Investments, Making Money, Peer to Peer Lending, Taxes »

Part 1: Opening a No Fee Lending Club Roth IRA

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 »