Saturday, July 26, 2014

Lending Club: How I Invested My Money

If I wanted to learn about investing in the stock market, I would go to one of many websites where you can enter a portfolio.  I'd "give" myself a sum of money to spend, "invest" it by picking stocks or funds on a particular day, and then, after entering my hypothetical portfolio, watch it for a several months and compare it to both published indices like the Dow Jones and S&P and to what I could do with the money elsewhere.  Unfortunately, I couldn't find a way to invest in the Lending Club with play money.  Fortunately, I recently inherited a nice sum of money so risking $1,000 on something I knew nothing of a few weeks ago didn't sound quite so unreasonable.

I split the $1,000 into two pots; the first I used to buy 20 newly issued notes, the second I used to purchase 37 notes on the secondary market.  Here are my results:

If you click on the pictures  you can see them better.  In short, I bought the new notes at face value so I got 20 of them at $25 each for a total of $500.00.  The resale notes were generally bought at a slight mark-up.  Also I decided to gamble with small portion of the money and bought some discounted notes that were in grace period (late but not so late as to incur late fees).  I then decided I didn't have the stomach for gambling so I sold them, losing $10.80 in the process.  If you add the $10.80 to the price of my notes and add the cash still in the account, you get to $500.00 for the "used" portfolio.  The question I'm going to explore over the next year is whether peer-to-peer lending is a good idea for me, and, if so, whether I do better with new notes or resale notes.  

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