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Author Topic: Loan Sizes

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Loan Sizes
OP: November 22, 2012, 12:00:00 AM
Hey guys!

Do you all have some threshold for note sizes like say, no note should be greater than 0.5% of the total portfolio balance?  Or do you just do the same increments regardless.  As my account grows, I imagine I'll need to step it up from $25 notes but am curious if anyone has strategies with regard to diversification.

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Loan Sizes
#1: December 31, 1969, 07:00:00 PM
I've always used $50 per note. The way I decide on loans in which to invest doesn't suggest too much advantage in making some notes outsized. They are all very similar performers in expectation.

If I do another large round of funding (I invested 20k in July and August), I will probably bite the bullet and go with $75 just to shave a couple weeks off the investment time.
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Loan Sizes
#2: December 31, 1969, 07:00:00 PM
I think it depends on what you mean by "diversification."  If you have 300 notes invested in only 3 grades, say, in A, B, and C at 100 for each grade, I think that kind of diversification suffices.  But if you have 300 notes invested across all 7 grades, A thru G, with a little over 40 notes for each grade, you might not have sufficient diversification, especially for the lower grades where you have higher default rates.   So, it depends.  In the first scenario, I think you can go from $25 to $50 per note after you have invested in a total of 300 or 400 notes, but in the second scenario, you might need more than 500 notes to do that. But if you go from $25 to $50, you should plan to put in twice the size of current capital invested. 

My two cents.
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Loan Sizes
#3: December 31, 1969, 07:00:00 PM
I kept my investments at 25$ until I had 400 notes in LC (mostly D-G with some A&Bs with people who had credit scores >780).  Now I look at the notes that are available on any given day and invest between 25-50 (rarely 75) in the notes that meet my criteria until all of the $$ I have available is invested.  It took me close to 7 months to get my initial 400 notes, I was pretty selective in who I invested in.  I keep a pretty close eye on my notes, and I don't want to end up trying to manage thousands of notes.
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Loan Sizes
#4: December 31, 1969, 07:00:00 PM
Thanks for the insight and good points.  Did anyone attend those Lending Club webinars back in like 2007 or 2008?  I don't think they do them anymore, but there was one on diversification.  I can't remember the details though.
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