lending club, my best investment of 2008

I have written about person-to-person (or P2P) lending several times.
The big players in the US are Prosper (currently not accepting new lender registrations) and Lending Club.  I invested a bit of money in both of them.  I was checking up on both of my accounts and noticed a startling fact:  my current rates of returns on these two accounts make them my best two investments of the past year – bar none.

My 401(k) is down a ridiculous amount. My IRAs and brokerage accounts took a pounding, and the only positives out of those are my cash and bond fund positions.  Even other areas which could loosely be called investments are sliding:

  • Home values in the New York area – after resisting the rest of the US real estate bust for a long time – finally started falling, and fast.
  • My contract consulting work dried up – the networking and recommendations don’t mean much when the corporations who usually would hire me are collapsing.
  • Even other side businesses – websites, freelance work, etc. – require a lot more effort for lower returns.

I am not bemoaning my financial situation (I’ve done enough of that in other posts, I think) and I’m not lauding P2P lending as an investing opportunity that you must jump into with reckless abandon, because my results might not be your results.

What I am noticing is that the mantra of “diversify, diversify, diversify” can’t be hammered home enough – even to myself. My index funds are way down – but less than my two individual stocks (mistake)!  My portfolio is down, but not as much as if I hadn’t included bond funds.  My income is down, but not by as much as it would have been had I not had side earnings.  And P2P lending continues to give me great rates of return.  Hindsight is 20/20, but I should have invested more in Lending Club when I had the chance.  That small diversification of my investments at least gave me a few seconds to smile in an otherwise grim year-end assessment.

My other posts about < Lending Club:

photo credit: josef.stuefer

(and no, the photo has nothing to do with the post – I just figured we could all do with a picture of a Leffe)
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