Author Topic: How much to invest in p2p lending  (Read 2704 times)

LendingClubStatistics

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How much to invest in p2p lending
« on: June 24, 2013, 10:29:50 am »
Being relatively new to actually investing in LendingClub, I am constantly second guessing how much to invest. I am curious what others do: Do you have a 'magic' % of what gets invested in p2p lending vs. index funds vs retirement accounts etc?  I would imagine some people here are fairly aggressive when it comes to investing in p2p lending.  I currently have less than $1500 invested (and contribute $50 monthly) and before I came very interested in p2p lending my plan was to only invest an amount I would be OK with not having at all.

neals384

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Re: How much to invest in p2p lending
« Reply #1 on: June 24, 2013, 01:26:19 pm »

rawraw

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Re: How much to invest in p2p lending
« Reply #2 on: June 24, 2013, 01:50:14 pm »
I invest a lot higher percentage lately because I think equities are over valued and will continue to correct downward

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Cries

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Re: How much to invest in p2p lending
« Reply #3 on: June 28, 2013, 10:04:14 pm »
I invest a lot higher percentage lately because I think equities are over valued and will continue to correct downward

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I am grappling with this as well.  I have a lot of cash currently, and considering putting more into lendingclub.  I am considering going up to 35% of my net worth.

Crazy?

Zach

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Re: Re: How much to invest in p2p lending
« Reply #4 on: June 28, 2013, 10:29:12 pm »
I invest a lot higher percentage lately because I think equities are over valued and will continue to correct downward

Sent from my SAMSUNG-SGH-I747 using Tapatalk 2

I am grappling with this as well.  I have a lot of cash currently, and considering putting more into lendingclub.  I am considering going up to 35% of my net worth.

Crazy?

Not at all unless you're super old :)

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AnilG

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Re: How much to invest in p2p lending
« Reply #5 on: June 28, 2013, 10:52:23 pm »
I hope you are aware of this restriction by Lending Club on lenders.

"In addition, no investor may purchase Notes in an amount in excess of 10% of the investor’s net worth, determined exclusive of home, home furnishings and automobile."

Personally, I will call any retail investor crazy who invests 35% of their net worth in a single asset class specially a new unproven one like consumer lending. I hope you meant net worth as (investment - debt) and didn't just equate net worth with investment only.

In addition, no investor may purchase Notes in an amount in excess of 10% of the investor’s net worth, determined exclusive of home, home furnishings and automobile.

I am grappling with this as well.  I have a lot of cash currently, and considering putting more into lendingclub.  I am considering going up to 35% of my net worth.

Crazy?
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neals384

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Re: How much to invest in p2p lending
« Reply #6 on: July 01, 2013, 12:35:17 am »
I would not recommend 35% of net worth invested in P2P Loans.  The returns we see today can easily go south for any number of reasons...including higher unemployment that could adversely affect those to borrow P2P.

The 10% limit is there for a reason!

Rob L

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Re: How much to invest in p2p lending
« Reply #7 on: July 01, 2013, 03:43:25 am »
What I fear the most isn't poor returns but an event that takes out LC, or Prosper, etc. The cleanup is unproven, probably costly and very messy. The list of financial failures over recent history is long. There's Bear Stearns (Notes from the Chairman anyone?), Leahman Brothers, Knight Capital, Solomon Brothers, Drexel Burnham Lambert, LTCM, the S&L's of the 80's and these are just off the top of my head. They all went down surprisingly quickly, with little or no warning. Our P2P lending investments are extremely illiquid. Peter said in a post the other day referring to lower interest rates that he felt LC is more financially stable today than ever. This has lowered the lender's risk and provided some justification for lower interest rates we've seen recently. Agreed, but we're not talking TBTF institutions here. We have been warned. On rare occasions bad things happen to good companies. Fat tails, black swans whatever you want to call them; .... happens.

On the other hand, if you would be completely comfortable losing the entire investment at whatever % you choose then why not?

rawraw

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Re: How much to invest in p2p lending
« Reply #8 on: July 01, 2013, 10:38:14 am »
I agree with Anil but I also think the size of the amount you are taking a % also matters. 

35% of a net worth of 2,000?  I wouldn't be as alarmed. 

35% of a net worth of 200,000 when you make 30,000 a year?  I'd be alarmed. 

35% of a net worth of 200,000 when you make 100,000 a year?  I don't think I'd sweat it.

 IMO I really think % of net worth is only part of the puzzle in determining suitability.
« Last Edit: July 01, 2013, 10:39:59 am by rawraw »

Rob L

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Re: How much to invest in p2p lending
« Reply #9 on: July 01, 2013, 12:13:22 pm »
Age (your remaining human capital) is a major determinant as mentioned above

LendingClubStatistics

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Re: How much to invest in p2p lending
« Reply #10 on: July 01, 2013, 04:15:28 pm »
Very interesting, I did not know about the 10% restriction. I am very young, financially stable and my expenses are minimal so I feel like I can handle the risk at the moment.  I don't 'need' any of the money in LendingClub and likely won't need to sell any notes to get access to my investment.

mitgib

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Re: How much to invest in p2p lending
« Reply #11 on: July 01, 2013, 05:32:05 pm »
With the brown nosing of inst. investors, I fear something very bad will happen in the future and have stopped adding new funds.  It's a shame as the returns are better with less risk, but I think LC will do whatever the big money demands and something unforeseen will bring this to a tragic end.

investforfreedom

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Re: How much to invest in p2p lending
« Reply #12 on: July 06, 2013, 02:24:14 pm »
I couldn't agree more.  35% is excessive, IMO.  It reminds me of folks putting a large number of their retirement nest eggs into tech or biotech in the go-go days of the late 1990s. 

One thing you can do is to regularly withdraw part of the interest received from your p2p investments.  If you receive $100 worth of interest per month, withdraw, say, $50 dollars.  You would recoup at least part of the principal if either LC or Prosper went south for any reason in a few years.  This is like collecting rent on your rental property.  After some years, you recoup your investment capital and then any rent received thereafter is pure profit. 

If you have an IRA account, regular monthly withdrawals in the sense of cashing out are not quite feasible.  That's why I don't invest in retirement accounts, precisely because p2p lending is still an unproven investment.  I want the cash withdrawn monthly from my p2p accounts to be used for other purposes. 

What I fear the most isn't poor returns but an event that takes out LC, or Prosper, etc. The cleanup is unproven, probably costly and very messy. The list of financial failures over recent history is long. There's Bear Stearns (Notes from the Chairman anyone?), Leahman Brothers, Knight Capital, Solomon Brothers, Drexel Burnham Lambert, LTCM, the S&L's of the 80's and these are just off the top of my head. They all went down surprisingly quickly, with little or no warning. Our P2P lending investments are extremely illiquid. Peter said in a post the other day referring to lower interest rates that he felt LC is more financially stable today than ever. This has lowered the lender's risk and provided some justification for lower interest rates we've seen recently. Agreed, but we're not talking TBTF institutions here. We have been warned. On rare occasions bad things happen to good companies. Fat tails, black swans whatever you want to call them; .... happens.

On the other hand, if you would be completely comfortable losing the entire investment at whatever % you choose then why not?
« Last Edit: July 06, 2013, 02:33:09 pm by investforfreedom »

New Jersey Guy

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Re: How much to invest in p2p lending
« Reply #13 on: July 06, 2013, 03:22:02 pm »
"With the brown nosing of inst. investors, I fear something very bad will happen in the future and have stopped adding new funds. "

The conservative approach is to look at LC and Prosper like the glass is "Half Empty".

I look at it as "Half Full" and will continue to add funds.

There are still some rough patches for both companies to overcome, but both have rooted themselves as a force in the money-lending world.  The fact that institutional investors and companies like Google are dumping truckloads into this reinforces the fact.
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Simon

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Re: How much to invest in p2p lending
« Reply #14 on: July 06, 2013, 05:22:22 pm »
Bigger fan of this investment class than any other. I personally feel the LC 10% limit is way too safe...
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