Many peer to peer loan investors are using automated investing to select loans to add to their portfolios. This is certainly convenient and the filter feature allows you to select very level of risk, however, there are limits on how selective you can be with automated investing tools. For this reason, it makes more sense to learn how to select loans and build a portfolio that meets your needs. There are many lending club investing strategies to choose from. The first part of your strategy should be to determine your level of risk tolerance. This is simply how comfortable you are investing in lower grade (or riskier) loans. If you want to minimize the potential for losses then you have a low risk tolerance and you will want higher grade loans that pay a lower interest rate. If you seek to maximize your return then you should look at lower grade loans with higher interest rates. Most investors fall somewhere in between and diversity their portfolios across two or more risk levels.
The second part of your strategy is selecting the specific loans that you want to invest in. Remember, you should invest in at least fifty to one hundred loans in order to diversify your peer to peer lending portfolio. Lending Club provides dozens of pieces of information on each loan and the borrower that is requesting it. You should look at this information which includes length of employment, home ownership, income verification, late payments, payment history, number of credit accounts, and much more. You will need to develop a list of criteria that borrowers need to meet before you will invest in their loan.
You may be wondering what the research has shown on these variables. This analysis is very complex and you should only accept the findings of an analytics professional. While individual investors may have been successful with their strategies you do not know if it was luck or skill. Also, they may not be successful over the long term. Unless you track their performance for many years you do not really know how well they are truly doing. Therefore, you can take many of these stories and personal experiences with a grain of salt. This is your money that we are talking about and you need to be very careful before investing it. Would you take the word of ‘some stranger on the internet’ for other important financial decisions? I hope not! Then why would you invest based on some of these stories, many of which are really affiliates just trying to get you to click their link so they get a fee for sending you to the peer to peer lending site. Even if it is someone you trust, again, you don’t know how there strategy will work for you over the long run and in changing economic conditions.So, what is the best lending club investing strategy? No doubt you should trust the professionals at Peer Loan Advisor. They have consulted with top analytics professionals and are the experts in peer to peer lending investing.