Author Topic: P2P lending - Larger notes?  (Read 2038 times)

MoonLiteNite

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P2P lending - Larger notes?
« on: August 24, 2016, 03:12:01 AM »
Just wondering what everyone's take on doing more than the normal 25$ min loans on P2P sites?
It makes sense to do 25$, along with some type of back tested filter to create the most gains.

But is there ever a time to go above 100$ notes?

I have only been in P2P lending for about 6 months now, and at first my filter would generally pop up 1-5 loans and it would only take me a few days to clear up my bi-weekly 250$ deposit. But over the last 6 weeks or so it is HARD to find a single loan that meets my requirements. I just hit accept on 2 notes at 150$ a piece. And just wondering what other people's views on this :)

frugledoc

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Re: P2P lending - Larger notes?
« Reply #1 on: August 24, 2016, 03:53:34 AM »
Depends what your total allocation target is.  2% per loan seems standard advice but I have gone up to 5% on asset backed p2p loans

MoonLiteNite

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Re: P2P lending - Larger notes?
« Reply #2 on: August 24, 2016, 04:02:26 AM »
I guess viewing it in terms of % would be better.
My account is currently at 5k, so a 25$ note is just 1% of my acccount.
So in my case, 50$ a note would be the "standard" amount since it would at 2%?
And as the account grows, getting 100$ notes wouldn't really be bad/good for the overall gains due to the number of notes?

Kakashi

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Re: P2P lending - Larger notes?
« Reply #3 on: August 24, 2016, 04:05:24 AM »
If you feel your filter will outperform the average, then nothing wrong with it.

MoonLiteNite

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Re: P2P lending - Larger notes?
« Reply #4 on: August 24, 2016, 04:11:31 AM »
If you feel your filter will outperform the average, then nothing wrong with it.
well 6 months in, there really no way of knowing, backtesting it came out at 8% through LC timeline. In recent times it comes out closer to 9%.
Currently sitting at 16.5% with still nothing beyond grace period! So far so good.
Frugledoc said about the 2%. I will look into that to seeing the math reasons why 2% of the total account per a loan is a good number.

frugledoc

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Re: P2P lending - Larger notes?
« Reply #5 on: August 24, 2016, 11:44:48 AM »
I guess viewing it in terms of % would be better.
My account is currently at 5k, so a 25$ note is just 1% of my acccount.
So in my case, 50$ a note would be the "standard" amount since it would at 2%?
And as the account grows, getting 100$ notes wouldn't really be bad/good for the overall gains due to the number of notes?

$50 is 1% of 5k.  $100 is 2%.  But if you are planning on fully investing 10 k then the % would drop.


okobrien

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Re: P2P lending - Larger notes?
« Reply #6 on: August 25, 2016, 08:34:57 AM »
I have been investing with Prosper for a few years and have changed my pricing strategy a couple of times.  I was buying $100-$200 notes because of the reason you mentioned.  I have specific requirements based on back testing and not allot of loans are posted that meet my requirements.  eEven though I have done unusually well with my returns, I have recently lowered my investments to $50 each.  I ran some experiments with selling my notes on foliofn and found it much harder to resell the more expensive notes.  In case I want to sell early, I would like the increased liquidity, even at the cost of some funds sitting idly aside.

AM43

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Re: P2P lending - Larger notes?
« Reply #7 on: August 25, 2016, 09:46:39 AM »
I've been investing with LC since 2009. Have over 850 notes invested in and always buy $25 and $50 notes.
Spread your risk across 3-5 notes instead of buying that 1 note for $100, because some of those $100 notes will default for sure.

okobrien

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Re: P2P lending - Larger notes?
« Reply #8 on: August 25, 2016, 10:25:50 AM »
I've been investing with LC since 2009. Have over 850 notes invested in and always buy $25 and $50 notes.
Spread your risk across 3-5 notes instead of buying that 1 note for $100, because some of those $100 notes will default for sure.

Yes, it does suck when a $100 or $200 note defaluts, but I disagree that diversification beyond a certain point is a better strategy if it is causing you to invest in notes that don't meet your criteria.  From what I remember, somewhere around 150 to 200 notes is the point where increased diversification has next to no impact on the variability of returns.  If the OP is only investing a few thousand than $25 per note may be ideal, but as your account gets into the tens of thousands of dollars, I think quality of note becomes much more important than over diversification.  Again, where I would keep to the small note strategy is if you are looking for more liquidity.  Way more people are looking to buy $25 and $50 loans in the aftermarket than $100-$200.

signhere

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Re: P2P lending - Larger notes?
« Reply #9 on: August 25, 2016, 10:26:14 AM »
as others have said, diversification is key with P2P lending and you should generally want the most notes as possible.

that being said, if you've identified a particular (expensive) note as +EV then by all means go for it.

AM43

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Re: P2P lending - Larger notes?
« Reply #10 on: August 25, 2016, 10:37:42 AM »
I've been investing with LC since 2009. Have over 850 notes invested in and always buy $25 and $50 notes.
Spread your risk across 3-5 notes instead of buying that 1 note for $100, because some of those $100 notes will default for sure.

Yes, it does suck when a $100 or $200 note defaluts, but I disagree that diversification beyond a certain point is a better strategy if it is causing you to invest in notes that don't meet your criteria.  From what I remember, somewhere around 150 to 200 notes is the point where increased diversification has next to no impact on the variability of returns.  If the OP is only investing a few thousand than $25 per note may be ideal, but as your account gets into the tens of thousands of dollars, I think quality of note becomes much more important than over diversification.  Again, where I would keep to the small note strategy is if you are looking for more liquidity.  Way more people are looking to buy $25 and $50 loans in the aftermarket than $100-$200.

I have filter set up and also use automated investing option to which my filter is attached and never invest in notes that don't meet my criteria. I am very patient and don't jump off my seat if I don't have any notes to invest in.

okobrien

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Re: P2P lending - Larger notes?
« Reply #11 on: August 25, 2016, 12:21:53 PM »
I've been investing with LC since 2009. Have over 850 notes invested in and always buy $25 and $50 notes.
Spread your risk across 3-5 notes instead of buying that 1 note for $100, because some of those $100 notes will default for sure.

Yes, it does suck when a $100 or $200 note defaluts, but I disagree that diversification beyond a certain point is a better strategy if it is causing you to invest in notes that don't meet your criteria.  From what I remember, somewhere around 150 to 200 notes is the point where increased diversification has next to no impact on the variability of returns.  If the OP is only investing a few thousand than $25 per note may be ideal, but as your account gets into the tens of thousands of dollars, I think quality of note becomes much more important than over diversification.  Again, where I would keep to the small note strategy is if you are looking for more liquidity.  Way more people are looking to buy $25 and $50 loans in the aftermarket than $100-$200.

I have filter set up and also use automated investing option to which my filter is attached and never invest in notes that don't meet my criteria. I am very patient and don't jump off my seat if I don't have any notes to invest in.

That sounds like a solid plan to me.

MoonLiteNite

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Re: P2P lending - Larger notes?
« Reply #12 on: August 25, 2016, 09:39:21 PM »
I've been investing with LC since 2009. Have over 850 notes invested in and always buy $25 and $50 notes.
Spread your risk across 3-5 notes instead of buying that 1 note for $100, because some of those $100 notes will default for sure.

The issue is my filter is only showing a very small number of notes, thus i am not getting any money in.
Yes there is auto investing, but that hasn't picked up anything in over a month at this point, i am able to get some in if i manually use my filter.

As others have said, wait give it time, but if i were to "give it time"  my account would be over 750$ in cash at this point, and that isn't good investing.

As said below.... this is the question i am asking, at some point is it OK to go over the 25$...

I've been investing with LC since 2009. Have over 850 notes invested in and always buy $25 and $50 notes.
Spread your risk across 3-5 notes instead of buying that 1 note for $100, because some of those $100 notes will default for sure.

Yes, it does suck when a $100 or $200 note defaluts, but I disagree that diversification beyond a certain point is a better strategy if it is causing you to invest in notes that don't meet your criteria.  From what I remember, somewhere around 150 to 200 notes is the point where increased diversification has next to no impact on the variability of returns.  If the OP is only investing a few thousand than $25 per note may be ideal, but as your account gets into the tens of thousands of dollars, I think quality of note becomes much more important than over diversification.  Again, where I would keep to the small note strategy is if you are looking for more liquidity.  Way more people are looking to buy $25 and $50 loans in the aftermarket than $100-$200.


I am not at the tens of thousands of dollars yet, but it won't be long until i am. From my own math, it doesn't seem so wrong to up the amount i put on per a note. But that is why i was asking here :)
Quality over quantity - after you have enough quantity at least
« Last Edit: August 25, 2016, 09:41:41 PM by MoonLiteNite »

okobrien

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Re: P2P lending - Larger notes?
« Reply #13 on: August 26, 2016, 06:36:29 AM »
I've been investing with LC since 2009. Have over 850 notes invested in and always buy $25 and $50 notes.
Spread your risk across 3-5 notes instead of buying that 1 note for $100, because some of those $100 notes will default for sure.

The issue is my filter is only showing a very small number of notes, thus i am not getting any money in.
Yes there is auto investing, but that hasn't picked up anything in over a month at this point, i am able to get some in if i manually use my filter.

As others have said, wait give it time, but if i were to "give it time"  my account would be over 750$ in cash at this point, and that isn't good investing.

As said below.... this is the question i am asking, at some point is it OK to go over the 25$...

I've been investing with LC since 2009. Have over 850 notes invested in and always buy $25 and $50 notes.
Spread your risk across 3-5 notes instead of buying that 1 note for $100, because some of those $100 notes will default for sure.

Yes, it does suck when a $100 or $200 note defaluts, but I disagree that diversification beyond a certain point is a better strategy if it is causing you to invest in notes that don't meet your criteria.  From what I remember, somewhere around 150 to 200 notes is the point where increased diversification has next to no impact on the variability of returns.  If the OP is only investing a few thousand than $25 per note may be ideal, but as your account gets into the tens of thousands of dollars, I think quality of note becomes much more important than over diversification.  Again, where I would keep to the small note strategy is if you are looking for more liquidity.  Way more people are looking to buy $25 and $50 loans in the aftermarket than $100-$200.


I am not at the tens of thousands of dollars yet, but it won't be long until i am. From my own math, it doesn't seem so wrong to up the amount i put on per a note. But that is why i was asking here :)
Quality over quantity - after you have enough quantity at least

MoonLiteNite, Yes, it is ok for you to buy bigger shares than $25.  Go for it knowing that your returns are more likely to be different from the average lender's returns.  Your returns might be lower, but it is just as likely that your returns will be higher.  I actually think if you have found a reliable combination of filters based on your backtesting research, you are likely to beat the average invesor buying similar grade notes. (make sure the backtesting results are based on a significant number of loans)
Check out this article for some good graphs and info on P2P diversification: http://www.lendingmemo.com/diversification-lending-club-prosper/