Monday, July 2, 2012

Lending Club Update - July 2012

¿Que Bueno?
Since my last Lending Club update, I am significantly closer to getting back in the black. My new total to the right, while still negative, is a lot closer to zero than it was in April. Yes, I realize the irony in looking forward to a 0% rate of return.

Why has it improved so much, you ask? Well, a limited portfolio like I have is a double-edged sword. On the one, pointy end (they'll cut you, fool), having only a small number of notes at Lending Club means that if one of your borrowers stops paying, your rate of return, like mine, will probably fall over 20%. On the other end (the end where I do the cutting), if everybody else you lend to pays on time, your rate of return will, relatively quickly, work its way back up.

So where does that land me as far as sticking with Lending Club as an investment? I actually plan to keep buying.

You see, I'm something of a contrarian when it comes to receiving bad news (though not nearly as much of a contrarian as Nelson -- how's that RIM stock working out for you, buddy?).* I think that most people in my position, after seeing a double-digit negative return figure in an investment, would probably stop putting money in that investment vehicle.

Not me. In the same way that when there's a plane crash, I actually feel safer getting on a plane the next day, now that I've had my first Lending Club default, I'm actually eager to keep putting money into what I consider to be high-quality loans. While it'll still be a limited investment (the biggest chunk of my investing money goes into my 401(k) right now due to my employer's awesome matching program), my plan is to get up to 50 notes in the next few months. I'll then reassess where I'm at.

What do you think? In my position, would you have stopped investing? Let me know if the comments.

*I thought about including a smiley face here to indicate that I was joking, but I figure we're all big boys here, and big boys don't need to use emoticons.**
**One might also argue that big boys don't need to use footnotes to explain when they're joking. To this harrowing assessment, I have no retort. In the words of the immortal Phoebe Buffay, "I have tasted my own medicine, and it is bitter!"

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