I’ve been investing with Lending Club for three years now and my returns are still over 10%. I’ve developed a specific set of filters that I feel give me a distinct advantage over the average LC investor yet it’s nothing ground breaking. The average investor is doing pretty well according to Lending Club, but I want to do better. My filters have produced just one default out of 50 loans(37 still issued and current) in my after-tax account and although my initial investment was only $500 3 years ago, I’ve been continuously re-investing interest payments and my account value is now over $700. That is a pretty amazing return considering the low interest rate environment we’re in.
I wouldn’t dare compare Lending Club to fixed investments like CD’s or even bonds in terms of risk but I’d say there is a very favorable risk-reward trade-off when it comes to peer to peer lending. Since it’s such a relatively young business, the market has not caught up to it yet and individual investors like you and I can take advantage of that fact. I’d say the risk is somewhere in-between stocks and bonds but the returns are more closely aligned with stocks. Read the full story »