If you are looking to diversify your investment portfolio, (and you should be) here are two alternative investment strategies worth considering. But first, full disclosure: We have absolutely no affiliation to the firms mentioned below and receive zero compensation or any compensation, financial or non-financial from these firms. At times, we will recommend and acquire these investments to add to our investment management clients’ portfolios. Both investments come with risk of loss, so you need to do your due diligence before investing.
Propser & Lending Club
Peer-to-peer lending has been popular in Europe for many years and it’s finally getting its due attention here in the states. The two leading companies in this space are Prosper and Lending Club.
By creating a virtual platform bringing together borrowers and lenders aka-peer to peer- outside the conventional banking system, peer to peer lending is surely going to become more and more popular as word spreads. NPR recently did a story on this new concept that you can read or listen to.
I had the pleasure of meeting one of the owners of Prosper at a recent breakfast meeting in San Francisco. His vision, strategy and track record left little doubt in my mind that this is an alternative investment that needs to be seriously considered.
Prosper for example offers 1, 3 and 5 year notes for investors with varying interest rate returns depending on the borrower’s credit score and overall risk profile. Monthly interest payments can be reinvested or deposited electronically into your checking account.
Lower risk seasoned returns at Prosper currently average 5.41% with higher risk notes earning 14.12% and higher. Investments in personal loans from qualified borrowers can be as little as $25. For fixed income investors seeking higher income, this could play a role in your portfolio. Being able to invest across different credit grades and estimated yields provides the diversity you need.
Perhaps it was my 3 years of experience working at Fair Isaac, home of the FICO credit score, that has me believing in this alternative investment so highly, yet peer-to-peer lending/investing in my humble opinion is the next big thing in the investing world. Check it out, make sure you fully understand the risks involved and see if it has a place in your portfolio.