Beating Broke

Personal Finance from the Broke Perspective

  • Home
  • About
  • We Recommend
  • Contact
  • Privacy Policy

Powered by Genesis

My eBook/eReader Conversion

September 2, 2011 By Shane Ede 14 Comments

After Andrea’s wonderful post on Go Green Method to Save Money: eBooks, and the ensuing conversation that started in the comments, I though it might be nice to share my story in regards to ebooks and ereaders.

Where it begins.

I’ve been a reader for as long as I can remember.  Some of my earliest memories of reading are of reading the Chronicles of Narnia series and the Hardy Boys series.    All through my school years, I read voraciously.  I made my way from shorter books up through goliath undertakings like just about anything by James Michener.  Sadly, when I moved to college, I drifted away from reading.  Most of my reading time was taken up by schoolwork and socialization.  Later, while taking a break from college to pursue more nefarious things, I had a job which usually entailed a whole lot of doing nothing.  To pass the time, I began reading again.  The spark was back.  Heck, I even read the 5th Harry Potter book in a day.

I eventually got a real job, finished my degree, and then got married and started having children.  And, as I was pretty busy doing those things, my reading habits slipped off again.  It wasn’t until we cancelled cable shortly after our first born came along that I got back into it.  And, even then, it was not nearly with the same pace as I had before.  Throughout all of this, I’ve carted around my books.  Each time I wanted to read something new, I bought it rather than borrow it.  Why?  Call it OCD collecting.  I’ve always fantasized about having this huge library in my house with wall-to-wall books. In short, I had an infatuation with books.

59/365: Lectura

But, here’s the thing.  Of all the hundreds of books I had (have), I’ve only reread less than 10 of them.  So, I came to the realization that I was carting around all these books that I would never (probably) read again.  Moreover, they were slowly taking over every bookshelf in the house, and even some of the floor space.  When I came to this realization, I went through them all, and posed a large majority of them on PaperBackSwap.  But, all that did, really, was to swap the clutter of books I had read with a clutter of books I hadn’t read.  I’ve currently got well over 50 books on my “to read” shelf.  For reference sake, I only read about 35-40 books a year.  So, I’ve got close to a year and a half worth of books sitting, waiting to be read.

Through all of this, my desire to have less clutter in my space has led me to try to remove as much of it as possible.  I had downloaded the kindle reader app for my blackberry phone, but I found it absolutely terrible to try and read anything on the little, itty-bitty screen.  At that point, I decided that ereading just wasn’t for me.  At the time, I would rather have the physical book in my hands than try and read on a little screen.  Then, I upgraded my phone.

I traded in my blackberry for a new android based phone.  It’s got a screen that’s roughly twice the size as the old blackberry had.  A couple of books that I wanted to read were available only as ebooks.  So, I gave the cell phone reading another try.  On the larger screen, not only was it bearable, but I found that I liked it.  And, now, several ebooks later, I’m a convert.  An ereader has rocketed to the top of my wish list, although I haven’t decided whether it will be a kindle or a nook, or something else entirely.
photo credit: anieto2k

Shane Ede

Shane Ede is a business teacher and personal finance blogger.  He holds dual Bachelors degrees in education and computer sciences, as well as a Masters Degree in educational technology.  Shane is passionate about personal finance, literacy and helping others master their money.  When he isn’t enjoying live music, Shane likes spending time with family, barbeque and meteorology.

www.beatingbroke.com

Filed Under: Books, Green Tagged With: android, blackberry, ebook, ebooks, ereader, kindle, nook

Selecting Lending Club Investments – How I do it

August 24, 2011 By Shane Ede 22 Comments

As I mentioned in my previous post on finding a Real Rate of Return for My Lending Club Portfolio, I am unable to invest directly into the loans on Lending Club.  There’s some regulatory issue between Lending Club and my state that makes it that way.  So, I have to purchase my investments through their note trading system called foliofn.  Not a huge deal, but it makes it a bit more interesting.

Using the Lending Club foliofn Search

First, I have to search for available investments.  They’ve got a decent search, but it’s missing a few key things that really would make it top notch.  Here’s what you’ve got as far as filters for the search, and, also how I usually set it up when I do a search.

Lending Club foliofn search options

I don’t like seeing anything that’s been late, or is currently late.  Late payments don’t show any intention of improving your situation, so I’m not going to take a risk on you if you don’t take it seriously enough to pay on time.  You’ll notice that I also change the remaining payments to 56.  The max is 60, but it’s hard to eliminate those who have been late if they haven’t had the chance to be late, so this makes it so that a few payments have to have been made.  Of course, there are shorter term loans available in Lending Club, so you’ve got to keep an eye out for those.  I don’t really limit the rates at all.  I’ll explain why in a moment.  Here’ s a sample of the results you’ll see when you do a search (click to see bigger).

Lending Club foliofn search results

Selecting Lending Club Investments

As you can see you get a really basic overview of the available loans.  They’re all sortable.  I usually sort by Asking Price because I usually have a set amount of available funds in my account and I want to purchase investments that will come as close as possible to exhausting those funds.  There are three things that I pay very close attention to when I’m shopping for investments here.  The first is the Credit Score Change.  This is a visual indicator of whether the borrower’s credit score has gone down, up, or stayed the same since the loan was issued.  I only buy loans where the credit score has gone up.  It’s indicated by a green arrow that points up and to the right.  Again, this is a personal preference, but I want borrowers who are want to improve their situation.  It’s what this site is about, and something that I feel strongly about.  I like to think of it as ethical investing.

The second thing that I look closely at to compare the term of the loan with the remaining payments.  This goes back to the late/never late thing.  I’m able to eliminate loans that have been late through the search if the term of the loan is 60 months, but not if it’s anything shorter than that.  I’m looking for loans that have made at least 2-3 payments.  Finally, and most importantly, I look at the Yield to Maturity field.  If I could change one thing about the search on foliofn, it would be to add a way to filter by this field.  Here’s why.  Because foliofn is a secondary market for these investments, you aren’t necessarily paying the price of the remaining principle.  The seller is able to set his own price for the investment.  So, the interest rate on the loan isn’t necessarily what you will earn on the loan.  The Yield to Maturity field shows what the yield on the loan will be when it is paid off.  This field will vary. That’s also why I don’t limit the interest rate in the search, although you could if you were looking for a certain credit level of loan to invest in. If you look at the example above again, you’ll see that the investments shown would be very, very bad choices.  Where you draw the line for the yield will vary based on your personal preferences, but I usually won’t buy any of them unless they are at least 5%.

Further Thoughts and My Results

My goal is to maintain a higher interest rate than any savings account, while maintaining a medium-high risk level.  This means that my portfolio is weighted towards the C-D range loans.  I still keep it diversified amongst the different rate levels, but it’s heavier in that area.  You’ll notice that the results don’t show what range the loan is.  For that reason, it’s handy to know, generally, what the interest rate ranges are for each of the loan credit ranges.  Using the interest rate (not the yield to maturity) field, you can guess where the loan lies.

Lending Club Net Annualized ReturnSo, all that goes into it.  I look for an investment that has a upward trending credit score, that hasn’t been late and has made at least 2-3 payments, and that has a Yield to Maturity of greater than 5%.  My portfolio is still rather small, so I try to keep individual investments to a $20-$40 range.  I just don’t want to put too much of the portfolio in one loan and then get caught with my pants down if it defaults.  As the portfolio grows, I’ll likely increase the upper end of this range.  So far, I have had 4 of the investments paid off.  Two of them have been paid off early.  I have had no defaults. That’s a screen grab of my real return on the left.  Adjusted for inflation, using the formula in my previous post, it’s still above 10%.  Try and get that anywhere right now.  My 401(k) is at -0.85% YTD, and my local bank pays 0.25% on savings accounts. Sure, it’s riskier, but I feel the increased return outweighs the increased risk, and I think it will keep it’s place as part of my investment strategy.

I feel that I should make a disclaimer here.  I’m not an investing professional.  None of this should be taken as advice, but merely an amateur sharing information on my portfolio.  See an investing professional if you’re looking for advice.  Otherwise, feel free to share your stories in the comments!  And, as always, if you liked the post, please take a moment to share it using the bar on the left hand side, or at the bottom of the post.

Need an account? Sign up for Lending Club.

Shane Ede

Shane Ede is a business teacher and personal finance blogger.  He holds dual Bachelors degrees in education and computer sciences, as well as a Masters Degree in educational technology.  Shane is passionate about personal finance, literacy and helping others master their money.  When he isn’t enjoying live music, Shane likes spending time with family, barbeque and meteorology.

www.beatingbroke.com

Filed Under: Investing, loans, Passive Income, ShareMe Tagged With: foliofn, lending club, lending club investing, p2p investing, p2p lending

Calculating a Real Rate of Return on My Lending Club Portfolio

August 22, 2011 By Shane Ede 14 Comments

For the past month or so, I’ve been performing a bit of an experiment.  I’ve been taking 10% of all income from this and my other sites and splitting it between an investment account and my Lending Club portfolio.  The idea, of course, is to see which performs better.

In order to do that, I needed to find a good way to calculate what the real rate of return to me is.  Here’s the formula I settled on.

(1- (Total Deposits / ((Total Deposits + (Total Interest Received – Fees Paid))*.97)))

I should qualify the rest of this by saying that I’m not the best at math, so there may be flaws here.  Feel free to let me know in the comments.  Also, if there’s a better way to go about this, please let me know in the comments as well.

Golden Guy Balancing RiskSo, let’s break that down a bit.  The *.97 part is  meant to give some accounting for inflation.  It takes 3% right off the top as an inflationary cost.  Is 3% enough?  That’s debatable, but it seems like a fair average, historically.  This bit: (Total Interest Received – Fees Paid) is merely the total income on the portfolio.  I’m missing a small bit here, as the cost of the principle is not equal to the actual principle of the portfolio.  That’s because I live in a state where Lending Club doesn’t have the right permissions to allow me to directly invest in the loans.  So, I’m having to go through their foliofn note trading platform to buy my notes and there is usually a small premium on the notes.  I haven’t decided on a good way to really include that in, or if it really should be.  The next bit, (Total Deposits / ((Total Deposits + that previous bit is basically determining the % growth.  Total deposits divided by current “balance”.  The 1- part at the beginning just gives the cleaned up decimal percentage.

Let’s walk some numbers through it. We’ll use these:

Total Deposits = $1000

Total Interest Received = $25

Fees Paid = $5

So, plugging those numbers in we get: (1-(1000/((1000+(25-5))*.97)))

We’ll do this old school and solve as we go, showing our work.  Parenthesis get priority, followed by addition and subtraction.  So, we next end up with (1-(1000/(1020*.97))).  Then, we end up with (1-(1000/989.4)).  Next step, 1-1.011 = -.011.  So, we get a return of -1.1%.

Seems logical right?  In the case of my portfolio, the result comes back as 10%.  That’s a pretty good number, if you ask me.  I haven’t had any defaults yet, and I’ve had loans in my portfolio since January of 2010.  (the experiment I talked about earlier only began in July, however, but previous portfolio is included for easy of calculations)

I’m sure there’s some much more complicated formula that would take in risk of default on remaining invested principle, and a way to get the most accurate number, but really, I’m not sure that I want to take it that far.  This will never get to the point, I don’t think, of having a majority of my overall portfolio in it.  It’s not nearly safe enough for that, and my retirement accounts will remain in more traditional markets.

But, with results like 10%, and the current state of the stock market, one has to begin to wonder if the stock market is the safer of the two markets.  The stock market certainly isn’t showing returns of 10% recently.

photo credit: lumaxart

Shane Ede

Shane Ede is a business teacher and personal finance blogger.  He holds dual Bachelors degrees in education and computer sciences, as well as a Masters Degree in educational technology.  Shane is passionate about personal finance, literacy and helping others master their money.  When he isn’t enjoying live music, Shane likes spending time with family, barbeque and meteorology.

www.beatingbroke.com

Filed Under: General Finance, Investing, Passive Income, ShareMe Tagged With: Investing, lending club, p2p lending, rate of return, return on investment, stock market

  • « Previous Page
  • 1
  • …
  • 60
  • 61
  • 62
  • 63
  • 64
  • …
  • 119
  • Next Page »
  • Facebook
  • Pinterest
  • RSS
  • Twitter

Improve Your Credit Score

Money Blogs

  • Celebrating Financial Freedom
  • Christian PF
  • Dual Income No Kids
  • Financial Panther
  • Gajizmo.com
  • Lazy Man and Money
  • Make Money Your Way
  • Money Talks News
  • My Personal Finance Journey
  • Personal Profitability
  • PF Blogs
  • Reach Financial Independence
  • So Over Debt
  • The Savvy Scot
  • Yes, I am Cheap

Categories

Disclaimer

Please note that Beating Broke has financial relationships with some of the merchants mentioned here. Beating Broke may be compensated if consumers choose to utilize the links located throughout the content on this site and generate sales for the said merchant.

Visit Our Advertisers

Need to change careers? Consider an Accounting Certificate Program from WTI.