On 9/18/16 11:44 AM, jmh530 wrote:
On Sunday, 18 September 2016 at 12:39:25 UTC, Andrei Alexandrescu wrote:


Thanks all for answering! Well there is a relatively low-risk option
to make some 5%-7% annually by investing in marketplace lending, see
https://lendingclub.com/. (Individuals may do the same, too, btw -
look into it!) I've been using them since 2013 with moderate amounts.
Right now the portfolio's return rate is 5.06% - not to sneeze at. The
issue is liquidity, i.e. your principal and interest are returned on a
monthly basis over 3-5 years. The monthly schedule is actually nice
for the Foundation because it matches the way operations are paid for.

I would advise against investing the whole sum with the Lending Club
(some smaller amount, say 5-25%, I have less of an issue with). 5-7% is
what people earn investing in dollar-denominated sovereign bonds from
Emerging Markets. That's the kind of risk your taking on.

Wouldn't that be risk from the unsecured personal lending business, which although numerically similar has a different dynamics?

You think it's
low risk because you don't see the risk: unemployment is low and has
been falling since 2013, so there are few defaults. What happens when
there is a recession? There will be higher defaults, slower repayments.
And you can't exit the position because you've locked up the investment
for 3-5 years.

I've been looking at their historical numbers. Their accounts didn't lose money even during the trough of the recession. At that time they were one of the best places to invest out there. There are challenges in the world of marketplace lending, but as far as I understand it sure is a solid choice.

Regarding the stock market, IB is quite attractive, and has an
incredibly low margin rate.

Frankly, this comment makes me cringe.

s/cringe/curious to know more/

The basic idea here is to have a buffer for short-term borrowing. For example, for DConf we'd need to plop down some money for renting a conference hall until proceeds from registration roll in. The notion of being able to take a 1.60% APY for that is quite attractive. Sadly, I've looked at IB since and they don't offer any checking or general banking. I'm not 100% sure, but I assume they'd lend money only for investing; they wouldn't allow you to transfer cash on margin into your bank. Does anyone know exactly what the case is?


Thanks,

Andrei

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