Beating Broke

Personal Finance from the Broke Perspective

Lending Club Returns Update

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As I mentioned before, I’ve been taking the normal 10% contribution amount that most would be putting into their retirement accounts and splitting it between my lending club account, and a sharebuilder account.  It’s been a bit of an experiment.  I happen to think that lending club is a relatively safe investment option for a portion of your portfolio.  I’ve still got my 401(k) from my old job, so the investments that I’ve made at lending club and in the sharebuilder account don’t even really make up 5% of my total investments.  In short, I can afford to get a bit risky with the money.  So far, it’s been anything but risky, however.  I’ll update on the sharebuilder account in another post.  Let’s take a look at what my lending club account has done.

To date, my investments look a little like this:

  • Total loans invested in: 24
  • Total loans paid off:5
  • Total loans defaulted: 0

Lending Club Net Annualized ReturnWith only 24 loans, it could be that I’ve just been lucky thus far.  I’ve had a couple of the loans go past due by 10-15 days, but nothing that hasn’t been caught up and made current.  And no defaults.  As I continue, I expect that I’ll see one or two.  With all the doom and gloom about the economy recently, I fully expected to see one already.

To date, I’ve deposited $257.20 into the account.  That includes money from before this experiment started, so it’s not all recent.  With that 257.20, I’ve invested in $511.36 in loans.  The math savvy of you will notice that the invested amount is quite a bit more than the deposited amount.  That just means that the money has turned over almost 100% since being invested.  The more recent money, which accounts for about 50% of the account hasn’t had a chance to turn over yet, or that number might be higher.  My total income, minus fees, is $36.26.

My portfolio breaks down like this:

  • 39% of the loans are D grade
  • 25% of the loans are B grade
  • 15% of the loans are C grade
  • 9% of the loans are F grade
  • 7% of the loans are E grade
  • 4% of the loans are A grade

As you can see, I’ve gone a bit riskier and weighted the portfolio towards the higher grades, but is still heavily centered around the C/C+ grade.  (Read this to see how I select loans)That keeps my return a bit higher, while also keeping the risk a bit lower.  Speaking of return, what is mine?

According to lending club, my net annualized return is 12.82%.

I like that.  It’s far better than any bank or credit union is going to pay me for my money.  To get that, I give up the liquidity of the money (I’d have to sell my notes to get the cash), and I give up some of the stability of the money (it’s riskier than a savings account or CD).  Because this isn’t my emergency fund, or normal savings, I’m ok with giving up both of those things, in exchange for an above average return.

Do you invest with peer-to-peer lending?  Do you use Prosper? Lending Club? Both?  How’s your return?

Quick and Easy Passive Income Ideas

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Building passive income streams can be hard work.  They usually take a significant amount of work and/or money to set up before they can really become a full-fledged passive income stream.  It’s part of the argument over whether they really are “passive” or not.  Obviously, as with anything, the more work or money you put into your passive income ideas the better the resulting passive income streams will be.  But, when you’re first getting started, there are several ways you can set up some small passive income streams that will provide with different forms of passive income.

Here’s a few passive income ideas.

  • deposit money with passive income ideasBlogging – As a blogger, myself, this one is one of the first ones I usually suggest.  To be sure, it’s not for everyone, but it can set up a rather nice passive income stream.  Blogging is work, but a well set up blog, with some content, could eventually be left alone to collect traffic, and Google adsense checks.  The initial work is a bit heavier, but the maintenance while setting it up can be as little as a few hours a week.
  • Cash Back Cards – Some might argue that this isn’t really a passive income stream, but I think that it can be.  Using a tax free cash back card to pay for bills/things that you would normally buy anyways makes the cash back an added bonus.  The only added work is to immediately pay the balance for the things that you’ve bought, and the cash back becomes an extra stream of income that you earned by buying things you would have anyways.  I have a coworker that does this and makes $500-$600 a year.
  • Peer-to-peer lending – I’ve written before about my portfolio on LendingClub, and how, with very minimal maintenance, I’m slowly building a passive income stream that earns me money.  As my portfolio grows, and I reinvest the interest, the interest income from the portfolio grows with it.  Eventually, if I keep with it, I could have a compound interest passive income machine, built with less than $20 and 20 minutes a month.

Those are just a few quick and easy passive income ideas to build passive income streams.  They don’t require a lot of work to get started and maintain, but they will provide for extra income that you can use to build them further, or to help beat broke.
photo credit: alancleaver_2000