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J
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OP: November 08, 2012, 12:00:00 AM
What's your Modus Operandi?  By that I mean what have your found to be a comfortable way to invest?  Have you developed habits or strategies beyond the obvious (diversification, no red flags etc...)for conducting business? I've only been doing this about three months and am still pretty new.  But the more research I do and the more I think about how a little detail could make a big difference the more I refine my approach.  Here are a few of the things I like to do, I'd love to hear any feedback

I log-in daily but only pick the best few (one or two) loans out of a tight filter that typically only presents a dozen or so options.  My goal is to find the best loans if they are there and if they are not I don't invest.  When I first started I transferred in $500.  I felt this emotional pressure to get it all allocated as fast as I could so it would not be sitting dormant in my account (although it had been dormant in my bank account for some time).   Looking back, I think I invested in some loans I wouldn't choose now (business loans etc...).

I sort by newest loans first and consider the percentage that has been funded.  I don't want to waste my time reviewing a loan that's been up for grabs for the last 11 days and only 10% has been funded... there is probably a reason.  Also don't want to review a loan twice.  I wish there was a way to tag loans I have already reviewed in a previous sessions.

As soon as I see one red flag I move on.  I'd rather just one good loan than 10 good loans with one bad.  Someday when I have more invested and can be more diversified that may change.

I've been investing $500 at a time in a portfollio named with a sequence number and the date.  That way I can track if my performance is improving over time.

I watched Peter's youtube video about lendstats to determine where to set my filters.  (Thank you Peter and lendstats)

Each Monday I read through Peter's weekly round up.


 
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r

rev

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#1: November 08, 2012, 12:00:00 AM
John,

Very good post. I'd like to share my MO as well, as I see a lot of similarities in our lines of thought. I'm the creator of Interest Radar, so this post may sound a lot like self promotion, but the fact is that I've added to the site all the tools to help me pick loans seamlessly, and finish the process in a few minutes with no concern of double-investing etc.

I've set up a weekly transfer from my bank account to LC, so that I don't have the urge that you described of "not letting money sit there". The amount I transfer was calculated based on the number of loans matching the criteria I determined, in the past 12 months, times $25, divided by the number of weeks. Which means I should have in average just enough to purchase all the notes I find appealing, no more no less.

Every day I log in to invest, just after Interest Radar's alerts (that are sent as soon as LC refreshes the list of loans). I normally have some cash lying there, especially because notes sometimes are not issued.
I aim the high interest loans. I use basically 6 strategies available in Interest Radar: F/G Income, G Mortgage, D/E Income, F Mortgage, and 2 custom strategies that select high IR01 scores, one for 36 months and one for 60 months.

I sort by Interest Rate, higher to lower (the default sort order in my site). I don't review individual loans. Instead, I trust the IR04 score that filters out loans with sketchy attributes (so I have Unknown and High Risk filtered out in all my strategies). I also never invest in loans with descriptions (text input by the borrower) that result in more than 10% default rate in the word frequency analysis of Interest Radar. It's incredible how many times this indicator helps me discard business loans disguised as "debt consolidation" (descriptions like "I need to consolidate my debt to improve my business").

Every time I click to invest, Interest Radar makes note of that and removes the loan from future searches. If I see a loan I don't want to invest in (high default rate for the description for example), I click Discard and it is "uninvestable" after that, for that session and the future. I always keep checked the option "Hide Invested" in the filters, so that at each new search or when loading a new strategy, the discarded and the already invested don't even show up.

I try to have at least 50% of notes with a 36-month term. That's why my Score strategy (IR01 of at least 390, and IR04 of Medium or Low) is split in 36 and 60. I start with 36, because the other strategies are all primarily 60-month (loans F/G are basically all 60-month).

After these strategies are depleted, I stop investing and leave the cash there for next day.

Then I place the order in LC, and in Interest Radar I switch to My Portfolio and upload the update notes.csv to see how balanced my notes are in terms of Loan Length and Credit Grade, and to record the history of investment over time.

Rev
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#2: November 08, 2012, 12:00:00 AM
Great conversation starter John. I do it a little differently to many people here. I download everything into Excel every two or three days where I run macros with all my filtering criteria. I keep track of the data and time I invest and then sort by date on the download file so I never invest in the same loan twice.

If you are looking to tag loans then I highly recommend you check out the statistics sites like Interest Radar or Peercube. Both have plenty of features for investors, many of which Rev detailed above. Read my reviews of these sites here:
http://www.lendacademy.com/review-of-new-lending-club-analysis-site-interest-radar/
http://www.lendacademy.com/peercube-review/

My filters that I am using are available here. I have tweaked these a little since I wrote this post but they are still very close to this:
http://www.lendacademy.com/investing-in-lending-club-and-prosper-in-2012/

Hope that helps.
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B
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#3: November 08, 2012, 12:00:00 AM
You've got some great insight regarding how to filter through notes in the last two comments.

One of mine, which is also backed up in the data, is that I only invest in Debt consolidation loans.  I know that other types *can* be successful, but I am a big anti-debt person.  So from a personal point of view, I don't want to fund a vacation or a business with my money.  I want to invest in notes that are helping others get out of debt.

Obviously, that doesn't mean every note I invest in actually ends up reaching that goal, but I think it's much more likely.  I also look for red-flags that don't look like earnest attempts to actual get out of debt.  That might show up in the amount asked for, the notes the borrower leaves, etc.

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T
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#4: November 08, 2012, 12:00:00 AM
A little unconventional, but if I were not in a FolioFN-only state I would be very tempted to try some quick note-flipping. Look for nearly-funded loans that are reasonably good, mark them up 2%, and sell them on Folio for an immediate profit. You'd be surprised how fast a decent note sells at a 2% markup. You lose 1% to the Folio fee, but you could end up with a 1% profit in just a couple of days. Annualize that and you could make some real money.

It is hard to find good brand-new notes at 2% markup so I know they would sell like hotcakes.
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b
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#5: November 09, 2012, 12:00:00 AM
Filter strategies necessarily restrict loan volume too much. Each characteristic only has a probability of causing no repayment. I come up with a probability of a problem and consider the interest rate, then invest in the top ten percent of a ranked list. Takes two minutes to create a list using programs I developed and a stats package.
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v
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#6: November 10, 2012, 12:00:00 AM
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T
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#7: November 10, 2012, 12:00:00 AM
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f
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#8: November 11, 2012, 12:00:00 AM
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T
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#9: November 11, 2012, 12:00:00 AM
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T
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#10: November 11, 2012, 12:00:00 AM
Macros are handy for automating performing calculations, modifying links so that they can be for a specific investment amount, doing a check against a notes.csv file to make sure that there aren't any notes that you've already invested in listed.

So I like to keep the monthly loan payment < 10% of the monthly income, and I like the amount borrowed to be less than the amount owed on revolving debt, a macro could do these calculations as soon as I open the file and then filter appropriately.

It just automates the filtering and calculations so that you can get there faster.
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y
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#11: November 11, 2012, 12:00:00 AM
I used to just invest in whatever loans were getting funded quickly, kind of a "Wisdom of the Crowds" thing.

But now that large investors are snapping up 75% of a loan in one go, it's kind of thrown a wrench into my "system."
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T
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#12: November 11, 2012, 12:00:00 AM
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T
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#13: November 11, 2012, 12:00:00 AM
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T
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#14: November 12, 2012, 12:00:00 AM
Viking,
I've moved our discussion to the IR board: http://www.lendacademy.com/forum/index.php?topic=253.0
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