Time again for a Beat the Market Experiment monthly update, for the first 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 of person-to-person loans. The goal is again to beat the benchmark by setting a target return of 8-10% net of defaults.

$10,000 Benchmark Portfolio as of March 2, 2013. My account is held 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. I funded it with $10,000 and bought all the ETFs required to be fully invested on 11/1/12. All trades were commission-free.

Here’s a screenshot from my account showing exact holdings and their market value on 3/2/13 mid-day:

(click to enlarge)

Here’s the asset allocation pie chart, tracked with a simple Google Docs spreadsheet:

No new trades over the past month as the allocations are still close to targets. Still no dividends or money market interest. Here is the target asset allocation:

[Read more…]

Here is my monthly update of the trailing total returns for the major asset classes that I find useful. Passive ETFs are used to represent major asset classes, as they represent actual investments that folks can buy and sell. Return data was taken after market close at the end of February 2013.

For an easy visual comparison, here is a chart of the 1-year trailing returns:

I like collecting this information because it allows me to keep an eye on the market while still keeping the long-term returns in perspective. Often, the asset classes with the best long-term returns have had recent poor performance. The 1-year chart helps me decide where to invest new funds and also for rebalancing. Note that I do not necessarily invest in all the listed asset classes, see my personal portfolio for details.

[Read more…]

Here’s the 3rd and last piece of the monthly updates for my Beat the Market Experiment, a set of three real money portfolios started on November 1st, 2012. See also my $10,000 Benchmark and $10,000 Speculative portfolio updates for February 2013.

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.

$5,000 LendingClub Loan Portfolio. Below is a screenshot of my LendingClub account as of 2/1/13. Keep in mind that I had loans before, but sold them all on the secondary market and started fresh for this tracking experiment. However, the charged-off loans from that period stayed on my record even though the overall return for my very conservative loan portfolio back then was over 5%.

(click to enlarge)

I now have a total of 194 active and issued loans. I used simple loan criteria based on my LendingClub filters post as well as my Prosper filter research noted below, saving me from having to look through individual loan descriptions. The portfolio is very young, but so far all loans are current (16 days past due is considered late). The current weighted average interest rate is 11.66%, which means I can lose 3.66% to defaults and still net an 8% return.

LendingClub.com account value: $5,113.27 (includes principal + accrued interest, after fees)

$5,000 Prosper.com Loan Portfolio. Below are screenshots of my Prosper account page as of 2/1/13.
[Read more…]

Here’s the 2nd piece of the monthly updates for my Beat the Market Experiment, a set 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 Consumer Loan Speculative Portfolio – Split evenly between LendingClub and Prosper, this portfolio is designed to test out the alternative investment of peer-to-peer loans. The goal is again to beat the benchmark by setting a target return of 8-10% net of defaults.

$10,000 Beat-the-Benchmark Speculative Portfolio as of February 1, 2013. 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 am using a TradeKing account for this portfolio as I’ve had an account with them for a while and am comfortable with their simple $4.95 trade structure and free tax-management gain/loss software. Here is a screenshot taken from my TradeKing home page after market close 1/31/13:

(click to enlarge)

New activity. Well, this certainly wasn’t a great month for my stock picks. I basically tripled-down on Apple prior to their earnings announcement in late January, betting that they would have record-breaking profits in the 4th quarter. Well, they did, but the stock went down anyway due to growth concerns. I’m still giving it until the end of 2013 to see this play out, although I may pare back the position. I think Steve Jobs left us one last surprise… or I might just lose a bunch of money on this highly un-diversified move.

I also sold my Emerging Markets ETF (DEM) at a slight profit and used the proceeds to buy 500 shares of Enphase Energy (ENPH) at $3.77. Enphase manufactures micro-inverters for solar photovoltaic systems, which converts DC to AC and also allows you to individually track the power output of each panel on your roof. I believe that residential solar PV will take off soon, as electricity prices continue to rise and equipment costs drop. (Low interest financing won’t hurt either.) However, betting on a specific solar installer like SolarCity (SCTY) or a solar panel manufacturer when there is so much competition seems even harder. In addition, I believe that Enphase is a good takeover target in the future.

Here’s a pie chart of my holdings, tracked with a simple Google Docs spreadsheet (2nd tab):

[Read more…]

Time again for a Beat the Market Experiment monthly update, for the first 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 of person-to-person loans. The goal is again to beat the benchmark by setting a target return of 8-10% net of defaults.

$10,000 Benchmark Portfolio as of February 1, 2013. My account is held 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. I funded it with $10,000 and bought all the ETFs required to be fully invested on 11/1/12. All trades were commission-free.

Here’s a screenshot from my account showing exact holdings and their market value as of 2/1/13 before market open:

(click to enlarge)

Here’s the asset allocation pie chart, tracked with a simple Google Docs spreadsheet:

No new trades over the past month as the allocations are still close to targets, no dividend distributions, no money market interest. Here is the target asset allocation:

[Read more…]

Here is my monthly update of the trailing total returns for the major asset classes that I find useful. Passive ETFs are used to represent major asset classes, as they represent actual investments that folks can buy and sell. Return data was taken after market close at the end of January 2013.

Here is a chart of the 1-year trailing returns for the major asset classes above, which I use to help decide where to invest new funds and for rebalancing. Note that I do not necessarily invest in all the listed asset classes, see my personal portfolio for details.

[Read more…]

Here’s the last part of the monthly update for my Beat The Market Experiment, a set of three real-money portfolios started on November 1st, 2012. See also my $10,000 Benchmark and $10,000 Speculative portfolio updates for January 2013.

On 11/1/12, I deposited $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.

$5,000 LendingClub Loan Portfolio, January 2013 Update. (A little late on the update, although only about $9 in extra interest was accrued since 1/1.) Below is a screenshot of my LendingClub account as of 1/9/13. Keep in mind that I had loans before, but sold them all on the secondary market and started fresh for this tracking experiment.

(click to enlarge)

Since last month, I invested another $400 for a total of 191 active and issued loans. I used simple loan filters based on my LendingClub filters post as well as my Prosper filter research noted below, and haven’t spent any time looking through any individual loan descriptions. The portfolio is very young, but so far all loans are current (16 days past due is considered late).

LendingClub.com account value: $5,082.51 (includes principal, accrued interest, net of fees)
[Read more…]

Here’s another piece of the monthly update for my Beat the Market Experiment, a set 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 Consumer Loan Speculative Portfolio – Split evenly between LendingClub and Prosper, this portfolio is designed to test out the alternative investment of peer-to-peer loans. The goal is again to beat the benchmark by setting a target return of 8-10% net of defaults.

$10,000 Beat-the-Benchmark Speculative Portfolio as of January 1, 2013. 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 am using a TradeKing account for this portfolio as I’ve had an account with them for a while and am comfortable with their simple $4.95 trade structure and free tax-management gain/loss software. Here is a screenshot taken from my TradeKing home page as of market close 12/31/12:

(click to enlarge)

[Read more…]

Time again for a Beat the Market Experiment monthly update, for the first 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 Consumer Loan Speculative Portfolio – Split evenly between LendingClub and Prosper, this portfolio is designed to test out the alternative investment of peer-to-peer loans. The goal is again to beat the benchmark by setting a target return of 8-10% net of defaults.

$10,000 Benchmark Portfolio as of January 1, 2013. I chose to open an account at TD Ameritrade due to their 100 commission-free ETF program, including the best low-cost, index ETFs from Vanguard and iShares. I funded it with $10,000 and bought all the ETFs required to be fully invested on 11/1/12. All trades were commission-free. My target asset allocation is below.

Due to simplicity and small portfolio size, for now I am going with 100% stocks and no bonds. This is meant to be appropriate for young investors, who should try to get a long horizon for stocks and can add more bonds later on. According to popular glide paths, a rule-of-thumb is having your age minus 20% in bonds. Here are the ETF components that represent each asset class:
[Read more…]

Happy New Year! 2012 has come to an end, which makes this monthly update into an annual wrap-up of the trailing total returns for selected asset classes. Passive ETFs are used to represent major asset classes, as they represent actual investments that folks can buy and sell. Return data was taken after market close at the end of December 2012.

Here is a chart of the 1-year trailing returns for the major asset classes above (also 2012 total annual returns), which I use to help decide where to invest new funds and for rebalancing. Note that I do not necessarily invest in all the listed asset classes, see my personal portfolio for details.

Every single asset class ended up in the green, with equities overall having a very strong year despite lots of continued uncertainty. I haven’t bothered to look, but I remember most forecasts from this time last year predicting a “sideways” market. I see 2012 as another year where it was helpful to ignore all the short-term predictions and instead focus on long-term returns.

[Read more…]

As the last part of my ongoing Beat The Market Experiment, here’s the December 2012 update for my consumer loan portfolio. See also my $10,000 Benchmark and $10,000 Play portfolio updates for December 2012.

On 11/1/12, I deposited $10,000 split evenly between Prosper Lending and Lending Club, and went to work lending other people money and earning interest. Here’s how I’m doing it:

1. 8-10% target return, net of defaults and fees. Each site provides an estimated return based on the interest rate and expected delinquency rate, but I am also using specific filters to try and maximize my return. Overall, I would say my risk profile is moderate/conservative. If I can get an 8% net return over the next 3+ years in the current interest rate environment, I’ll view the portfolio as a success.
2. Minimal time commitment. I’ve done the manual loan-picking thing, and I’m over it. 400 loans at $25 a pop would take forever. Both sites allow you to save customized loan filters and use an automated investment algorithm to pick a portfolio for you.
3. Loan Filters. I’m constantly tinkering with the loan filters, but you can get a good idea of what I am using by reading this best Prosper filters post and this older LendingClub filter post. Nothing too fancy, just some broad filters based on historical inefficiencies that may or may not persist.
4. Loan term lengths and reinvested interest. I thought about only buying loans with 3-year terms in order to have a clean ending timeframe to this experiment, but in reality that would leave a lot of cash at the end as many people pay off their loans early. Also, higher rates are found in 5-year loans. Given the ample liquidity I found in secondary market, if I wanted to end the experiment I could just sell all my loans and cash out. (In October, I sold all of my existing loans on the secondary Folio market in a matter of days, quite easy as long as you’re willing to sell at a discount.) This way I will reinvest any additional cash into new loans maximize return.

LendingClub Details
Below is a screenshot of my LendingClub account as of 12/3/12:
[Read more…]

As part of my Beat the Market Experiment, I started three portfolios on November 1st, 2012:

1. $10,000 “Good Boy” Passive ETF Benchmark Portfolio that would serve as both a performance benchmark and an example portfolio that would be easy to build and maintain for DIY investors.
2. $10,000 “Bad Boy” Beat-the-Benchmark 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 Consumer Loan Portfolio – Split evenly between LendingClub and Prosper, this portfolio of peer-to-peer loans will have a target return of 8-10% net with the goal of beating the Benchmark portfolio over the long run.

This is the monthly update for $10,000 Play Portfolio as of December 1, 2012. I have to admit upfront that I haven’t devoted much time into this portfolio. I am no wannabe-Warren Buffett, as he would read the financial statements and 10-Ks of any company before buying in. Still, I am serious about trying to beat the market, as this is my own hard-earned money I’m using. I am using a TradeKing account for this portfolio, and here is a screenshot as of close 11/30:

(click to enlarge)

Here’s a pie chart of my holdings:

Details below:

[Read more…]