I believe in index funds and not timing the market. Most of my investments are in low cost market tracking index finds. Sure I have some play money in individual investments… I own Oracle (ORCL) (100 shares for sentimental reasons as my former employer); I own Haier Electronics (via OTC: HRELF) (11,000 shares as a play money bet that a title sponsor of Beijing Olympics will receive a significant lift); and I own Etrade (ETFC) my bank and brokerage which I like very much… (1500 shares bought very recently at an average price of $4.94.)
My p2p lending style is very similar. I believe in indexing into to the credit grades for which I have faith in the ROI. Sure I will take some fliers on stories or people I know, but in general I want all loans which will yield X% (X being the risk free rate of ~5% plus a risk premium for that credit grade) estimated ROI. What I want from LC is an easy automatic way to index the market with specific extended credit.
Lending Club has a tool called LendingMatch. If you are going to invest at least $500 you can use LendingMatch to quickly build a diversified portfolio of loans… In my opinion this tool has 2 current significant shortcomings which if addressed would make this a near perfect vehicle for ongoing continuous hands-free lending at LendingClub.
- Inability to add extended credit filters
- LendingMatch is a one shot deal
How to address…
The 1st shortcoming seems the easiest and one that needs to be addressed for manual bidding as well. Add extended filters on search and LendingMatch.
The 2nd shorting coming I will admit is a little tricky… I would like to set up a continuous LendingMatch portfolio (with an extended credit filter) based on a risk level… Which means that as money is paid from existing loans or as I add money to the platform the LendingMatch portfolio would look at my current portfolio and determine which credit grades of loans could be added, find loans that meet both the LendingMatch risk diversification and the extended credit filter, and bid on those listing automatically. It is tricky because there would need to be some leeway in the algorithm.
Which credit grade should “next” in a currently perfectly risk balanced portfolio? Any! Which credit grade should “next” in a currently unbalanced risk portfolio? Any! At the end of the day however, the portfolio should have an average daily risk balance of the risk level of the portfolio, plus or minus some acceptable tolerance with the goal of getting money invested as quickly as possible.
That would be AWESOME!
Questions, Comments, and/or Screams of Anguish?
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