Stock investing for dummies
If you meet those requirements, you can start investing. Investors need to decide between manual investing and automated investing. Expert LendingClub investors recommend starting with a pre-selected option from LendingClub. That ensures that you’ll maximize your diversification while lowering your expected risk of default.
When you’re first getting started on LendingClub, you probably won’t pay any fees.
LendingClub charges $100 per year for their self directed IRA accounts, but they waive that if you maintain $5,000 of investments in your first year or $10,000 in subsequent years.
As cash from your investments start to roll in, you’ll start to see LendingClub’s fees. They charge a 1% fee on every payment you receive. If you invest in a loan that defaults, they take up to 35% of the amount recovered if no litigation is involved. They don’t charge fees if they don’t recover money.
One thing that differentiates LendingClub from some other online platforms is the opportunity for liquidity. Investors can sell notes in a secondary market. The secondary market isn’t particularly robust, and mostly includes sellers looking to unload underperforming loans.
You should note, the IRS taxes LendingClub as ordinary income. That makes it an unfavorable investment from a tax perspective (unless you have it in an IRA).
Investigate And Automate
Most people who are first getting started on LendingClub will benefit from playing around on the platform before investing.
You can investigate individual loans, filter based on certain criteria, and manually invest your money in loans. It’s considered best practice to invest just $25 per loan amount.
Once you select your loans, LendingClub will help you evaluate the risk on your portfolio of loans. They will even provide a projected rate of returns based off of history.
As you start to become more comfortable with the investing process, you can start to create filters that will help you automate your investments. You can choose only the loans that fit your risk profile, but you can invest your money automatically.
Final Thoughts on LendingClub
LendingClub is an excellent way to invest in the consumer credit markets. However, it should supplement, not replace a stock market or real estate investment strategy. If you invest using LendingClub, it would seem prudent to reduce your bond holdings and your holdings in the banking sector.
It’s also important to remember that the LendingClub loans will follow trends in the broader consumer credit market. Recently, most loans are approaching all time lows with delinquencies. Some analysts expect delinquency rates to start to rise if employment or wage stability starts to fall.
As an investor in LendingClub, you have to track those trends on your own. An imprudent investor could lose a lot of money if they risk too much, too early on.
Overall, diversifying into consumer credit seems like a solid move for people who need more income producing assets in their portfolio. It’s not without risk, but the LendingClub platform is one of the best in the market today.
Check out LendingClub Today.
Have you tried peer-to-peer lending or would you ever consider it? Why or why not?
stock investing for dummies