Eight Months on Lending Club

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Already another month. My NAR keeps dropping like a rock as Lending Club is coming to terms with those Late Notes that will never pay as they move them to Default and Charge Off. I had almost a dozen Notes that went Late. One completely paid the Note off. One came back into payments (and then I was able to sell the Note). I think I sold another couple.

Even though the graph looks depressing, I am optimistic. I have realized what I have done wrong, and how to prevent future Late Notes (which nearly inevitably lead to Defaults and Charge Offs). Since the first wave I have only had one more Note go Late.

As I peruse the other P2P Lending Blogs (see several excellent ones to the right) it seems that 12% NAR is considered pretty good. It's definitely better than than the Stock Market (see Why You Should Invest in the Stock Market) but my target is 16% or higher, mainly to offset the effects of real inflation (see Not All Inflations Are Created Equal). I'm confident I can get back to 16%.

Once I learned the ropes of Lending Club, I wanted to make sure that the time I was spending on investing was not offsetting my gains (unless your time is worthless, you need to consider this). Now that I have the Chrome Browser extension (see Alright, I'm Ready To Share), I feel like I have finally been able to bring down my time spent to a reasonable amount. Before I used this extension, I was only looking at Lending Club 3 days a week to cut down on the time I spent investing. Selling Notes used to be my biggest time consumption, and that was manually entering dozens (even more when I went to 3 days a week from 6) of sell prices from my spreadsheet. Now my extension enters them all for me (coming in version 0.2).

I'm back to 5 to 6 days a week, but it is a 5 minute checkup as opposed to 10 to 15 minutes. And the time spent will not grow dramatically as I scale up my portfolio. I was having a hard time seeing 400 let alone 800 Note portfolio before. Now I can easily see it.

I've now sold 3 times the number of Notes I currently hold (churn). My Notes held average $24.88 and I've held them on average for 2 1/2 months. The Notes I've sold I've held for just over 3 weeks. My median return on sold Notes is 28.8% annualized, or 38.2% days weighted annualized (the longer the Notes been held, the more weight it is given in the average).


The average rate for my Notes held is over 21%. This is a snapshot. I tend to sell off higher Interest Rate Notes, so my held Notes is a little lower, but we'll get to that later.




Almost all my Notes are 60 month Notes. I prefer it this way. I try to buy Notes with a lot of Principal left, which means that the payments are mainly Interest. 60 month Notes have even more Interest since the Principal is spread out over a longer period.



This is a natural side effect of how I choose Notes. I look for Notes with good Yields, and 60 beats out 36 just about every time.





Overall Composition

I always get concerned when I look at this chart. I really don't like holding G Grade Notes, but I have more G Grade than E Grade (I'd rather the reverse). I do like to see that the majority of my Notes are F Grade (in my opinion best Risk/Return balance).

The D and B Grade Notes are the stragglers when I have less than $25 left to invest, then I go find a good Yield Note with less Principal and these can often be lower Grade Notes.

The nice thing about having portfolios is that you can analyze your Note in different segments (see How I Use Lending Club Portfolios). You'll recall I had separated out my fairly newly purchased Notes from those that I had received at least 2 payments from (my Buttercups and Wesleys, respectively). This helps me see how my buy and sell strategy plays out. I buy irrespective of the Note's information just on it's raw Yield or Discount. It could be a Note that has a plunging credit score, lives in Florida, leveraged to the hilt, only on the job for a month, high debt-to-income G Grade Note, and I'd still buy it because it has a good Yield to Maturity.

However, when I sell is when I look at the details of the Notes. That G Grade Note will get sold for near 16% annualized return markup. While the Notes I would rather keep, the F Grade 10+ year employed, home owner, from Oklahoma, get a higher, closer to 32% annualized return markup. So let's see how that affects my portfolios.


Buttercup

The Buttercup portfolio are the Notes I've recently purchased (and haven't gone bad in any way). As you can see, it skews highly towards the G Grade Notes. This is a symptom of buying Notes based solely on Yield To Maturity.

If you compare this graph to the overall composition graph, you'll notice that I sell many of the G Grade Notes before they reach a second payment.










Wesley

My Wesley portfolio are the Notes that I've held for at least two payments and have not started missing payments. This is what I like to see in my portfolio. Overwhelmingly F Grade Notes, followed by E Grade and a few G Grade Notes (and a smackling of smaller Grade Notes).

Notice I still have an over 20% Weighted Average Rate, but I am more heavily invested in F Grade Notes, which have a lower Default Rate than G Grade, and have a higher average Yield (see Low Risk, High Return Lending Club Strategy).



Strategy Change

I have three buying strategies I use. The first is Newly Issued High Yield to Maturity 60 Month Notes (see the bottom of Seven Months In And Things Are Slowing Down). The second is High Yield to Maturity only. The third is Highly Discounted over 16% Yield to Maturity.

I used the second strategy the most heavily for the longest and have been using all three lately. However, until I get my extension to add risk factors to selling prices, I'm probably going to have to focus on the third strategy (Highly Discounted). Many of the seasoned veterans use this method (although not necessarily limiting it to above 16% Yield to Maturity) and have called into question the High Yield to Maturity model. Without my risk based selling prices, I think I'm going to have to agree with them. Plus Now I have a tool that allows my to visually see Discount vs. Yield to Maturity (see Discounted Notes on Lending Club's FolioFN).

Conclusion

So the effects of the Late Notes from the end of last year are finally starting to show in my Net Annualized Return. We'll see when I actually hit bottom on that. As long as I can prevent future Late Notes (which eventually lead to Defaults and Charge Offs), which so far has been pretty successful and will only get better with the Chrome Browser extension, I think I can climb back up to 16%.

I'm excited about the time savings I am getting from using the Chrome Browser extension. It makes the process so much more fun (less tedious) and cuts my time spent "investing" dramatically. It cuts the time down so much, I feel like I still need to do something when I'm done, 5 minutes is not very long.

Seven Months In And Things Are Slowing Down

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Seven months have passed and I am now starting to feel the results of the Late Notes that are now Charged Off in my Net Annualized Return. 16.36% is still in the neighborhood of my target 16%. I still have six Late Notes that I am steeply discounting, but it appears that they rarely sell.

I've received enough interest to offset the complete loss of the Charged Off and remaining Late Notes assuming they are all worthless. The total interest I've received amounts to 6% of the money I deposited. Now we are on to start growing again (back to the beginning).

I've sold 2.7 times as many Notes as I currently hold (of course using the proceeds to buy more Notes). My median annualized return on Notes sold is 32%. If you weight the annualized return by days held (the longer held the more weight you give to it's annualized return) my Notes Sold have an average of 58%. This sounds great, but the raw gain, Cash Received (Sale + Payments) vs Cash Paid, is 1.9%. This has probably been impacted most by by selling off of Grace Period and pre-Grace Period Notes at a discount and buying a bunch of pre-Grace Period Notes at a premium before realizing they were pre-Grace Period.

When ranking the risk of my Notes (which I use to determine asking price when selling, 16% - 32%), I weighted most heavily (5 times the weight of the least weighted):

• Accounts Now Delinquent
• Delinquencies in Last 2 Years
• Delinquent Amount
• State (Bad: SC, OH, CA and FL Good: WY, ME, with other rated in between)
• Inquiries in the Last 6 Months
• Months Since Last Delinquency
• Status of the Note (Issued, Current, Fully Paid, Grace Period, etc)
• Public Records on File
• Revolving Line Utilization. I am adding to that 

I am now increasing the weight of the Grade of the Note to the same level (was weighted the least, now weighted 5 times higher). I have an uncomfortable number of G Grade Notes. I would rather sell those than hold on to them.

Lending Club has also been making some changes, or rather FolioFN, specifically to the way Browse Notes works. On the positive side they got rid of the confusing checkboxes for Rate and replaced it with a Range. Much better.

On the downside, they now no longer include Issue Notes when viewing Never Late. This makes me sad. I really like Issued Notes, and now they are hard to find. Well, they are hard to find the way I was looking for Notes.

I now choose Notes by looking at everything. I sort first by Yield to Maturity (click once to sort ascending) and then I sort by Remaining Payments (click twice to sort descending). This gives me newly issued Notes with the highest Yield to Maturity. I then look for the Accrued Interest over $0.50, meaning the Note will soon (hopefully) make a payment. This way I get the first payment (which is mostly interest) and hold it just a short period of time before I get that interest. Then if it sells, I get a (mostly) interest only payment, get my Principal back and a premium in a small period of time.

I am not buying exclusively Issued Notes, as there are some great deals in the rest of the Notes. Those I just chose Never Late only and sort by Yield to Maturity. I'm not sure how much of a mix between Issued and Current Notes I'm going to buy. I'll still need to play with that.

Bottom line is that I have taken some lumps (and still waiting for 6 more Notes to be Charged Off) and am still at my minimum target. I look forward to clawing my way back up above 18%.

Six Months and I'm Reaching A State of Peace

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So I've gone from flying high to 14 Late Notes (one is now in Default). I was able to sell one of the Late Notes pretty early on. One of the Notes came current (and immediately sold, now that it was not Late and steeply discounted). I don't expect to sell any of the Late Notes I am currently holding before they go into Default. I have steeply discounted them, but it appears that Late Notes just don't sell, especially this Late.

I did have one Note finally go into Default (Charge Off). However, I did get some money from collections ... and then the collection fee ate that recovery up.

I went through and looked at the Notes that were Late and noticed something ... I had three Notes from one Loan that went Late! Three Notes! Not just one or two, Three! I went through my list of Notes and sorted by Loan number. I got pretty good at looking at the last digit to see quickly where I had Notes from the same Loan. I culled out another half dozen from back in the day before I watched for duplicate Notes.

So, lessons learned. First, check the Note before you buy it to make sure they haven't already failed a payment (apparently they still show up as never late). Second, make sure you do not have more than one Note from the same Loan (or Notes worth more than $25). Third, treat Grace Period as the plague. Grace Period sells, but Late does not (only 7% of my Late Notes sold while Late).

As far as returns, Lending Club is still reporting my NAR above 20% (although I am considering those Late Notes as Charged Off already. I've sold more than twice as many Notes as I currently hold, so about every three months I cycle through Notes. Of the Notes I hold, they are worth an average of $24.88. I've held them for almost two months on average. Of the Notes I've sold, I've held them for an average of 19 days (almost three weeks). My median annualized return on Notes sold is 33%, however I like to use a Days Weighted Average (the longer I hold it the more it is weighted) which is 72%.

I feel like I'm emerging from the Fire Swamp, and now it's time for Prince Humperdinck, I mean Tax season. (Maybe I will name my portfolio Buttercup).

Five Months and The Good Times Roll (For Those Who Ran Off With My Money)

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So after five months I've had a great run, followed by an avalanche of Late notes. I think I've had a total of 13 notes that have gone Late. One of them I've been able to sell off.

Every one of the Notes that have gone Late have made payments, but none of them have made payments to me. They were never late and were current when I bought the Notes (assuming that is what those checkboxes mean when Browsing Notes).

When they give my return, they obviously don't take into account that the Late notes are as good as gone. The chart above shows that of the Notes that go past 31 days, you have basically a 50/50 chance of getting any money back (they don't specify how many were fully recovered versus partially recovered, and how much that partially is). The site reports my return as over 21%. They no longer show your percentile. When they did show it, I had dropped solidly into the 99% (before I was waffling between being in the top 99% and 100%). My own internal reporting needs to change. I've been calculating my account value as the sum of what I paid for all my notes. What I need to use is the lesser of what I paid or what I am asking. I believe that will more closely represent my account value.

Of course, it may be more representative to consider Late Notes to be $0. I don't know what the conversion rate from Grace Period to Late is, but from 16-30 Days Late to 30-120 Days Late has been 100% for me. I've been able to stem the tide of Late Notes by being more aggressive at selling Grace Period Notes. I've still had a few slip into Late status. 

I've been selling Grace Period Notes at 80% of P+I (rounded down to the nearest dollar), and dropping the price by $0.10/day. Some of these Grace Period Notes have received payment and then sold at this discount. At first I was disappointed, but then I realized I didn't want the notes where the borrower was willing to go into Grace Period.

Late 16-30 Days I sell at 75% of P+I (rounded down to the nearest dollar), and dropping the price by $0.10/day. Late 31-120 Days I sell at 50% of P+I (rounded down to the nearest dollar), and dropping the price by $0.10/day. Not that discounting Late Notes seems to work. I have only sold one Late Note, and none have returned from the grave. I may consider being more aggressive at selling Grace Period Notes just to prevent Lates, since they seem to be the land of no return.

Most of my Notes (almost 2/3) are still F Grade. If I read the numbers correctly, 76% of the F Grade Notes are still Active (Current or Late). Of the Active F Grade Notes, 95% of them are Current. 25% of my Late Notes are F Grade while the compose 63% of all my notes. It appears that F Grade Notes are a pretty sweat spot.

E Grade Notes have roughly the same Current, Late and Default rates. They are also about 25% of my Late Notes. However, they only comprise 6% of my portfolio. So apparently I've been really unlucky with E Grade Notes.

Half of my Late Notes are G Grade. Given that about 1/3 of my portfolio is G Grade and that the stats for G Grade notes is a bit worse (91% of Active Notes are Current as opposed to 95% for E and F) that is not surprising. About 8-9% of E and F Grade Notes are in Default. For G Grade Notes, it's 14%.

You would think that due to the very small place that E Grade Notes hold in my portfolio (and that they are statistically equivalent to F Grade Notes) that they would not hold such a prominent spot in my Late Notes.

It is also interesting to see what Lending Club is doing to attempt to reclaim my money from the Late Notes. Below is a chart of the latest action Lending Club has taken on the Late Notes.

Months Old	Payments Made	Latest Action
3	2	Sent email to borrower
4	7	PAYMENT Failed
5	2	Borrower contacted Lending Club
5	3	Sent email to borrower (three notes for this loan)
8	4	Borrower located (skip trace)
8	5	Borrower provided Bankruptcy counsel information
9	6	Borrower filed for Chapter 7 Bankruptcy
9	6	Collections Agency attempted to contact borrower
12	8	Drafting lawsuit
19	16	PAYMENT Failed (previously: Borrower provided Bankruptcy counsel information)

So now after my big Late Note hit, I'm making some changes. First, Grace Period Notes seem to sell. I think I need to discount them slightly more than I have been. I'll be discounting them to 75% of value instead of 80%. Late Notes don't seem to sell at all (especially 31-120 Days Late). I'm also adjusting my Risk Factor for Note Grade. I used to just convert the letter to a number and the trailing number to the fraction (ie A1 = 1.1, F4 = 6.4). Now I will be squaring that (ie A1 = 1.1^2 = 1.21, F4 = 6.4^2 = 40.96). This should cause my tool to more steeply discount G Grade Notes, as they will be rated 36% more risky instead of 17% more risky. This may also weight my portfolio more towards E Grade Notes. Given the lower return and about equal risk to F Grade Notes, I'm not sure how I feel about that (not to mention my propensity to have Late E Notes).

Also, of note may be the states my Late Notes are from: SC, AZ (2 Notes), NY, VA (3 Notes, same loan), CA, OH (2 Notes), OR, MN. I was already weighting the risk of Notes based on state, thanks to Nickel Steamroller. Currently I weight riskier than average the following states (riskiest to less risky): CA, FL, NE, IN, MS, TN, IA, ID, MT, UT. I also weight the following states less risky than average (least risky first): WY, ME, OK, LA, CT, KY, NC, WV, KS, AL. I am adding "riskier than average) to my Late Notes' states (although I already had CA as the riskiest, I considered the others as average risk). Since SC and OH have two Late Notes each, I made them as risky as CA and FL. The other states I put their risk about equivalent to TN or IA.

And yes, I have three Notes from the same Loan and the Loan went into Default. I have identified some holes in my detection of Notes from Loans I already own. This is the risk I was trying to avoid. I think I've worked out a way to avoid the hole that got me three notes from the same loan and I think I discount Notes which I have multiple from the same loan.

If I assume that all my Late Notes are worthless, I think I'm basically back to my original investment, so 0% return. So now that I've learned a lot of lessons, I'm starting from the beginning again, and hopefully will come back with a vengeance!

Fourth Month and Seven Deadbeats

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Well, I knew this day would come. I have had seven notes that have gone past the Grace Period into the Late Period. Lending Club states that those within the Grace Period, I have an 83% chance of getting some money back from. Those that are Late 16 to 30 days, 75% chance of getting some money back. Late 31-120 days yields 55% chance. Note that this does not state that you will get all your money back, but get some back.

I'm changing my pricing strategy a little. Any notes in the Grace Period, I am now selling for Principal + Interest. This means I could lose up to 7 days of interest if it sells on the seventh day from when I put it up, but given that there is a 17% chance I could lose the entire note, it's little to give up. Then when a note goes Late, I start decreasing it's sales price by $0.10/day.

Of the 7 notes that have gone into Late, I've sold one so far. This is my first chance to get real data (although not enough for statistical significance) as to who defaults. Of the six notes I still own that are Late here is the info (notice that I bought all of these notes right before they stopped making payments):

Months Old	Payments Made	Latest Action
4	2	Voicemail left
7	4	Collections Agency attempted to contact
7	5	Borrower provided Bankruptcy counsel information
8	6	Borrower filed for Chapter 7 Bankruptcy
11	8	Drafting lawsuit
18	16	Sent email to borrower

We'll see how this plays out as far as collections. However, I'm still optimistic. My account is currently worth 5.1% more than the money I put in. On notes I sell, I get a median return of 38.5%. On average I sell notes after holding them for two weeks. The notes in my portfolio I've held for an average of 40 days. So it looks like my strategy holds on to some notes and cycles through others.

I've been bouncing around between 99% and 100% for my investor percentile. We'll see how that pans out over the next several months as we see what happens with these Late notes. Currently, I'm guessing I'm really in the 99.5% and the rounding gets me to 99% or 100% depending on the day.

The main thing I've been focusing on is keeping my time to a minimum on handling my account. My routine is to spend about 5 to 10 minutes a day each morning buying and selling notes.

Lending Club reports that I have a return of 21.22% (average is 9.64%). I think my Late notes will affect this, but I'm hoping my Grace Period and Late note selling strategy will minimum the impact on my return.

I'm still a small investor. I am over the 100+ Note range but not quite to the 400+ Note range. Of the 100+ Note investors, if I can stay in the top 6.5% of investors, I will still have a 15%+ return. My target is 16% per year, so 21.22% gives me some wiggle room.

So I think the changes to my strategy will be to:

#1 Do not buy notes that are in Grace Period
#2 Sell notes that reach Grace Period at value
#3 Discount Late notes by $0.10/day

This is where it gets really fun, how to mitigate risk and still make a good return. When I said I've been lucky so far, this is where we see what the real possibilities of Lending Club are.

Third Month and Going Strong

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Three months down and my luck is holding. Lending Club reports that I am getting over 20% (my target minimum is 16%). This appears to put me in the top 1/2%. I say that because I've been fluctuating between top 99% percentile and 100% percentile. I think they are rounding it. I can't seem to find how many investors there are on lending club, so I'm not sure if I'm in the top 5 or top 50.

I'm still trying to figure out where the problem is with about 1/3 of the notes I sell being sold for less than 16%. Of the notes that sell for less than 16%, they all sell for 1.7% to -100% (annualized). I'm hoping it's my tool. I now review my sales to make sure that I at least ask for the principal and interest.

I may also have my first default here soon (16-30 days late).

My strategy hasn't changed. Buying: I prefer to hold notes that have just been issued or are within the first year (the earlier the better). I only buy $25 fractions. I try not to buy notes from loans from which I already have a note. I want loans that are Now Current and Never Late. Then I look for the highest Yield to Maturity. Selling: I offer all my notes for sale. I set the sales price such that with taxes, fees, payments and purchase price taken into account I would get 16% to 32% annualized return if the note sold in 7 days.

I have a formula that determines the risk of a note using 30 different criteria (which my tool grabs from the original loan information and the note information pages):

Accounts Now Delinquent	Amount Requested	Credit Score Change
Credit Score High	Credit Score Low	Debt To Income
Delinquencies (Last 2 yrs)	Delinquent Amount	Expected Final Payment
Fraction	Grade	Gross Income
Home Ownership	Inquiries in the Last 6 Months	Interest Rate
Issue Date	Last Payment Date	Late Fees Received
Length of Employment	Length	Monthly Payment
Months Since Last Delinquency	Next Payment Date	Open Credit Lines
Public Records On File	Purpose	Revolving Credit Balance
Revolving Line Utilization	Status	Total Credit Lines

The more favorable these criteria are, the closer to 32% (I want to hold the note longer). This way I lower the price on riskier notes to have them (hopefully) sell before there are problems while less risky notes are held to collect payments until they start getting in the risky category.

As you can see I mainly have F and G notes (highest Yield to Maturity) as well as mainly 5 year notes.

This mix seems to jive with Lending Club's reported Return by Credit Grade. Grade F notes get the best return generally, with Grade G being slightly behind. Grade E notes are even further behind, which may be why I only have a handful of them.

While I have over 100 notes, Lending Club doesn't know about all of them. In the "Your Investment Numbers" chart above, it reports I only have 99 notes. The rest of my notes are being held in Foliofn. It takes a business day (sometimes more) for trades to settle. So at any point I may have a half dozen to several dozen notes bought or sold and pending settlement. It is a little confusing at times having notes and cash in the Lending Club account and pending sales or purchases in Foliofn.

So apparently my strategy can, at least in the short term, put me in the top 1.35% of all those with 100+ notes. On this chart they state that it takes a minimum of $2,500 to get to 100 notes. While that is not technically true (you could buy 100 notes near the end of their term for $5 to $15 each), you probably won't get the best returns buying those notes. Remember that the early payments are mainly interest, while the last payments are mainly principal. The value in a note for sale is the principal plus the next interest payment. However, the longer term value is the principal plus all future interest.


After three months I'm still having beginners luck. I'm still getting more than twice the average return. Still no defaults (although I have about a 25% chance that one of my notes will default). Still working it.

Second Month Of Lending Club

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So it's been two months and things are still looking pretty good. I've had a 4.5% growth in the funds I deposited. 58 Days ago I bought my first notes. I've been adding a little money to my account over the last two months, but if I had put it all in at the beginning, that would be an annualized rate of 32%. Since my minimum target is 16% per year, I think double is a good rate.

I've moved from a Google spreadsheet to a custom tool I developed that grabs the data directly from Lending Club's website. This way I am not limited by the amount of data I am willing to copy into a spreadsheet, it cuts down on the time I spend entering data (none) and I have more flexibility with what I do with the data. I now can spend less than 10 minutes a day to sell dozens of notes and buy at least a half dozen notes.

In a previous post I stated that I was going to change my strategy to cut down on the number of trades I do. This was mainly to cut down on the time. Every note that I bought I would enter a limited set of data into a spreadsheet. For each not I sold, I would add some more data about the sale. All this manual entry was time consuming. Now with my new tool, I can trade more frequently with less time being taken to enter data. Buying notes still takes a bit of time to find the right notes to buy. I wish Foliofn had better filters (like "only show notes with Yield to Maturity greater than X").

So I am still Top of the Class. My Net Annualized Rate dropped to 21.79% (or 22.01%, depending on where I look). The lowest it has been was 21.68%. Lending Club reports that for "Investors Like [Me]" 100% have a NAR less then me. Less than 4% of all Lending Club investors get over 18%.  "Investors Like [Me]" dropped to 5.56% NAR and overall average remains at 9.64%.

I'm still not convinced this is more than beginners luck. I am, however, transferring a larger chunk of funds into my account.

Currently I am holding about 1/3 of the notes I've ever held. Or, in other words, I've sold twice as many notes as I currently hold. The notes I sell I hold for an average of about two weeks. The average return is really high because I've sold some notes for a premium (I really wanted to hold them) the day after I got them. When you annualize that, it gets pretty crazy. However, my median annualized return from selling notes is 43.7%. The notes I am currently holding I've held for an average of about two weeks. The purchase price of the notes I am holding now average $18.27.

I still haven't had a default. I focus on buying high interest rate notes in their first year with either the highest Yield to Maturity or the lowest Markup (roughly equivalent). I want the notes to be $25 fractions of the overall loan. Then I sell the note for somewhere between 16% and 32% annualized (assuming it sells in 7 days). Since I don't hold notes for more than two weeks on average, that means no note really even has a chance of defaulting. That and I choose notes in the first year, which is the least likely time to default on a note (in my opinion).

I've found that there is a limited number of low Markup (or high Yield to Maturity) $25 fraction notes for sale. There are several in the range of $250 fraction, but the minimal ones tend to have a higher markup. The opportunity is there to take the lowest Markup $25 fraction notes and mark them up higher. If I can continually buy all the lowest Markup $25 fraction notes, and make sure the lowest ones are the ones I am reselling, then it increases the demand for my notes. At least that's the theory.

One Month Of Lending Club

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Well, I was surprised today. I had a little extra money come my way, so I wanted to try a new investing platform, peer-to-peer lending. I'll discuss in another post more about my philosophies and the difficulties of government regulations in trying to get started in peer-to-peer lending, but I wanted to give some stats after the first month (more for me to look back and say, "What a fool I was.").

Currently I am using a Google docs spreadsheet to track my notes and my performance. I started out looking for a minimum of 16% per year average return. After the first month (mid-July to mid-August), Lending Club reports that my Net Annualized Return (NAR) is 24.20%, which puts me in the top 18% of lenders at lending club. More specifically, of those who have invested less than $1,000, I'm in the top 100%. The average return for the less than $1,000 invested crowd is 5.72%. The average for all investors in 9.64%.

I'm afraid this is more of beginner's luck than experience. As much as I'd like to say that it is my investor savvy, with the little bit of money and few notes I have, I'm afraid I've just gotten lucky so far (no defaults, but investing in the riskiest notes).

So, so stats from my spreadsheet:

I have 15 Active notes right now. I've purchased those notes with $340. The scheduled monthly income from those notes (principle and interest) is $10.46, or around 3% per month (at which rate it will take about 2 1/2 years to recover my investment). I do put every note up for sale, at an annualized 16%+ interest rate (more on the + when I post about my philosophies). I've sold 17 notes so far, although I'd rather not sell notes. My median annualized return on selling notes is around 46%. I average about 3 1/2 notes sold per week. I'd like to get this down to 1 1/2 notes sold per week. Apparently 16%+ is too low an asking price. If you annualize the proceeds from the sale of the notes (minus tax) I'm getting about 18% per year on selling notes. The notes that sell I hold for of an average of about 2 weeks.

I haven't had a default yet. Of the notes that I currently hold, I have one each of A, B, C and E. I have two F5 loans. The rest are G loans. I paid an average of $22.65 per note.

So there is the snapshot of my first month. I look forward to seeing how this data changes over time.