Lending Club Investment Returns
On this page I will provide updates to show you how my investment returns are doing and how they compare to the platform averages. In addition, I will provide information from other investors. Hopefully, this will help you determine if your returns are reasonable.
First, let's provide some context. Lending Club provides investors with a lot of information. In general, the average return is approximately 5.5%. However, this can vary significantly based on factors including diversification and risk. See more investment return details on the LC site.
One interesting aspect of returns relative to grade is that grade C loans have, at times, performed better than grade D and E loans. This is remarkable because the interest rates, and therefore the risk, is lower for grade C loans. The conclusion one can make from this data is that new and inexperienced investors should probably stick with higher grade loans. They are more likely to have a higher return and less likely to have a very high default rate. The other lesson here is that investors need a good strategy or advisor to make the most money. This is not a DIY investment for the average person and the results can be disastrous if not managed properly.
Some investors stick with A grade loans and are happy with the 4% return that will come from a large, well diversified portfolio. Adjusting for risk using standard valuation models, this is a good return. The only down side is that your money is tied up for three to five years, to some extent. Of course, you are getting interest and some principal each month. But this is considered a longer duration so the return needs to be in line with similar fixed income investments that keep capital locked up for a while.