Personal Performance

I have received several questions from readers regarding my own performance on Lending Club. After doing a quick search for "Lending Club Reviews" on Google it is easy to understand why people would want to see some credentials before blindly accepting my opinions. There are literally thousands of blog posts out there by people who are promoting Lending Club so shamelessly that they must be working for the site. My posts are completely independent, however, I have had much more success investing with Lending Club than any other investment I have managed myself so at times I may sound like those other paid promoters.

I have been investing with Lending Club since February 2010. Initially I invested $1,000. Subsequently I have made 3 separate $3,000 investments to bring my total investment to $10,000. I will post more detailed descriptions of my strategy in the future but I will provide a quick overview of what I look for in this post.

I have a rather unique investment strategy that focuses exclusively on the highest yielding notes. My weighted average yield fluctuates, but I try to keep it above 19%. Currently I do not hold any notes in the A-D grading categories. I also have a tendency to focus on borrowers with high incomes (at least 10x their monthly payment). I also look for borrowers who provide answers to a lot of questions and go into detail in their responses. I assume that all borrowers are asked at least 6 or 7 questions over the period that their loans are listed and if they don't have a lot of responses I assume they are lazy or hiding something. Finally, I prefer loans that are used to consolidate debt. The logic behind this is that the borrower is already used to making that payment each month so it should not be a problem for them. On the other hand, loans for new purchases will likely be a new burden on the borrower.

Another aspect of my strategy is to sell notes as soon as they become delinquent. On the first day that they are late I typically mark them down 5%. Many of them will sell within hours of posting them on the trading platform. If they do not sell I continue to mark them down further at a relatively subjective rate until I can unload them.

Using this strategy I have been earning returns of about 1.2% per month. This translates to an annualized return of about 15.4%. Due to the slow ramp up of my investment my $10,000 has only grown to around $11,200 so far. However, I am consistently earning well over $100 a month now so hopefully that will grow more quickly in the future. I will continue to keep you posted on my performance.