I signed into my Lending Club account today and I had this thought:
“I’ve got to admit it’s getting better, better… A little better all the time…” – Paul McCartney in the song Getting Better
I’m purposely leaving out Lennon’s response of “It can’t get no worse!” That was appropriate when I started doing my Lending Club updates in January. I was making 4.78%, which meant that 84% of Lending Club members were doing better than I was. In that article, I outlined the changes I was going to make. I’ve steadily seen my return climb. It was 5.90% in March. It was 6.42% in May. It’s the end of July now and it’s 6.70%:
(“Only” 76% of Lending Club members are doing better than me. Ugh.)
I probably could make that number jump a lot more by adding a ton of new money and investing as I have over the last few months, but I’m focusing on buying a new house. Since the beginning of the year I’ve put less than $500 in the account. The majority of the increase is due to simply reinvesting the payments from previous loans with the new philosophy.
In some ways, the growth from 6.42% in May to 6.70% now is a disappointment. I had gotten used to the big jumps early on. However, it makes sense that it will be tougher and tougher to move that number up. Perhaps my current strategy is typically good for “only” a 9% return in the long term. Since I still have a ton of loans on the books where I was lending money with the strategy that only returned 4.78%, the best I can do is hope to approach 9%. I expect it to be a year before I get to 7.75%. Fortunately, the new investor, you can jump in and take advantage of my miscues.
I will close this update with my typical reminder about peer-to-peer lending. No results are guaranteed… there is risk in investing in these loans. I believe that risk is minimized by diversifying amongst many loans (like how a mutual fund is diversified by investing in many company stocks). Pragmatically I look at it and think that if I’m getting 6.7% and 76% of people are doing better than me, it’s probably worth adding to your portfolio to increase your level of diversification. If you agree, give it a shot by signing up for Lending Club today.
Side Note: I still have a number of invites for free credit monitoring from Credit Karma that I offered yesterday. Go get ’em!