P2P lending is greater as a BORROWER. you have a very competitive interest rate and it is unsecured debt which means if you have to default the lenders have no resource on your assets....

as a lender you have no recourse if the borrower defaults. you are also highly reliant on the underwriting risk metrics/model the company employs (i lent money through lending club)

to understand why lending club has incentive to fund as many loans as possible you first have to look at how they make their money... they do it primarily by originating loans and servicing loans. the bulk of their income is in the origination side.. servicing doesn't make them much money. they make money other ways but these are the primary ways

why is that bad?

because LC has incentive to originate as many loans as they can. they will manipulate their risk metrics to justify funding a loan at X% and Grade which implies a certain level of risk. the risk that comes along with these poorly underwritten loans do not justify the pay off

additionally, as a borrower you do not have a lot of information from the borrower so it can be tough to make an assessment yourself as to how risky the loan actually is. you are pretty much going off the grade of the loan and their historical credit information without really understanding what their current income/expense situation is like. additionally, borrowers may say they will use the money for X but they may actually use it towards Y

i also believe there is a lot of fraud going on.. ie: people taking out loans before they die or taking out loans without any intention of paying them back

i would have lost money but i employed a strategy where i would buy the original issue, mark up 2% on the secondary market and sell it off to people who live in states that didn't have access to the original issue.. that made up the bulk of my return. all the defaults i suffered would have made my return negative if i didnt trade notes

I agree entirely with what you're saying, these are all things that I've considered. I currently have 8% of my savings at lending club. I have a base of 25% of my investment in 3 year loans between A and C. The rest is used to buy loans that are less than 5 months to maturity and yield over 2% APY. Over the course of a year, my yield is at ~9%.

damn you did better than me

My primary concern is that this is a scheme, and that my money won't be there to withdraw when it's all over.

i went to far out on the risk spectrum.. B-C with some D+E

After I found out they had a trading platform, I was in the clear.

@John O - , i don't think that'll happen(i think they may be FDIC insured) but with that said if you feel uncomfortable i'd withdraw my money as i have been doing over the last ~2 years

How do you make withdrawals without incurring charges?

on lending club? did you invest IRA money?

there is a transfer tab on the homepage.. you can withdraw money for free

Not IRA, personal savings. I might sound like a lunatic, but I don't trust any retirement fund.

Err... Cash money, not personal savings.

i hear you.. you should be able to withdraw all of it for free

even if its IRA money you just have to transfer the money to another IRA account

Gotya. I wired it in and incurred a $25 fee.

odd i never had a fee in any transfer contribution or withdrawl

was the fee charged by lending club or your bank?

it may be because you did a wire rather than an ACH/electronic disbursement transfer

The bank. It was because I wired it, but LC reimbursed me. They only reimburse deposits, though.

link your bank account and do a ACH transfer.. the fee should be $0

Once again, I might sound like an insane person, but I'm trying to get all my money out of financial instruments rn. When the economy starts to recess in a few years, I think It'll be best to be liquid.

nah man i am right there with you.. i am gradually liquidating my investments in general

probably not going to go 100% cash but i am gradually pairing down my holdings and getting more defensive with what i do hold

I hate playing this game. It's rigged from the start. I just need to buy a house and rent out a room.

dont buy now whatever you do

I don't delude myself into thinking I'll ever be a full time landlord, but my money has to go somewhere, and playing this gets me in fits.

i work in RE and homes are well overvalued

Oh yeah, I'm not retarded.

especially in FL

Orlando is inflated af

o.k. so, i'll be very boring for you fine men. Fail to diversify at your own risk. Finance is one where we must totally accept things the way they are. Idealism shouldn't play a role in finance, in my opinion. Indeed, I've learned a good deal from well vetted Jewish finance authors, among many other goys as well. This is an area where, while I cringe to throw any money (((their))) way, I have become a pragmatist. Examples of good Jewish financial authors who have it right (not scams) are Rick Edelman and William Bernstein. Among goys, classics such as Value Investing by Benjamin Graham, anything by Jack Bogle (founder of Vanguard), Rick Ferri, and many others are worthwhile. Diversify to be sure, and depending on your risk tolerance, you can do that any number of ways in terms of assett allocation. Also, maximize 401k, IRA's (even if you don't qualifty you can do back door Roth's), HSA's (a great way to further maximize pretax savings), and MINIMIZE expenses. Do not pay loads, or excessive fees, and Vanguard is an excellent source of low cost index funds (among many other things). Don't speculate on stocks either. It's a total crapshoot.

Also, while rebalancing is something I'll chat about later, the data strongly suggests that if you have greater than a decade of risk tolerance, then indexing and STAYING invested is important, because the data shows that trying to time the market highs or lows keeps you from gaining on the recovery side, and losing on the buying low side of things. It's very clear. Sometimes big market busts which may last 1-2 years, show that the entire recovery occurred within a few very short months . If you were sitting on the sidelines waiting for the bottom you may very well may have missed the entire recovery (into positive returns) if you were not vested during that particular time. Nobody can time the market either. Nobody. So, I urge you not to try it.

Now. If you have a goal of 60/40 (stoks always supercedes bonds when people talk like that), and stocks run up, your assets may become valued such that your prior goal of a 60/40 portfolio is now 80/20 (via the big run up in stocks). So, REBALANCING is the term used to sell some stocks, while buying some bonds (in this example) such that your portfolio resembles your original 60/40 target. When to do this is controversial. Some funds constantly do it for you (quite neat actually). Otherwise, maybe every 1-2 yeasrs seems to be concensus amongst the vetted financial guys I will allow myself to listen to. You aren't so much as timing the market by rebalancing, but inherently, you are selling high (those stocks that ran up) while buying low (those bonds that have been lagging or going down).

Also, depending on the asset, and the SEC yield, you'll want to hold some things (REITS or High Yield Bonds) in tax "advantaged" accounts (like IRA, 401k, Cash balance accounts, HSA's) etc.