Why I am Investing Another $100,000 in P2P Lending

Earlier this month my total p2p lending portfolio crossed over $100,000 in value. It has steadily risen in value every month since I started investing in July 2009 (except for one month) and I have continued to add new money on a regular basis.

But I have decided that is not enough. So today, I am announcing publicly that I will invest another $100,000 in both Lending Club and Prosper over the next 12 months – thereby doubling my current investment.

Putting My Money Where My Mouth Is

It is no secret that I am a big believer in this concept. I have stated many times that I think p2p lending is the best risk/reward investment available in the world today. But the more I have studied the numbers and talked with management at Lending Club and Prosper, the more I became convinced that I should add to my investments substantially.

I wrote a couple of weeks ago about the concerns some investors have with p2p lending and why many people do not invest. I am fully aware of the risks, I know that there are safer places for this money, but I also know there are few places I can go today to get a consistently high rate of return. In fact my goal with this additional $100,000 is to get a real world 12% return. This will require an improvement on where I am today, which is an 8.15% actual return (calculated using Excel’s XIRR() function) on my portfolio over the 12 months ending September 30, 2011.

Now, I am not going to invest this money all in one hit. It is going to be done slowly and methodically but I intend to have an additional $100,000 completely invested by October 1, 2012. I will be focusing mostly on high interest loans – grades C-G at Lending Club (interest rates greater than 15%) and grades D-HR at Prosper (interest rates greater than 20%). I will be sharing my exact criteria in upcoming posts.

Splitting the Money Between Lending Club and Prosper

Until now I have had the majority of my p2p investments in Lending Club mainly because the bulk of it is IRA money and Prosper does not offer IRA’s (yet). But this new money will be mostly in taxable accounts and will be split 50-50 between Lending Club and Prosper.

I truly believe in both companies and I think they provide a useful diversification for investors seeking high interest returns. I have started off this process by transferring $20,000 in to Prosper and I will also be adding to my Lending Club account soon.

My goal with telling you this is not so much to demonstrate my commitment to p2p lending – that should be obvious by now. In coming weeks and months I am going to have a series of posts that deals with managing multiple accounts and putting large amounts of money to work.

So, I will be sharing exactly how I am investing this money and the returns I am getting. Stay tuned.

 

  • Peter Renton is the chairman and co-founder of LendIt Fintech, the world’s first and largest digital media and events company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series. Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.