As the blog continues to gain readership, I often get questions from the contact form. We all know that there is no such thing as a stupid question. Folks also seem to have similar questions – so what better way to spread the word about peer to peer lending than to post my responses on the blog. I enjoy hearing from others and it often gives me a different perspective on things. With this industry still being relatively new, people are at all different levels as far as educating themselves and I need to keep this in mind. I hope you enjoy these posts as much as I enjoy hearing from readers. Let’s get started!
Steven initially asked about my portfolio post which had not been updated in some time. I realized that many people are interested in my returns. Below are the relevant links:
Thanks for the reply, and it sounds like you’re doing well- even if LC is overstating investor yields. I haven’t read up on the XIRR, which I understand involves downloading your info into Excel.All this is very new for me. Today, I open an account at The LC, and should have funds there by tomorrow. One question I have for you, is how many notes do you have? I’ve read that- to achieve “full” diversification, one should target 200-400 notes, but I’ve also read that this should be done slowly, over time.Most likely I’ll start with a few B-D graded notes (@$25 each), and build a portfolio, over time.I know NSR is great to study past performance, and analytics, but do you use them for actual purchases? Or do you “cherry pick” your notes off the LC website? Looks like LendingRobot might also be a good way to go.
I have about 300 (now over 400) notes from the primary market and initially started with a smaller account of $2000 and have added consistently.
I enjoyed LendingRobot’s post on diversification:
As far as tools, I’m currently automating using the beta of Nickel Steamroller. If you haven’t read this post, I recommend it as an overview for automation:
YouTube videos of BlueVestment & LendingRobot:
It’s really up to you what tool you want to use and you can always sign up for one and try something else later. Besides Nickel Steamroller, I use BlueVestment with P2P-Picks (Bryce Mason). I have used LendingRobot as well and was happy with the service. They are currently the only tool registered with the SEC as an Investment Advisor.You can listen to LendAcademy’s podcast with Bryce (owner of P2P-Picks) here:
What is XIRR?
XIRR – Returns the internal rate of return for a schedule of cash flows that is not necessarily periodic.
Calculating your return with XIRR is extremely easy and doesn’t even require expensive Microsoft Software (Excel). XIRR can be calculated by creating a spreadsheet within Google documents which is free. Here is a screenshot of my calculation to help you. Remember that the first value will be the starting balance and the last number is the current balance, but is a negative number. The rest of entries are additions to my Lending Club account. If you withdraw money, you will also want to include those. The formula does the rest, which is shown below. I wait until my Lending Club monthly statements come since it is easy to see when I added funds.
It is great that you are doing your research prior to investing – back when I started just last year I invested by just blindly picking notes and not knowing much about all of the factors that go into being successful in p2p lending.
Please let me know if you have any questions!