In the past five days the Dow Jones Industrial Average has slipped 10.36% and the past two days we have seen wild swings both up and down. The news of volatility in the stock market has been the leading story in most major news outlets. Many stocks took a large hit yesterday and recovered slightly throughout the day. Many investors panicked and sold their positions. Investors using TD Ameritrade experienced slowness due to historic volumes. Even Lending Club’s stock hit a 52 week low of 10.28 at market open yesterday, dropping around 11%. It now sits around $12.
Time will tell whether this was just a small correction and this bull market will continue or if this is the start of a sustained slump. It is impossible to know where the market will go from here. The important thing to remember is that these market fluctuations are common when you are investing in stocks. Investing in marketplace lending has and will likely continue to produce far less volatile returns.
The consistency of returns has long been reported as a benefit of investing in marketplace lending, but it isn’t until events like these that we actually come to appreciate the consistent returns. Since Peter Renton began reporting his returns in 2011, he has seen overall returns ranging from 8.12% to 12.44%. This performance should continue, despite whatever might be happening across the stock market, barring another recession or a spike in unemployment. This makes investing with companies like Lending Club or Prosper, a great diversifier. Investing in unsecured debt is an asset class that is uncorrelated to stocks.