Test, test, and test

OK, OK, I can’t quite unwind my pursuit of Lending Club. I’m pretty disappointed in my results and have decided to get out of my investments in Lending Club notes. The number of charged off loans and the declining overall rate of return are the primary reasons. As I indicated in my last post I plan on running out the string by 2021. In the meantime, I have decided to add notes that are scheduled to be paid off by then. So the question becomes how to select the notes?

I’ve had several thoughts and continue to do analysis on this issue. I’ve actually come up with 7 approaches and will use these to obtain new notes. I’m dividing these into different portfolios (a Lending Club option) so they can be tracked. I’ve decided to run a long-term test of these 7 approaches and have divided them into test cases. Unfortunately, this is the only approach since not all can be back tested. I’m going to describe these approaches in the next few posts. I’m actually buying these notes now. Each test case will have at least 40 notes. While that is not a large number it should shed some light on how the approach is working. I will be generating a monthly report on how they are performing.

The first 2 test cases involve buying notes on the secondary market, Folio Investing. In particular I have bought two separate groups of notes, ones ending in 2017 and the other with less than 12 months to go (mainly ending in 2018).

I’m still accumulating some of the notes but am endeavoring to fill the test cases reasonably quickly so each will have notes of about the same age. My next post will have a completely different approach and it should be out in a few days. Follow me on Twitter @billlanke and I’ll let you know when it is posted.