Lending Club Update 12/13/18

Hey everyone, sorry for the delay, I just took my last 2 exams yesterday 12/12/18 for school and can finally settle down and get some non-school related work done. So today I’ll be comparing my Lending Club portfolio to what it was on the last update from 9/17/18. Now for those of you who are reading this blog for the first time let me catch you up quick. If you are familiar with me and Lending Club skip down to the horizontal line.

My name is Brandon, I’m a college student if you couldn’t tell by the exams above, I graduate this upcoming May, and already have a job secured so that’s exciting. Lending Club is a peer to peer (P2P) lending platform where, rather than borrowing money from a bank or financial institution, individual investors fund the borrows and receive interest and what not just like a bank does. I’m obviously on the investor side of things so I can’t say much about the borrowing side.

It’s a rather simple platform, I as an investor put in say $1,000 (you can invest with as little as $25 but this is just an example), I can pick which loans I want to fund and fund it into $25 increments (it’s not all or nothing). So, for example, XYZ is requesting a loan for $20,000 for credit consolidation, Lending Club does its due diligence in terms of background information (credit score, credit history, current income, current debt, debt-to-income ratio, etc. etc,), they then assign them a scoring based on the above information in an A-E, 1-5 scale. An A1 rating represents the safest investment while an E5 represents the riskiest investment. Based on that scoring the interest rate is calculated as of today (the rates have changed recently due to rising interest rates in the U.S. and Lending Club has been doing a good job of keeping their investments in line with rising interest), an A1 loan has a 6.46% interest rate, while an E5 has a 27.27% interest rate. The loans come in either 3 year or 5-year lengths and the investors get paid monthly. So in the previous example if I were to take that $1,000 and put the money to work in a variety of loans ($25*40=$1,000) spread over different ratings, I would get paid monthly on all of those and earn somewhere between 4%-7% give or take because of course Lending Club takes a 1%-2% cut or so. Now the loans can always default, or get paid back early, in that case you lose potential interest. So obviously there’s some risk involved as with any investment and even the high-quality A grade loans have defaulted on me before.

My favorite aspects of Lending Club are the monthly principal and interest payments from every loan. In November I collected $75.28 in interest and received about $250 in principal back. I also love the ease of reinvesting at the level I am at. With about $325 coming in from last month divided by the $25/note price tag I could reinvest my P&I 13 times in a month all while earning around 7% interest! Only place you can reinvest quicker is a good savings account and even then, the best you’ll make is 2% (at least that’s what my discover account makes a year)

Alright time to compare the last 3 months side by side. For the following comparisons we’ll do the September data on the left and the December data on the right.         lending club notes       LC notes snip 12.13.18

As you can see, we have a significant increase in notes over the almost 3-month period. I mentioned in the previous update that I was waiting on my internship bonus to come in to help fund this endeavor and when it arrived it allowed me to put another $1,500 into Lending Club. Charge offs, fully paid and other scenarios have gone up as they always had.

I did not include the following pictures in my previous update but here they are now. Below is a pie chart depicting my current portfolio by what rating it has. As you can see it is relatively spread even throughout the spectrum except for F and G as they are no longer offered and were incredibly risky. My detailed returns are also shown below.

note composition 12.13.18 note details 12.13.18

Moving on, we’ll examine the overall account value as well as return on investment. Since these pictures are long, the September numbers will be shown first, then December.

lending club adjusted

LC interest 12.13.18

This shows the adjusted account value and return for my entire portfolio. It is adjusted based off the probability and amount of the various late and defaulted notes in my portfolio. As you can see the account value is dramatically higher as well as the % return. I expected this to happen for a few reasons. For one I mentioned a $1,500 deposit I made to the account increasing its value as well as being able to compound the account through October to reinvest my earnings. As for percent return the account had an influx of new notes at the time as you can see by the first set of pictures. When notes are not issued they add to the account value but not to the profit because they haven’t started paying you yet. This decreases the % return significant and I have seen it every time I make a large deposit. Over time this will drop due to notes defaulting and being paid late.

The next set of pictures show the non-adjusted account values again we will go September then December.

lending club no adjust

LC interest non adjust

As you can see the percent return and account values are both up and consistent with the previous set of pictures.

So you may be asking what the point of all of this is, like nice bro you made some money, but what’s the deal? Well making money especially passively has always been a huge focus for me, you only have 24 hours in a day and you gotta sleep, so until you can make money while you sleep or while you are not working you will be broke forever. (paraphrased from Warren Buffett) So check that one off the box. I mentioned earlier that I am a college student, I have internships over the summer and I don’t work for the other 9 months of the year, and I needed a way to generate income in a fluid manner throughout the school year. Yes I know I could just stick it all in the bank and withdraw when needed but you don’t make shit at the bank so that’s wasting your money’s potential.

Here’s a bit of background, I moved out of my fraternity house this semester, so I was kinda on my own as far as rent went and I wanted a way to pay my rent and make money at the same time as I have been eluding to in the previous paragraph. I decided to go balls out in Lending Club, utilize the monthly payouts, utilize the return, utilize the fluidity from Lending Club to checking account transaction, and fund my rent through Lending Club.

Overall, I think I accomplished what I was trying to do, if you recall the September update, I mentioned my rent at school was $275 + utilities = approx. $350. I know that’s dirt cheap but it’s a small college town and its not the most glamorous house but whatever I’ve dealt with worse. The total collected amount for principal and interest in November was about $350 so I technically made it, but it doesn’t quite feel like it. I wanted to do better than where I am at now and I am currently in full out withdrawal mode to pay rent, and credit cards, fund my ski trip, buy Christmas presents etc. etc. So, I can’t compound or add to Lending Club any time soon. I believe that if I could’ve started adding to Lending Club sooner this summer (between rent and deposits and just starting work, I was seriously in the hole the first month of my internship this summer) I would’ve had a better shot. I made incredible money over the summer, but I lost the time value of it and the compounding power, because I received about half of my total payment after I left to go back to school. You can read about my internship here

Well awesome guys thank you so much for taking the time to read this, lots more will be coming here in December, we’ve got big plans, big goals, and lots of ambition to get there. Please let me know what you like, don’t like, want to hear more about, if you want shorter or longer posts, videos, tweets, more or less stuff on Instagram etc etc.

I’m here to provide insight and value to all my followers and readers. I want to know what you guys want to hear so I can deliver the best content in the best format possible. Hit me up here and leave a comment, or dm me on Instagram @bsquared.website.

Here’s the link to Lending Club Update 9-17-18

Thank you everyone!

B^2

Passive Income overview 9/5/18

Passive Income is all the rage these days, with ecommerce blowing up, YouTube, podcasts, blogs, investing etc. there are lots of reason why it should be something to think about. Let’ s dive into it and see what it is all about!

Passive income is income resulting from cash flow received on a regular basis, requiring minimal to no effort by the recipient to maintain it. (Wikipedia)

That sounds amazing! Minimal to no effort and receiving cash from it, but its not quite that simple. Passive income often requires either initial upfront energy, effort, and time or initial upfront cash.

My expertise is with the initial upfront cash portion, so we’ll get into that. I have been collecting data on my passive income for over a year now. I currently receive passive income in the form of interest payments from Lending Club, my savings account, stock dividends, stock interest payments, and I guess money saving apps as well. I won’t go into that last one in depth as I am saving that for an article in the future. Hopefully if you’ve been following me for awhile or are at all familiar with investing you understand what a stock dividend is. Essentially you own a dividend paying stock a every quarter or for every month you receive a little gift from the company in the form of a monetary payout for being their stockholder. I also receive some interest payments from my stocks when people short the stocks I own. Between my savings account interest, stock interest, dividends from both Robinhood and Stash I have received $186.37 this year. Not too shabby most would say, but this does come at a price to the tune of ~$12,500 invested in the above-mentioned platforms. The other vehicle I use for passive income is Lending Club. Currently I have received $233.74 in interest payments this year through that platform and that is to the tune of about $4,000 ish invested. A little calculator work later and we are at $420.11 this year in passive income, or about $46.68 per month.

I’m proud of that number to say the least but there’s more to come and in fact my goal for 2018 was to make $1,000 in passive income this year. There is still along way to go to reach that $1,000 mark and less than 3 months till the ball drops and we are standing in 2019.

My plan to get there is already in the works, I have a sizeable position building in Lending Club, in fact there is quite a lot of notes (loans) that haven’t paid me yet because they are so new. When that all comes clicking together and I continue to add to that platform I expect my interest payment payouts to sky rocket. I think I’ll put in another $1,000 into that platform or so and will be reinvesting the principals and interest payments to snowball that passive income stream and make it larger.

The other side of the coin is my stocks and etf’s I own. I have added around $750 into my stash positions and most of those pay dividends. I’ve also added $1400 to my robinhood portfolio and a decent chunk of that has gone to dividend stocks. I plan to continue to add to both and make profits on my positions to reinvest into dividend stocks as well as reinvest the dividends back from where they came from.

The goal for this is to reach financial freedom. There are various definitions to this but for my purpose it is to create passive income streams that are greater than my active income (the money I make from working). When you reach this and assuming you account for inflation, cost of living increasing etc. you can effectively retire. Now of course I don’t plan to retire super early and go live on a beach or anything like that, my mission is much bigger than that, however that is the ultimate plan.

You might be taking a look at this and scratching your head like, “Brandon, you’ve got a long way to go to replace your standard income if you aren’t even at $1,000 a year yet” and you are absolutely correct. My stock portfolio currently yields around 3%, for a modest $40,000 a year to live on my portfolio would have to be around $1.3 million at that same yield to produce that. That’s a lot of motherfucking money to reach financial freedom if you ask me.

That’s why I am looking into investing in real estate when I build my capital up. With real estate’s monthly cash flow and leverage assuming a modest 5% return not accounting for increasing rents or refinancing or anything like that an $800,000 property would yield $40,000 a year and with a 25% down payment of $200,000 you could control that. That looks much more attainable to me.

Using Grant Cardone’s 40% rule, profits from my investments, and existing passive income streams that will grow that should be attainable within a few years if all goes right.

As Warren Buffett said, “If you don’t find a way to make money while you sleep, you will work until you die.”

Now are these passive income streams passive, no. I actively invest in the stock market, I do research on the positions I take, I check lending club frequently and hand pick my loans that I invest in etc. But all in all they are pretty passive. Real estate on the other hand isn’t very passive until you get to the big leagues and can afford a property manager.

Grant’s new real estate investing book is in route to my door in STL and I will be giving that a read very soon and I plan to implement his plan and to go big on my first deal. We’re talking 24-32 units costing $1.4- 2.0 million requiring a down payment in the neighborhood of $500-700k. Like I said large upfront capital or large up-front work, time, energy.

I should also mention what I am doing right here follows that other method that I haven’t gone over. This blog while it does not produce any income and actually never has produced any income for me may be able to one day. Consider how much time I’ve spent (10 months, 60 blog posts, advertising, Instagram etc.) to get it to this point and still haven’t made a dime with it. That’s what I am talking about in terms of up front time, energy, and effort.

It will not be easy whatever passive income route you choose, but with a good strategy and the work you need to put into it the prize is pretty frickin nice.

Let me hear your passive income journey!

B^2

What did I do when the stock market corrected?

If you at all follow the stock market you know it’s been crazy these last few weeks. Especially with that little correction that we had. What did I do? Warren Buffett’s quote, “Be fearful when others are greedy. Be greedy when others are fearful.” Rang a bell.

On February 6th, 2 days into the correction I took my only positive position at the time (I had recently sold several other positions and reallocated money to make new positions and cost average down some positions) E.L.F. cosmetics and sold all that I had. It was a small position worth $300 and change and I took that and bought AAPL stock at $157.51, it later dropped lower than that in a second dip but prior to that it hadn’t been at that price since October 2017. I cost averaged down my largest position CHK, cost averaged down ATRS, and cost averaged down TTS. Now unfortunately at the time I was not prepared for this correction. I had no extra cash lying around to put into investment accounts, I did not have anything I could really sell to get the cash to take advantage of the correction and I did not pay attention to the market as much as I should’ve, and my attention was directed elsewhere (school).

IMG_0356

My actions would’ve been more calculated and drastic had I been prepared and prepped for this event. Let’s see how it panned out though. I sold ELF 15 shares at $20.01 = $300.15, today it trades at $20.84 so that results in a lose of $12.45 had I held the position. I bought AAPL at $157.51 and it currently trades at $173.78 = a gain of $16.27. As you can see I already came out on top had I not invested the other portion of the sale proceeds but let’s look at what that did. I bought 25 shares of ATRS at $1.92 and sold them all at $2.23 on February 15th, a $7.75 gain = 16% short term gain. I bought 27 shares of CHK at $3.12 which has been fluctuating tons since then, but fortunately CHK beat earnings big time and shot up ~ 25% yesterday. As I am speaking shares are at $3.35 = $6.21 gain over the duration of holding them. TTS had the opposite happen and did not do well with earnings. I bought 2 shares on Feb. 6th at $8.44 currently trading at $5.50 – a net loss of $5.88.

So overall a split-second decision and action that I made before class/ walking to class led to a $11.90 increase over 17 days (12 trading days). Now why does anyone give a shit about a less than $12 increase?! They don’t but I also don’t have big money, but that also was a 3.97% increase in under 3 weeks. Extrapolate that out and that’s 85% APY now those are some numbers people can get behind! Now looking back, I probably should’ve held out for 2 shares of AAPL but hindsight is 20/20 as they say.

Hope you guys enjoyed that little victory in my investing career! Let me know what you think or share what you did during the correction.

-B^2