Each year, I like to try something new in personal finance. I don’t want to waste money, but I don’t mind testing the waters a bit with a small percentage of my income. Last year, my big test was on Sharebuilder… and my stocks obviously have not performed well (except Mickey D’s (MCD) that’s at least not losing money).
This year, I’ve decided it’s Lending Club’s turn for a little game time. I finally figured out how to use the site (phew) as last I was on I thought I had bid on two loans and apparently never made a final order. Oops. So I’ve now made a final bid/order on two loans for $25 each and I transferred in $200 from my paypal account.
While I don’t think Lending Club will make me rich (and I have little faith I’ll do better than break even given my luck on Prosper), I do like that you can lend just $25 per person. So you have a little more room for less costly defaults. Of course, then you also have more loans to default. I’m not mathematician, so I’m not sure which is better.
Regardless, I’ll start out with this $250 and see where it gets me. I’m also going to up my investing on Sharebuilder this year. I can’t resist a good sale. Thinking about purchasing some Proctor & Gamble stock, but not sure. Any stock I buy now will lose money over the coming year or two, it’s just a matter of how it looks in 3, 4, 5 years down the line.
At least with Lending Club I’ll either get my money back in 3 years or lose it in 3 years. With the stock market… I could make money and it could be gone in 10 years… as we’ve seen in the last 10 years. And I don’t really have much faith in banks or the ability of anyone – even Obama – to stimulate the economy. Of course, without such stimulation, even P2P lending is at risk – big risk. If jobs get cut people can’t pay their bills, even if they really want to. That’s just how it goes. So I don’t want to put too much money into P2P… just enough to see if Lending Club is better/worse than Prosper.