$10,000 Beat-the-Benchmark Experiment Update – May 2013

Here’s a condensed May 2013 update for my Beat the Market Experiment, a series of three portfolios started on November 1st, 2012:

1. $10,000 Passive Benchmark Portfolio that would serve as both a performance benchmark and an real-world, low-cost portfolio that would be easy to replicate and maintain for DIY investors.
2. $10,000 Beat-the-Benchmark Speculative Portfolio that would simply represent the attempts of an “average guy” who is not a financial professional and gets his news from mainstream sources to get the best overall returns possible.
3. $10,000 P2P Consumer Lending Speculative Portfolio – Split evenly between LendingClub and Prosper, this portfolio is designed to test out the alternative investment class of person-to-person loans. The goal is again to beat the benchmark by setting a target return of 8-10% net of defaults.

Executive summary. Six months have gone by since this experiment started, and the passive portfolio has ridden a hot stock market nearly the entire time. My speculative portfolio is catching back up a bit after my Apple holdings stumbled, while the P2P lending portfolio is still too young to make any firm conclusions. The details are below:

$10,000 Benchmark Portfolio. I put $10,000 into index funds at TD Ameritrade due to their 100 commission-free ETF program that includes free trades on the best low-cost, index ETFs from Vanguard and iShares. The portfolio was based loosely on a David Swensen model portfolio. Screenshot:

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Total portfolio value (5/1/13): $11,191.03 (+8.1% YTD return)

$10,000 Speculative Portfolio. Many people speculate with their money, buying and selling stocks now and then, but they rarely track their performance even though they may brag about their winners. Honest tracking is the primary reason for this “no-rules, just make money” account. I dropped $10,000 into a TradeKing account for this portfolio due to their low-cost $4.95 trade structure, free tax-management gain/loss software, and free dividend reinvestment. Screenshot:

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Total portfolio value (5/1/13): $10,480.87 (+4.6% YTD return)

$10,000 Prosper and LendingClub Portfolio. For this one, I started with $10,000 split evenly between Prosper Lending and Lending Club, and went to work lending other people money and earning interest with an 8% target net return. So it’s also a race-within-a-race to see which option offers the best returns.

The LendingClub portfolio now has 210 current and active loans, 11 loans that were paid off early, and several in funding. Two of the active loans are currently between 31-120 days late, which to be conservative I am going to write off completely ($48).

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LendingClub.com account value: $5,210 (includes principal + accrued interest, minus 30+ day lates, after fees)

My Prosper portfolio now has 221 current and active loans, 16 loans that were paid off early, and 3 in funding. 4 of the active loans are between 1-30 days late. One loan is over 30 days late, which to be conservative I am going to write off completely ($24).

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Prosper.com account value: $5,224 (includes principal, accrued interest, minus 30+ day lates, after fees)

Total portfolio value (5/1/13): $10,434