Beating Broke

Sharebuilder Returns Update

January 20, 2012 By Shane Ede 7 Comments

As I mentioned in my last post, I’ve been taking 10% of my income from my online ventures and splitting it between my Lending Club account and my Sharebuilder account. It’s been a bit of an experiment. Nothing scientific, but a test to see if I drop the same amount of money into each account, what the returns and stability would look like. My returns on Lending Club have been very good, and the stability has been good so far. Let’s take a look at the Sharebuilder account.

So far, I’ve got about $264 put into the account. (Yep, I’m a heavy hitter. 🙂 ) So far, I’ve got six investments that I’ve split the money between. There’s also about $50 that is in cash at the moment. I’ll explain why that is in a bit.

ARCC
CIM
LTC
MAIN
NRGY
TICC

If you’re like me, you’ve likely never heard of any of those. You’re probably more familiar with symbols like WMT, MSFT, APPL, or C. One thing they have in common, is that they’re all dividend paying stocks. I like that. As time goes on, I’ll be balancing out these lesser known stocks with some other, more familiar dividend paying stocks. For now, that’s what the portfolio looks like. They’re all pretty evenly split as far as portion of portfolio invested. So far, the only one that is in the green is MAIN, and just barely.

Currently, my Sharebuilder account is showing a -13.30% return.

The Sharebuilder account is getting a bit of a bad rap here. Part of the reason that the return is so abysmal is that I’ve got a $260 portfolio split up into 6 stocks. Each purchase comes with a $4 fee. So, right away, the investments have to overcome a $24 loss. Take that $24 out of the equation, and the account is only down a few bucks, and the return, while still negative, is far less so. That also brings us to the cash that’s sitting in the account. Previously, I would make a purchase when the balance got over $34, so that, once the $4 fee was taken, I was still buying $30 worth of the stock. After seeing what that was doing to the results, I’ve changed that, and will likely start making purchases in $50-$60 lots. It will take longer to build the portfolio, but the impact of the fee will be lessened.

Overall, there really isn’t much comparison of the returns between the Lending Club and Sharebuilder accounts. Taken on their face, Lending Club wins hands down. I have to add, however, that the investments available in the two are very different. For the most part, you won’t lose an investment in Sharebuilder. Unless you invest in the next Enron, that is. With Lending Club, the risk is higher, because a borrower could default on the loan and you could lose all of that money if they do. But, there’s an obvious trade-off here. For the higher returns of Lending Club, you have higher risk. Less risk, with Sharebuilder, gets you less returns. Simple as that. I’ll likely continue doing both, for a while and see what the 1 year comparison looks like in July.

Have you ever used Sharebuilder? Where do you put your investments? Do you have a “fun” account like my Sharebuilder account?

Lending Club Returns Update

January 18, 2012 By Shane Ede 30 Comments

As I mentioned before, I’ve been taking the normal 10% contribution amount that most would be putting into their retirement accounts and splitting it between my lending club account, and a sharebuilder account. It’s been a bit of an experiment. I happen to think that lending club is a relatively safe investment option for a portion of your portfolio. I’ve still got my 401(k) from my old job, so the investments that I’ve made at lending club and in the sharebuilder account don’t even really make up 5% of my total investments. In short, I can afford to get a bit risky with the money. So far, it’s been anything but risky, however. I’ll update on the sharebuilder account in another post. Let’s take a look at what my lending club account has done.

To date, my investments look a little like this:

Total loans invested in: 24
Total loans paid off:5
Total loans defaulted: 0

With only 24 loans, it could be that I’ve just been lucky thus far. I’ve had a couple of the loans go past due by 10-15 days, but nothing that hasn’t been caught up and made current. And no defaults. As I continue, I expect that I’ll see one or two. With all the doom and gloom about the economy recently, I fully expected to see one already.

To date, I’ve deposited $257.20 into the account. That includes money from before this experiment started, so it’s not all recent. With that 257.20, I’ve invested in $511.36 in loans. The math savvy of you will notice that the invested amount is quite a bit more than the deposited amount. That just means that the money has turned over almost 100% since being invested. The more recent money, which accounts for about 50% of the account hasn’t had a chance to turn over yet, or that number might be higher. My total income, minus fees, is $36.26.

My portfolio breaks down like this:

39% of the loans are D grade
25% of the loans are B grade
15% of the loans are C grade
9% of the loans are F grade
7% of the loans are E grade
4% of the loans are A grade

As you can see, I’ve gone a bit riskier and weighted the portfolio towards the higher grades, but is still heavily centered around the C/C+ grade. (Read this to see how I select loans)That keeps my return a bit higher, while also keeping the risk a bit lower. Speaking of return, what is mine?

According to lending club, my net annualized return is 12.82%.

I like that. It’s far better than any bank or credit union is going to pay me for my money. To get that, I give up the liquidity of the money (I’d have to sell my notes to get the cash), and I give up some of the stability of the money (it’s riskier than a savings account or CD). Because this isn’t my emergency fund, or normal savings, I’m ok with giving up both of those things, in exchange for an above average return.

Do you invest with peer-to-peer lending? Do you use Prosper? Lending Club? Both? How’s your return?

How to Overcome Disappointment When Our Financial Role Models Fail Us

January 16, 2012 By Shane Ede 8 Comments

One of the biggest surprises about the whole Suze Orman “Approved Prepaid” Scam/Fiasco, to me, is that Suze Orman is a person who has been a role model, financially, for many people. She has been dispensing her brand of advice for many years, has multiple best-selling books on the subject, and regularly appears on news and talk shows trying to help people lead better financial lives. So, to have someone of that public stature, essentially attack someone I know and trust, led to some amount of disappointment. Disappointment in how she portrayed herself, and, also, eroded the trust that many had in her and her advice. (I should note that I never really cared for her style or advice, but many do and did.)

So, how do we overcome that level of disappointment when someone we trust to give good advice, and to behave in a professional manner, doesn’t?

First and Foremost, remember that the person is human. People have bad days. They have lives outside of the limelight, and sometimes that life can bleed over and cause them to do or say things that are uncharacteristic.
Remember that it’s still just advice. You should be doing your own research and assessing what is right for you in any situation. Remember when your mom would ask you “If your friends jumped off a bridge, would you do the same?” Well, the obvious point she was trying to drive home was that you need to be an independent thinker. Whenever someone recommends a product, service, or action, you have to determine if you should take that advice, or find an alternative.
Express your disappointment. Many times, people will disappoint us and not even know they’ve done it. Tell them why they’ve disappointed you. Do it constructively, don’t be a jerk. If they truly meant well, they’ll want to know, and they’ll want to find a way to improve.
Move on. Take what you have into account, and decide if you can continue to trust the person’s advice. If you can, let it go, and move on. If you can’t, let it go, and move on. (See what I did there?) Holding a grudge, or reacting negatively won’t help you, and it will reflect poorly on you.

People are disappointed with their role models all the time. People that we hold in high regard do something stupid, and fall from our good graces. It’s important to take the lessons that are available, improve upon your filter, and move on.

As I mentioned in the previous post, I don’t think that Suze Orman’s card is, necessarily, a bad card. I think it’s entirely possible that she created the card with the best intentions, and truly believes that it can be a useful tool for those that use it. I do think that the marketing for the card is far too broad, aimed at people who shouldn’t be using the card at all. I do think that she (or whomever is running her twitter account) overreacted to the criticism that was being presented by PT and others. Suze lost a lot of trust with a lot of personal finance writers over the whole fiasco. Depending on how the fallout from the whole situation lands, she might get some of that back, she might not. But, it’s those writers, expressing their disappointment, that might save a few people from using the card when they shouldn’t. It’s those same writers that may cause Suze to change her course, and improve upon the card based on the recommendations they made.

Disappointment is normal. We feel it all the time. How we react to it, and handle it, is what makes the difference.