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.
- Lending Club: 14.71%
- Prosper: 12.41%
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: