the Jeep instead of buying the Vibe will save us around $4,000.

Renting a high MPG car for trips will save us tons of money on gas, and save us from having the expense of owning 2 vehicles. We’re going back to Michigan in early April and plan to rent a Ford Focus or similar vehicle with great gas mileage, then just turn it in when we return.

Owning just one vehicle will save us hundreds every month on insurance, repairs and maintenance, fuel, and plates/registration costs (taxes).

What changes are you making?

What things are you doing to change your life for the better?

What purchases investments are you making in yourself?

What are you doing to earn more and spend less?

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