Investing With Lending Club (Jan '14 Update)

by Michael on Feb 14, 2014

Lending Club Logo

Hmmm. Looks like it’s time for another Lending Club update… As a reminder, I started this account with a $1,500 deposit during the summer of 2013 and have contributed $1k/month since then.

At the end of January, I had $7,358.56 in outstanding notes, another $100 (2 notes worth) committed to loans in the process of being funded, and about $295 in cash waiting to be invested.

During January, I continued to receive payments from borrowers that I had backed with my earlier investments. And, as that money accursed in my account, I re-invested it in more $50, just as I do with the $1k/month in new investments.

Looking inside my portfolio, I had 161 active notes, which included mostly Grade C notes (105), with fewer Grade D (47) and E (9) notes. This reflects my overall strategy of targeting somewhat riskier notes though, to the extent possible, I’d like to tilt even further toward the lower grades.

Related: Here’s an overview of how I select loans.

The average interest rate of these notes was 16.43% and my net annualized return (NAR), as estimated by Lending Club, stood at a bit over 16.7%. My adjusted return was, however, a bit lower (ca. 16.1%) due to one note being in the grace period.

Lending Club Returns

In terms of real world returns, my own calculations have me with a 15.81% annualized return, which is a bit lower than my stated NAR. This is primarily due to the effects of idle cash, which Lending Club ignores when estimating returns.

So… All continues to go well with my p2p portfolio. As always, I expect that some (hopefully small) fraction of my loans will ultimately default. But, for now, I remain on track to meet my long-term goal of 10-12% annual returns.

If you’d like to play along, you can get started here.

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