Most investors have more than just stocks in their portfolios.
You may have a savings account or a CD(s) with a bank … you could own individual bonds (government, corporate, municipal, etc.) or fixed-income mutual funds or ETFs … or you might own all of the above.
If you’re in this situation like many investors, you’ve probably soured on the fixed-income universe. After all, rates and yields are still abysmally low.
Here are the average yields of some popular fixed-income investments:
I know, you probably didn’t need the reminder. But, this brings me to a unique opportunity that I think you’ll find compelling.
That’s because it’s yielding between 6%-8% … it’s relatively safe … it will add diversification to your portfolio … and it’s still a fairly unknown and underinvested area of the financial markets.
Big-name investors like George Soros are using it. So are various hedge funds, private-equity firms, banks, insurance companies and other institutions. Even my own mom is using it … and she’s pretty thrilled with it so far!
And if you try it out today …
I’ve arranged for you to receive an exclusive, limited-time cash bonus offer … one that will give you an instant 3% return on your investment.
And I think that after you learn more about this alternative to traditional fixed-income assets, you’ll want to take advantage of this unique opportunity to make some "uncommon" returns in 2017 … and beyond.
These days, investors are increasingly venturing outside the stock and bond markets to juice up their returns. This means turning to "alternatives" like precious metals, real estate, trust deeds, promissory notes, limited liability companies and crowdfunding investments, among others. (You can even own them in an IRA!)
In the last 10 years, assets in "liquid alternatives" — that is, alternative investment strategies available through mutual funds, closed-end funds and ETFs with daily liquidity — have grown by 424%. That’s because investors want better returns, lower correlations to equities and bonds (diversification), and reduced volatility.
And one of the most-unique alternatives out there is one I want you to strongly consider.
It’s called marketplace, direct, online or person-to-person (P2P) lending.
The innovative thing about P2P lending is people can lend and borrow money without ever going to a bank.
So if you need cash for credit card balances, small businesses, education, mortgages or home equity lines of credit, cash advances, medical expenses, cars and even energy … these unique platforms are there to help you.
But if you want to take the other side of the "trade" … and "become the bank" … it can pay off pretty nicely.
It works like this:
- A borrower applies for a loan on a major P2P lending platform.
- The platform verifies each borrower.
- Approved loans are added to the platform and given loan grades. (Higher-grade loans yield less.)
- Investors choose the loans they want to invest in.
The big key to online P2P platforms is they don’t have the branch infrastructure or reserve requirement expenses of traditional lenders. Plus, P2P’s technology and business model drive other costs down (regulatory overhead, customer acquisition, underwriting, origination and servicing).
The result is P2P operating expenses of around 2%. Traditional lenders run at 5%-7%.
Translation: P2P lending is disrupting the world of traditional finance because it offers lower rates for borrowers … and higher returns for lenders.
Transparency Market Research reports the P2P market was $26 billion in 2015. (Over 60% of which came from the world’s largest P2P lending platform, Lending Club.)
Charles Moldow, a renowned venture capitalist and P2P investor, thinks this market could hit $1 trillion by 2025.
As more and more investors move away from the time-consumption and inefficiencies of obtaining traditional bank loans, P2P lending’s popularity will continue to increase.
As Ron Suber (Prosper’s CEO) told me last year …
"At some future moment, you will be asked at the point of sale: How do you want to pay for this: cash, credit card, check, PayPal or marketplace lending? It’s coming."
Every lending platform shares three goals:
- Change the way people invest, borrow and pay for things.
- Bring convenient, cost-efficient access to capital with a great customer experience.
- Provide investors simple and direct access to assets with attractive risk-adjusted yields.
For today’s purpose, we’re most interested in No. 3. Otherwise known as "P2P investing."
Here’s How P2P Investing Works
The main reason I’m recommending P2P investing is outsized yield.
Let’s stack P2P investing yields up against some other similar bond proxies …
As you can see, P2P investing rates crush fixed-income competitors.
- Now, P2P investing is not a new revelation. It got its start in the U.S. back in 2006.
- But in recent years, it’s become more of a revolution. Some of the world’s brightest investors are P2P investors.
George Soros (hedge fund titan), Mohamed A. El-Erian (former PIMCO CEO), Peter Thiel (co-founder of PayPal), and other top investors have entered the space.
Plus, various hedge funds, private-equity firms, pension funds, banks, insurance companies and other institutions have joined online lending platforms to claim their stake.
Hard to blame any of them for gobbling up these outsized yields.
The big players create their own algorithms and quickly scoop up corresponding notes with super-charged yields that fit their predetermined reward/risk parameters.
For example, they might look at a risk/reward spectrum like this:
Everyday investors aren’t left out in the cold. There’s enough issuance past Wall Street’s elite that you and I can participate in this unconventional strategy, too. (I’ll tell you how in just a moment.)
Plus, there are several additional reasons — beyond higher yields — why P2P investing should resonate with mom & pop investors …
- Higher yields. P2P investing provides a unique opportunity to earn higher yields relative to other asset classes.
- Low volatility. Prime consumer credit has existed for decades — with a proven track record for consistent returns.
- Uncorrelated. P2P investing doesn’t follow the traditional ups-and-downs of the market.
- Safety. According to Lending Club, since 2008, 99% of investors who owned 100-plus notes of relatively equal size have seen positive returns. 81% of those investors have earned 5%-plus over that time.
- Simplicity. Why try to handpick individual loans? You can set up an account in five minutes. And why try to handpick individual loans when you can flip the "cruise control" switch on as many as four different automated investing options?
I know about the mom & pop investor route, literally.
Mom’s Thrilled with P2P Investing So Far …
Two years ago, I persuaded my mother to open and fund a P2P investing account.
For the record, my mother is 70 years old, widowed and works two part-time jobs.
Although her equity portfolio had benefited from the bull market run, she knew the gravy train wouldn’t last forever.
And as I’m sure is the case with many seniors today, her fixed-income portfolio is more important to her than her equity portfolio.
The problem is traditional income investments have been paying next to nothing for some time. (See the yields I listed earlier.)
So, my mother wanted higher income — but not at the expense of increased risk.
When I told her about P2P investing and the potential returns, she was interested immediately. She’s not a big stock or bond market buff. But, she knew what savings accounts, CDs and government bonds were paying!
It didn’t take much convincing past outlining the benefits listed earlier.
My mother transferred a small percentage of her assets to test the waters. (FYI: It took her less than five minutes to complete the account setup process.)
She’s delighted with the results. And honestly, the returns have exceeded my expectations too.
Here’s a snapshot from my mother’s account:
|Source: My mother’s Lending Club account|
That’s not a misprint.
She’s earned an annualized 7.5%. And she’s been using the safest auto-investing option available for the last two years. (Even adding more money to her Lending Club account after her first year.)
Think of the auto-investing options as "indexing" for Lending Club. You simply give Lending Club your investment criteria, and it deploys your cash accordingly.
It’s less work. And studies show your returns will likely be just as good as — if not better than — attempting it on your own.
Here are the four auto-investing choices:
There’s a risk/reward trade-off as you can see above. (My mother chose the "A & B" Weighted" option per her risk level.)
If you’re willing to take some extra risk to potentially generate higher returns, you can explore the "Platform Mix" and "D-G Weighted" options.
And if you want to tinker around with custom allocations, you can tailor the "Custom Mix" option to your liking.
Also, you’ll have to select an investment amount per note. I’d suggest having at least $2,500 (double that amount to get a cash bonus in an IRA — more on that below) when opening an account.
This way, you can spread your money across 100 loans ($25 minimum investment per loan). You’ll also have to choose your loan term. In Lending Club’s case, it’s 3-year-only, 5-year-only or both.
Now, should you decide to follow my mother’s footsteps, please remember a few things about P2P investing:
- The more loans you can make … the more diversification and safety you’ll get.
- Your return on investment will come in the form of steady, monthly cash flows. After the borrower sends his or her monthly payment to Lending Club, you’ll see the credit hit your account in a couple days.
- Do what you want with your cash return. You can withdraw it. Or you can reinvest your principal and interest payments into more loans.
Now, let’s get to the "exclusive cash bonus" deal I’ve arranged for Uncommon Wisdom Daily subscribers …
In researching this space, I’ve been fortunate enough to attend the annual LendIt USA Conference … talk with multiple co-founders of the LendIt (the host of eight major events for the global lending community) … and meet several CEOs from the leading marketplace lending companies.
|Me and Scott Sanborn (formerly, Lending Club’s chief marketing and operating officer — now, President & CEO) at last year’s LendIt USA Conference in NYC.|
To sweeten the pot, I reached out to a few higher-ups at Lending Club.
I negotiated a fruitful deal for my Adventure Capitalist subscribers interested in P2P investing to earn a limited-time, cash bonus of $150 to $3,000 for trying Lending Club’s platform.
And after my publisher Brad Hoppmann read through the information I sent their way, he asked me if I could go back to my Lending Club contacts and see if they would extend this deal to all of our Uncommon Wisdom Daily readers.
And I am happy to report that this special, limited-time offer is now available to you as well …
If you deposit any of the listed amounts or higher in a new or existing Lending Club IRA account (traditional IRA, Roth IRA, SEP IRA or SIMPLE IRA), you can earn the corresponding cash bonuses. Lending Club’s platform accepts IRA transfers, Roth conversions and 401(k) rollovers.
This tiered offer is valid for new funds transferred to Lending Club IRA accounts by April 30, 2017, and invested by June 30, 2017.
Not only can you invest in a new uncorrelated asset class … earn higher yields of 6%-8% … and put it on autopilot. But this special incentive could bring you a nice chunk of cash in the upcoming months.
P.S. Again, to learn more about Lending Club and to take advantage of this special limited-time bonus offer for Uncommon Wisdom Daily readers, click this link here. And if you have specific questions about your Lending Club eligibility, give them a call at 888-596-3159.