81–87 of 87 posts
After rewriting my response 3 times I decided to lay out some basics. basics ----------- a. The most common fallacy in investing is that higher risk equates to higher returns. b. Any half decent investment strategy should have a solid risk management strategy, should account for (and discount) inflation and should have a strategy in place to emulate dollar cost averaging (most commonly by scaling into investments fro…
I'd buy a small newer (post 1979 construction so no rent control) rental property in San Francisco. With that much down you should be able to get it cash flow positive plus increase your equity at the same time if you needed to liquidate.
Here is an unusual one. I have followed this similar strategy for the past 4 years on a more aggressive plan, and have returned 36%, 28%, 33%, and 6% for the past four years. The strategy heavily shorts the market, and goes partially long in a way that 99% of the time generates reliable, steady returns, and in the 1% extreme cases offers adjustment techniques to handle what the market is giving you. The aggressive na…
Municipal bonds will yield 5-7%, very safe, all will be state tax free, some are also federal tax free. LendingClub can yield 10%+. You have to be pretty engaged, since you'll need to loan a small amount to a lot of people. At $1M, probably $2,500 to each of 400 people so the risk of default (there will be defaults) is diversified. You'll have to actively re-invest the principle/interest. But it pays back monthly and…
I think you're looking at this the wrong way. Decide the level of risk first. That dictates your stock/bond mix. After that, you get whatever the market gives you. If you're looking for a guaranteed 5%, it doesn't exist right now, and it won't be back unless inflation spikes close to 5%.
AT&T pays a 5.3% dividend. Given they're still effectively splitting a monopoly with Verizon, that's pretty close to guaranteed. You'd want to track the company's quarterlies, the competition (risk of a combined Spring + T-Mobile hurting them), and any big business moves, but otherwise it's predictable. The stock itself - and your principle - would get compressed in any market down turn though. The nice thing about h…
Municipal bonds will yield 5-7%, very safe, all will be state tax free, some are also federal tax free. LendingClub can yield 10%+. You have to be pretty engaged, since you'll need to loan a small amount to a lot of people. At $1M, probably $2,500 to each of 400 people so the risk of default (there will be defaults) is diversified. You'll have to actively re-invest the principle/interest. But it pays back monthly and…
Do you have personal experience with LendingClub? I'm curious as to how reliable their returns are and how much work it takes.
The key metric for LendingClub is the predicted default rate. If they are accurate, you can have good predictability of results and good returns. If not, then it's a long term problem for them. One might assume that their algorithm should improve as they get more data, and I'd love to hear from their modeling statisticians how that works, though it seems pretty close to their core IP. So I am taking it on faith a bit that they will get that part right.
My experiment was to lend $25 to 100 people. I loaned to the same rated borrowers so I did not have to deal with too much tracking. All pay 17.6% and there was a 5% predicted default rate and about 0.65% fees. Net yeild to me was predicted to be 11.95%. Fees are only paid on what is actually paid back to me.
At this time, 8 months in, I have 99 current 3 more than 31 days late 0 defaulted 0 charged off 2 repaid in full 11 sold at full price
The reason there are 115 total is that I loaned to more borrowers as payments came in.
I also put 15 up for sale on LendingClub's sister site to see how one might exit. 11 sold in a couple of days. The other 4 are still offered. Not sure why they have not sold yet, I put them up for sale last Friday.
The actual 'Net Annualized Return' as calculated by LendingCLub on my notes is 18.07%. That is expected to drop each time there is a charge-off.
I do expect some of the >31 day late to fall into charge off, but you can review the contact history between LendingClub and the borrower when LendingClub is trying to collect late payments. Checking one right now, I see that a payment is processing, so it looks like they are back on track.
Here is an unusual one. I have followed this similar strategy for the past 4 years on a more aggressive plan, and have returned 36%, 28%, 33%, and 6% for the past four years. The strategy heavily shorts the market, and goes partially long in a way that 99% of the time generates reliable, steady returns, and in the 1% extreme cases offers adjustment techniques to handle what the market is giving you. The aggressive na…