All Financial Wisdom
Automated Investing Tools at LendingClub
Recently, I changed my account settings to start reoccurring transfers into my LendingClub account and set the Automated Investing tool on. I came to the conclusion that I should start automatically transfer money into LendingClub and purchase more notes for allocation and the nice returns.
As you might already know, I have been investing in Notes on LendingClub.com for years. After my first investment, I spent several years with it forgotten and just a year ago, I rediscovered it, along with some interest. From there, I decided to give it another try and invest ten times the amount into LendingClub and see how diversifying would get me.
I received my annual tax statement from LendingClub yesterday. It turns out, it is going great. Just this year, I earned slightly better than 10% return on my investment. I think that is great in such an environment of volatile markets and the possibility of another recession. After analyzing it more, I think this is a great place to stash my 5 to 10 year allocation of funds. It is almost predictable and so far can act as part of my bond allocation.
4 Steps to Set Recurring Transfers
To set reoccurring transfers from you connected bank account to your LendingClub account, follow these simple steps:
- After logging into your account, click on the Bank Account option on the main menu. If you don't have an account, feel free to open one here. Check to see that you have a connected bank account.
- Click on Transfer option in the sub menu.
- From here, select the Add Funds Recurring blue square which should reveal several options. The Transfer Amount, that is the amount of money you would like to get transferred from your Source Account to your LendingClub account depending on your start date and your recurring frequency. You can select weekly, every other week, 1st and 16th of every month, or monthly.
- When you are done, click Add Funds and you will be all set.
Now funds should get transferred to your LendingClub account based on your frequency. I selected $25 so that each deposit, I can purchase a new note. I set up the Automated Investing tool to automatically take the $25 and purchase a note using the rules that I set and set to create the allocation that I want.
How to Set your Automated Investing Tool
To set your Automated Investing tool for your LendingClub account, follow these steps:
- In the submenu, select Automated Investing.
- Here, I have already played with the Automated Investing tool before and filled out the required agreements and notices. If you have not, you might have to agree and set your starting allocation. I will do so by clicking the Edit Allocation button.
- Now is the time to set the asset allocation for the automated purchasing. This might be very intimidating for you. There is a lot of percentages which can be confusing. You can certainly select one of pre-made allocations, such as the A & B Weighted, the Platform Mix, or the D-G Weighted allocations. These allocations show the projected return underneath. This is calculated using the effective interest rate and the historically expected charge off rate of the notes. The charge off rate is the likelihood the borrower defaults on their loan. Notice that the higher the effective interest rate of a note, the higher the average expected charge off rate is. This effects the projected return. An effective asset allocation balances the charge off rate with the effective interest rate to generate a beneficial projected return. To select a custom option, fill in the New Target Allocation boxes to generate your desired allocation. You can also select the desired note term length, 36 months or 60 months.
- Next, there is a hidden feature that I totally recommend. Click on Special Instructions and more options will appear. This is where you can have the automated tool only select notes that fill into your filter that you have already saved. It does limit the available notes the tool can invest in, so it would not be a great idea to make it too specific. My "1st Pass" filter allows only Notes that come from borrowers with a minimum length of employment of 4 years and excludes loans that I am already invested in. It is simple, but I have found that if they have had a job for 4 years or more, they are more likely to be stable and at least employable. Feel free to create your own filter.
- Now select Save your Criteria and you will be all set. After up to 1 business day, your automated investing tool will be up and running and will be trying to purchase notes for you once your account reaches $25 from deposits or payments.
What is your target allocation looking like? I am curious on what people are experimenting with to the desired level or return and comfort. LendingMemo.com has a great article that explains more about proper LendingClub portfolio allocation here.