Betterment, Wealthfront, Lendingclub, Prosper and more...

Mike

Mike

Audioshark
Staff member
Joined
Apr 2, 2013
Messages
30,492
Location
Sarasota, FL
It seems there are a number of options today when it comes to investing & saving for retirement. Many more today thanks in large part to technology. I, like many, believe he market is headed for a correction (10-25%)....but who knows truly "if" or when?

I've been interested for the past year or two in alternative investment options. I've looked at a wide variety of things including Real Estate, Robo Advisors or P2P lending, and many other options.

I've dipped my toe into P2P lending (lendingclub and prosper) based on some early trial & error testing and feedback from friends. I've also begun optimizing those accounts with some sophisticated AI (artificial intelligence) from lendingrobot. As a side, I believe AI is going to be the next hot "thing" in the IT world.

It's way too early to offer any feedback or thoughts on my P2P lending initiatives, other than it appears to be going according to plan.

I've been self-directing my investments (what little there is!) on my own for almost 30 years. I have tried utilizing investors a few times, but have mostly been burned. A year ago I gave $X to my Edward Jones rep and he managed to lose 15% in an otherwise, growth economy. WTF? Suffice it to say, he isn't anywhere near my money now.

What do you do? What do you think of some of these new "options" for investors? Is anyone out there trying P2P lending? Has anyone tried Betterment or Wealthfront?
 
Mike...haven't looked into any P2P lending platforms. How do the platforms screen the risk factors of various borrowers presented to you on the platform (I.e. What type of info are you given)? Do the P2P platforms provide any credit risk/analysis tools to help investors choose appropriate borrowers given a particular risk appetite? So for example, in public credit markets, you have rating agencies (Moody's, S&P, ...yes they proved to be useless during real estate bubble but leave that aside) that perform their credit analysis and out out ratings (which mean very little but anyhoo) to help bond and bank loan investors assess risk of a particular security. Do these platforms run any analysis and provide their version of a credit risk rating for investors?

Just curious how it works.
 
Cyril - they won't even look at you unless your FICO score is 690 or above. Each investor is buying $25 of each loan. Really spreading your risk. You CAN look at intricate details of each note before loaning. FICO score, the job the person has, their salary, how much they make, how long they've been employed, etc, etc. I did it manually, but LendingRobot is way more efficient. Their algorithms look at every detail of every note and compare that to your risk tolerance and portfolio goals before giving it a go or no go.


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What rate of return are they offering on those loans??
 
mep said:
What rate of return are they offering on those loans??
Click to expand...

Mark, it ranges from super safe 7% to moderate at 13%, to riskier at 20-29%.

The note grades go from A Rated to H rated.

I have a blend.

Using their algorithms, they can predict a percentage of the notes that will go bad (using historical data). So the net net in my case is 10% instead of 13%. Using LendingRobot, I'm improving on that.

What I found interesting is that LendingRobot is working on AI that will predict when a loan is going bad and sell it on the secondary market before it goes bad.

Hey...I'm no expert, but I've learned a lot about this stuff. Heck, there are even P2P forums!


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Mike said:
Mark, it ranges from super safe 7% to moderate at 13%, to riskier at 20-29%.

The note grades go from A Rated to H rated.

I have a blend.

Using their algorithms, they can predict a percentage of the notes that will go bad (using historical data). So the net net in my case is 10% instead of 13%. Using LendingRobot, I'm improving on that.

What I found interesting is that LendingRobot is working on AI that will predict when a loan is going bad and sell it on the secondary market before it goes bad.

Hey...I'm no expert, but I've learned a lot about this stuff. Heck, there are even P2P forums!


Sent from my iPhone using Tapatalk
Click to expand...


Ha! No doubt full of crackpot audiophiles too. You could start your own forum with all your spare time Mike.... ;)
 
Super safe 7% sounds real good. What are the minimum terms of the length of the loan and the amount you lend?
 
Mark, the notes are either for 36 or 60 months. The amount you lend, again, is $25 per note. You can lend more per note - like $50, $75 or even $100 if you feel so inclined. I have done a few at $100 that were A rated just to experiment.

What I've learned is that LendingClub appears to have more volume than the number 2, Prosper.com However, I'm experimenting with both.

I've done a lot of reading at this website: http://www.lendingmemo.com/category/p2p-lending-basics/

I found this a good overview as well: http://www.lendingmemo.com/p2p-lending-sites/

This Simon Cunningham seems to be a very knowledgeable guy and a straight shooter. I guess Ohio is one state that hasn't "legalized" P2P lending. 45 states have legalized P2P lending so far.

Here are some decent videos to watch:

http://www.lendingmemo.com/video/beginners-guide/

Here is a video on the RISKS to P2P lending:

http://www.lendingmemo.com/video/beginners-guide/basics/risks-peer-to-peer-lending/
 
KeithR said:
I would be pretty weary about these platforms after the Lendingclub disaster a few weeks back.
Click to expand...

Disaster? Their CEO did some things against SEC rules and resigned. Not sure I call that a disaster.


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Mike- LC can't fund itself in the ABS markets and may have to put loans on balance sheet. Private equity may be looking to buy the company hence the need to tighten lending standards today. I feel regulators are going to disrupt them as well. These loans won't perform well in a recession and there is no liquidity that I'm aware of. It entails quite a bit of risk in !y view. YMMV and all that jazz.
 
Interesting topic, and I was going to start one similar.

I don't know how it works in your neck of the woods, but for the first 3 months of this year my wife and I were bombarded with dinner invitations to listen to Investment and Retirement groups talk and try to get your business. Most are full of it, or admittedly want to cater to those with big $$$.

The oddest one we sat thru, and do not have the conscience for, was a company that goes out and finds Older Sickly Seniors who have a Life Insurance Policy. They convince these seniors or their families to sell them the policy for more than the originating company would buy it back for so as to give that person/family cash now and not at death. They then pool 20 or 30 policies together in similar to a Mutual Fund so each investor owns a little piece of each policy that was bought and then you wait and hope for all the people to die so you can cash in. After sitting thru the session and then being the one asking the non-obvious questions, we came away dumbfounded since as we see it, this is another way to pray and scheme on Seniors. I do understand that there are circumstances that you may need to sell your policy in order to live, but actively seeking out those you are betting to die sooner or later made me sick and I could never buy into an investment like that.

Now on the flip side, one Retirement Planning Group ended up inviting us to 3 different dinners over 2 months, and we went to all 3 because the info provided and the motivational speaking of the owner really fired us up to do something now so we are set in 13 years. They do not charge to meet with you where most others give you one free meet and then expect you to pay for each consult.....Bull! So far we have met with this group 2x totaling 4 hours. So far with the info we provided, they have given us a full Social Security analysis and an Upside Cash Flow analysis. We meet again next Tuesday and they will have gone over all of our current investments to see if we are paying hidden fees and charges we are unaware of. So far we have the 2 lower tiers of the Retirement Pyramid covered, which is a must. They asked us to come back with what our Wants and Luxuries would be when we retire so they can put a real plan together for us. This group uses good rated annuities and other Long Term Insurance items and whatever else you need planned in so we will be looking at all the options they give us.

Our current Adviser is pretty much just a Stock, Bond, Mutual Fund guy and all he knows how to do is be conservative and then switch your investments as you age. But he offers nothing else in the way of really planning for retirement.

We don't have a ton of money, but we have been working on it. Our current guy tells us that for our age, we are in the top percentile of people with actual savings for retirement, but that does not tell me that I will have enough to enjoy my retirement.

We really don't have big Wants and Luxury items but we will tell them $15K a year for Travel, a 1-time $20K for a Dog we always wanted (after we travel) and then I am adding in $20K for my Retirement Audio System.

When they laid out the Best Case Scenario using a steady realized 3% number from now, age 54 to death at age 95, we would die and still leave about $800K behind. But in today's market, that is hardly achievable so I am really hoping things get better.

All in all, we are in decent shape, no mortgage as we paid off our house over 10 years ago. No debt other than monthly bills. One 0% car loan. And as of now, no real health issues and no medications.

Other than what was already mentioned, what other products are you guys using to secure retirement?
 
Brian - you've definitely explored some options and you are in great shape with no mortgage (big congrats on that!) I'm glad to read that you don't have the conscience for the one that takes advantage of our poor seniors. Good for you! I hate reading about stories about some poor senior who was taken advantage of by some financial crook.

Slow and steady wins the race, but most people don't have the stomach to handle the big dips. I guess I'm one of them. In April when the DOW hit 18,000, I sold everything. The contrarian in me saw flags waving. The PE ratios on some of these stocks driving the DOW were making no sense. My thought was "jump out at 18,000 and wait for a lower entry point back into the markets." So far, my intuition has been spot on. The DOW has gone down and come back up to about the same point it was when I sold everything.

But, will there be a correction? If so, will it be 10% or 25%? No one knows if or when. But what's the harm sitting in cash? Well, if you believe the DOW is going to 22,000 - then you will miss out. Hard to know, but I'm not uncomfortable with my decision.

I think when I do jump back in, it will be with a simple TransAmerica S&P 500 index fund. Keep the fees low and get the benefits of the top 500 companies clawing and scratching their way back up.

I looked into real estate, but the net/net is at best 5-7% and that's assuming a 100% rented property. Any months where the property is not rented can wipe out those profits. But this remains something I am considering.

For now, I'm dipping my toe in the water with P2P lending to gain the experience of whether this is something that will form part of my diversified portfolio or not.

I'm curious about RoboAdvisors, but haven't investigated Betterment or Wealthfront beyond a few articles.
 
Diversified (using variation of coffeehouse portfolio) with low-cost Vanguard Index funds. Buy and hold. Rebalance annually. Rinse and repeat.
 
Mike,

I'm currently evaluating both Wealthfront and Betterment. The plan is to compare them against a more "traditional" house, like Charles Schawb.

So far, so good. I haven't heard about these P2P lending sites you mentioned, but they seem interesting. The ones I'm currently researching are Groundfloor and RealtyShares...
 
Brian, please tell us more about this $20k dog. Being a dog lover with three of them, you piqued my curiosity.

Rob

Shadowfax said:
Interesting topic, and I was going to start one similar.

I don't know how it works in your neck of the woods, but for the first 3 months of this year my wife and I were bombarded with dinner invitations to listen to Investment and Retirement groups talk and try to get your business. Most are full of it, or admittedly want to cater to those with big $$$.

The oddest one we sat thru, and do not have the conscience for, was a company that goes out and finds Older Sickly Seniors who have a Life Insurance Policy. They convince these seniors or their families to sell them the policy for more than the originating company would buy it back for so as to give that person/family cash now and not at death. They then pool 20 or 30 policies together in similar to a Mutual Fund so each investor owns a little piece of each policy that was bought and then you wait and hope for all the people to die so you can cash in. After sitting thru the session and then being the one asking the non-obvious questions, we came away dumbfounded since as we see it, this is another way to pray and scheme on Seniors. I do understand that there are circumstances that you may need to sell your policy in order to live, but actively seeking out those you are betting to die sooner or later made me sick and I could never buy into an investment like that.

Now on the flip side, one Retirement Planning Group ended up inviting us to 3 different dinners over 2 months, and we went to all 3 because the info provided and the motivational speaking of the owner really fired us up to do something now so we are set in 13 years. They do not charge to meet with you where most others give you one free meet and then expect you to pay for each consult.....Bull! So far we have met with this group 2x totaling 4 hours. So far with the info we provided, they have given us a full Social Security analysis and an Upside Cash Flow analysis. We meet again next Tuesday and they will have gone over all of our current investments to see if we are paying hidden fees and charges we are unaware of. So far we have the 2 lower tiers of the Retirement Pyramid covered, which is a must. They asked us to come back with what our Wants and Luxuries would be when we retire so they can put a real plan together for us. This group uses good rated annuities and other Long Term Insurance items and whatever else you need planned in so we will be looking at all the options they give us.

Our current Adviser is pretty much just a Stock, Bond, Mutual Fund guy and all he knows how to do is be conservative and then switch your investments as you age. But he offers nothing else in the way of really planning for retirement.

We don't have a ton of money, but we have been working on it. Our current guy tells us that for our age, we are in the top percentile of people with actual savings for retirement, but that does not tell me that I will have enough to enjoy my retirement.

We really don't have big Wants and Luxury items but we will tell them $15K a year for Travel, a 1-time $20K for a Dog we always wanted (after we travel) and then I am adding in $20K for my Retirement Audio System.

When they laid out the Best Case Scenario using a steady realized 3% number from now, age 54 to death at age 95, we would die and still leave about $800K behind. But in today's market, that is hardly achievable so I am really hoping things get better.

All in all, we are in decent shape, no mortgage as we paid off our house over 10 years ago. No debt other than monthly bills. One 0% car loan. And as of now, no real health issues and no medications.

Other than what was already mentioned, what other products are you guys using to secure retirement?
Click to expand...
 
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