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Investing Articles

My Short Term Stock Trades of Synacor (SYNC)

June 3, 2012 | Investing | My Ramblings | No Comments

For the last several months I’ve been thinking about getting back in the stock market.  However, I soon remember why I decided to exit the stock market and to never re-enter.  See “5 Reasons Why I Lost Over $300,000 in the Stock Market” to find out why.  However, lately I’ve been having the bug because the stock market has made people money over the last several months.

Looking back, at around October / November 2011, is when I should have entered the market again when everyone was fleeing and financial world looked like it was coming to an end.  There were so many bargains out there and I could have made a nice profit. Of course hindsight is always 20/20.  No one knew what would happen.  We could have entered a really bad long-term depression!

This time when I enter the market it will be short term.  No more buying stocks and holding them long term.  If I buy a stock and it goes up quickly, sell and grab my profits and don’t look back.  This time I won’t be greedy.  On the flip side, if a stock drops over a certain percentage, I’ll quickly sell it and cut my loss. No more holding a dog and hoping things will improve one day.  Let’s face it, the stock market is a gamble.  But it can be a calculated gamble if you use common sense and are lucky enough to get a little luck.

So I started looking around and stumbled on a stock that was hot, that I believe I could trade short term and make a little money.

The National Inflation Association  has been touting this one stock, Synacor (SYNC) on their site and news letter.  “Synacor, Inc. provides authentication and aggregation solutions for delivery of online content and services in the United States, the United Kingdom, and the Netherlands.”  You can read more about Synacor here.

I’m not one to be swayed by hype, but I started watching the stock and soon realized that the stock was having some really big daily movements with nice volume.  In some days it would be up or down 10-15%.  So I decided to ride the wave to see if I could make a little money.  I soon realized that if the stock had a nice jump over a few days, then it was a good time to sell and buy back when the profit takers came in.  See stock chart below.

The first time I purchased I make the mistake of buying after a nice run-up.  I watched it climb from about $9 to over $13 and jumped in at the top.  I purchased 200 shares at $12.795 and the next day the profit takers came in and it dropped.  I sold it $11.60 and hoped it dropped some more so I could jump back it.  Six days later I purchased 250 shares at $9.97 and watched it climb to over $14, placed a stop loss at $13.5 and sold it at $13.41.  The stock is now at $11.95.  I’m hoping it falls a little more and I’ll jump back in.  I strongly believe there is more upside potential to this stock and plan to ride the wave.

So far I’ve profited $592.86, with my 2 trades.  We shall see what happens over the next few weeks as I research other companies to trade short term.  I’ll be keeping my eye on SYNC to determine when to jump in and out to make a little money!

My Lending Club Account Performance Update 6

November 9, 2011 | Investing | My Ramblings | 1 Comment

How time flies.  Here is my number 6 update of my Lending Club Account Performance.  The last update was on May 13, 2011 about 6 months ago.

It’s amazing that it’s been over 2 years since I opened my account with Lending Club.  It feels like only a year.  

Since opening my account with Lending Club in August of 2009 my account has profited $7,639.23 in interest, however, about $1,000 of this is bonus paid to open the account and to add more funds.   With charge-offs I’ve actually profited $6,967.62.  The net annualized return is stated as 7.37%, but its actually 6%+ with the charge-offs.  Regardless, this more than beats CDs, with most paying less than 1%. 

I’ve invested a total $50,000.  I initially opened the account with $10,000, and then added another $20,000 because Lending Club was paying a 1% bonus to add the additional funds.  A few months later I added another $20,000 because Lending Club offered a 2% bonus.  (Note: Lending Club is currently offering a 2% Cash Bonus on your initial investment.)

Within the last 6 months an additional $429 has been charged off.  Currently, there is $1,065 late ($310 late 16-30 days, $755 late 31-125 days) and $40 in default, so some of this money will eventually be charged off as well.  This loss is a part of the game of lending money directly to individuals via unsecured loans.  Unfortunately, some people will default; however, the interest from paying borrowers “should” cover the losses.

Below is a screen-shot of my account as of 11/9/11.

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If you are interested in investing in Lending Club now is a great time because they are offering a 2% Cash Bonus on your initial investments.  Good luck!

Lending Club vs. Prosper – The Top 2 Social Lenders

October 4, 2011 | Investing | Loans | 3 Comments

The two biggest players in Social Lending (also known as Peer-to-Peer Lending) are Lending Club and Prosper.  If you are seeking to invest in Social Lending, you may wonder what the differences are with both companies.

But first if you are not familiar with Social Lending, Social Lending are online communities connecting people so they can loan and borrow money from each other thus eliminating the middle man, the bank. Because the bank is eliminated, lenders and borrowers can lend and borrow money at better interest rates for both parties with extremely low fees. 

Major Differences Between Lending Club and Prosper

Both Lending Club and Prosper are now very similar.  In the past Prosper used an eBay auction style where the interest rates are set by lenders via a bidding process. Lending Club sets the interest rate based on a formula and lenders and borrowers have to accept the rate. There is no bidding.

Prosper decided to change their business model and now operate just like Lending Club.  Now Prosper sets the interest rate and loan grade based on a formula which takes into account  Prosper Rating, Expected Loss Rate, Loan Term, Economic Environment and Competitive Environment.

Lending Club sets interest rates for the borrower and lender based on the borrower’s credit score and other financial parameters. A loan grade is then established which takes into consideration Assumed Default Rate, Lending Club Base Rate, and Adjustment for Risk and Volatility.

Investing at Lending Club

Since Lending Club started in mid 2007, the net average annualized return for investors has been over 9.5%. That is a fantastic rate of return! Lending Club average borrower has a FICO score of 713. The required minimum FICO score is 660. Individuals and organizations can be lenders. Lenders invest in loans called “notes”. (Note: Currently Lending Club is offering a 2% Cash Bonus on your initial investments.)

Requirements to becoming a Lending Club Investor:

  1. Must be U.S. residents of states where Lending Club does business which includes California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Kentucky, Louisiana, Maine, Minnesota, Missouri, Mississippi, Montana, New Hampshire, Nevada, New York, Rhode Island, South Carolina, South Dakota, Utah, Virginia, Washington, Wisconsin, West Virginia, and Wyoming, and is not available or sold to residents of any other state, the District of Columbia, any other territory or possession of the United States, or any foreign country.).

  2. Must have a bank account to transfer money to bid on loans.

  3. Must be at least 18 years old with a valid Social Security Number.

  4. A minimum of $25 is required to open an account.

  5. Individual lenders who are residents of states other than California or Kentucky must have an annual gross income of at least $70,000 and a net worth (exclusive of home, home furnishings and automobile) of at least $70,000; or have a net worth of at least $250,000 (determined with the same exclusions).

  6. California residents must (a) have an annual gross income of at least $85,000 and a net worth of at least $85,000 (exclusive of home, home furnishings and automobile); (b) have a net worth of at least $200,000 (determined with the same exclusions); or agree not to invest any more than $2,500 in Notes if you do not meet either of the tests set forth in (a) or (b).

  7. If you reside in Kentucky, you must qualify as an “Accredited Investor”. See website for further details.

  8. Lastly, regardless of your state of residence, individuals may not purchase Notes in an amount in excess of 10% of their net worth, determined exclusive of the value of an individuals home, home furnishings and automobile.

Borrowing at Lending Club

Lending Club is very selective with accepting borrowers. Borrowers at Lending Club get loans for a variety of reasons (paying off credit card debt, purchasing a car, consolidation of debt, education, home improvement projects, wedding, small business, elective surgery, balance transfers, etc..)

All Lending Club loans are:

  • Unsecured 3-year (36 months) or 5-year (60 months) fully amortized personal loans.

  • Have a fixed interest rate for the life of the loan and is typically lower than rates offered by credit cards and banks.

  • Monthly payments are fixed, and can be automatically deducted from the borrower’s bank account.

  • Borrowers can pay the loan in full early with no penalty.

  • No hidden fees

To qualify borrowers need a FICO score of at least 660 with a debt-to-income ratio (excluding mortgage) below 25%. Additionally, credit history must prove that you are a responsible borrower:

  • At least 1 year of credit history, showing no current delinquencies, recent bankruptcies (7 years), open tax liens, charge-offs or non-medical collections account in the past 12 months,

  • No more than 10 inquiries on your credit report in the last 6 months,

  • A revolving credit utilization of less than 100%, and

  • More than 3 accounts in your credit report, of which more than 2 are currently open.

  • Must be US citizens or permanent residents and at least 18 years old.

  • Have a valid bank account and social security numbers

Loans are issued by WebBank, an FDIC insured Utah chartered industrial bank located in Salt Lake City, Utah.

Investing at Prosper

Prosper Investors invest their money directly to people. Prosper charges a 1% annual loan servicing fee which is already taken into account in the rate investors bid on. Investors have access to each borrower’s credit history and why they want the loan. Prosper rates borrowers which help investors make informed decisions. Additionally, Prosper offers investors portfolio pans to help with automating the bidding process. (Note: Currently Prosper is offering a 2% Cash Bonus on your initial investments.)

Requirements to becoming a Prosper Investor:

  • Must be U.S. residents of states where Prosper is currently available (California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Louisiana, Maine, Minnesota, Missouri, Montana, Nevada, New Hampshire, New York, Oregon, Rhode Island, South Carolina, South Dakota, Utah, Virginia, Washington, Wisconsin and Wyoming.)

  • Must have a bank account to transfer money to bid on loans

  • A minimum of $25 is required to open an account

All Prosper loans are:

  • Unsecured 1-year, 3-year and 5-year fully amortized personal loans.

  • Have a fixed interest rate for the life of the loan and won’t change for any reason, even in the event of late payment.

  • Monthly payments are fixed, and can be automatically deducted from the borrower’s bank account.

  • For finalized loans there’s a one-time closing fee.

  • Borrowers can pay the loan in full early with no penalty.

 There are three ways to invest:

  • Search for individual loans and manually invest by clicking “Invest Now” from any loan
  • Use Quick Invest
  • Invest in Notes on Prosper’s trading platform

 

Quick Invest allows you to efficiently invest in a group of loans. You specify the Prosper Rating and any other selection criteria and Quick Invest will find loans that meet your criteria, so you maintain control of your investments. A diversified loan portfolio may enable you to spread your risk among many borrowers, so consider investing in small amounts across many loans.

Borrowing at Prosper

If you are looking for a personal loan, Prosper can get you a loan via person-to-person lending, eliminating the bank. If you are looking to buy a car, consolidate debt, pay for education, have a wedding, remodel your kitchen, etc., Prosper is a place to get a fixed rate loan with a very competitive interest rate.

All Prosper loans are:

  • Unsecured 3-year fully amortized personal loans.
  • Have a fixed interest rate for the life of the loan and won’t change for any reason, even in the event of late payment.
  • Monthly payments are fixed, and can be automatically deducted from the borrower’s bank account.
  • For finalized loans there’s a one-time closing fee.
  • Borrowers can pay the loan in full early with no penalty.


Risks for Investors

Unlike a bank, when you invest in loans, your money is not FDIC insured. Only when your money is in cash in your account is it FDIC insured by both Lending Club and Prosper. Keep in mind this is investing and not a savings account. There are risks involved. The main risk is for lenders having borrowers who default on their loan.

For more information visit Lending Club and Prosper. Currently Lending Club is offering a 2% Cash Bonus and Prosper is also offering a 2% Cash Bonus on your initial investments.

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Betterment.com Hassel Free Investment Account Review

September 27, 2011 | Investing | No Comments

If you are tired of your bank account paying you almost nothing in interest, you may want to consider Betterment.com.   I decided to open an account with them to kick the tires and test out their service after writing a Blog post in June 2010.

Betterment wants to replace your savings accounts with an investment account that is less complex and hassle free compared to a traditional investment account.

When customers deposit money in their Betterment account, the money is invested in their chosen blend of diverse stocks or a portfolio of US Treasury bonds. Customers can allocate funds between these two investment options, setting the level of risk they’re comfortable with. Opening an account takes about 5 minutes, there’s no minimum balance, and transfers are free.

When customers deposit money with Betterment, their money is transferred to Betterment Securities (their broker-dealer), with instructions to buy ETFs (exchange-traded funds, similar to mutual funds) based on their desired allocation between stocks and bonds. Customers own shares in the ETFs, while Betterment recommends and manages buying and selling.

Betterment charges an annual fee of 0.9%, based on a customer’s average balance which is a quarter percent lower than the average mutual fund fee and much less than the average amount banks make off of customer deposits.

Betterment is a Registered Investment Advisor and Betterment Securities is a broker-dealer regulated by FINRA and the SEC. Betterment’s SIPC coverage means that the securities in user accounts are protected up to $500,000 (for more information, visit www.sipc.org).  This means you can be assured that Betterment has the same protections as you would with a larger financial institution.  The company was started in 2008 by Jon Stein, with a $3 Million series A financing round from Bessemer Venture Partners (lead) and Anthemis Group.

Since Betterment invests customer’s money in the stock market, they can lose money if the market goes down. Balances will fluctuate based on market conditions. Over the long term customers should get a much better return that their savings account.

Betterment currently only operates in the United States.

Betterment.com is currently offering $25 when you open a new account.

Review of Betterment

Signing up with Betterment is fast and easy. You supply your typical information when opening account. You then have to link your account with your bank to transfer money to and from your Betterment account. Linking to your bank takes about 3 days. Once it’s linked and money transferred, when your log into your account, you first see a summary of your account. I opened an account with $2,500 and allocated 74% in stocks and 25% in treasury bonds. See screen shot below.

You can easily add funds to your account and set up an automatic savings plan to make regular ongoing deposit to your account. See screen shot below.

Betterment allows your to play with your allocation of stock and bonds over years (1 to 40 years) to get an estimate (based on historical data) of how your investment will perform.  See screen shot below.

One unique feature of Betterment is that if offers advice of how to invest based on your goal.

Step 1 is Goal & Planned Investment where you enter your goals. Your are given goal options which includes:

  • Retirement / Build wealth

  • Major Purchase

  • College / Education

  • Wedding

  • Vacation

  • Kids / Baby

  • Emergency / Rainy Day

  • Other / Various

Step 2 is Risk Tolerance in 1 Year where you pick a scenario you are comfortable with. Options include:

  • Conservative

  • Moderate

  • Aggressive

Step 3 is Risk Tolerance in 25 Years where you pick a scenario you are comfortable with. Options include:

  • Conservative

  • Moderate

  • Aggressive

You are given projections of how much money you will make based on your choices and recommendations of your allocation in stocks and bonds. Choosing conservative will allocate less money in stocks, while choosing aggressive will allocate all of your money in stocks.

You can also compare your allocation with your peer. See screen shot below.
 

One very interesting feature of Betterment is that you can compare your account performance based on percentage allocation to stocks.  Per the graph below if I had invested in 100% stock, my account value would have fluctuated more when compare to 50% stock and 75% stock. See screenshot below.

Conclusion

If you are looking for a very easy way to invest in the market (stocks and bonds) and place it on auto pilot, Betterment is the way to go.  If you want to adjust the allocation of stocks and bonds it’s a matter of just logging into your account and using a slide bar to change your allocations.  You can set up automatic investments to deposit money in your account every month. The money is then automatically allocated to your investment choice. You pretty much, set it up and forget about it, similar to your company’s 401K plan.

If you are saving long-term for items such as your child’s education, this is very good tool to use. However, keep in mind that your money is being invested in stocks, so there are always risks. Historically, stocks have done well, so it’s a good idea to think long-term.

Visit Betterment (Get $25 to open an account)

What is a Government Issued I Bond?

August 17, 2011 | Investing | 1 Comment

I Bonds are a low-risk, liquid savings product that earns interest which resets twice per year to keep up with inflation.  Currently, I Bonds are paying an amazing 4.6% annualized because of the recent increase in gas prices.

I Bonds are sold at face value, meaning, you pay $50 for a $50 I Bond.  You purchase in amounts of $25 or more.  If you redeem I Bonds in the first 5 years, you’ll lose the 3 most recent months’ interest; after 5 years, you will not be penalized.

If you purchase an I Bond before rates are adjusted in November 1, you’ll receive a 4.6% interest rate for the next 6 months. Even if you take into account the penalty for cashing in the bond before 5 years, you will earn a minimum of 2.3% if you withdraw your money out after 12 months.  Additionally, if the new rate is higher that 0, you will earn more.

I Bond Restrictions

Keep in mind that you can’t redeem I Bonds for at least 1 year.  Your investment is limited to $10,000 annually.  You can invest $5,000 at TreasuryDirect.gov and $5,000 at a bank.

How to Purchase I Bonds

To purchase I Bonds check with your bank or visit TreasuryDirect.gov.

My Lending Club Account Performance Update 5

May 13, 2011 | Investing | My Ramblings | 3 Comments

Here is another update of my Lending Club Account Performance.  The last update was on September 1, 2010, over 9 months ago.

Since I opened my account in August 2009, I’ve earned a total of $5,497.60 in interest; however, this includes about $1,000 with signup bonuses.

Since my last update, Lending Club enticed me to add additional $20,000 to my account for a $400 bonus for in immediate 2% return. So my initial investment is now $50,000.

Now of the negative news; I currently have 5 notes late 16-20 days and 12 notes late 31-120 days at a potential loss of $363 and $706, respectively.  To date I’ve lost $1,088 due to loan charge off (borrowers not paying off loan) but an additional $1,000 loss maybe coming in the near future due to late payments. Currently, the majority of losses are due to B and C investors with only one A investor.

To combat future late payments and defaults, I’ve continued to reinvested monies with A investors at $25 to $50 per note.  This should lower future risk; however, my rate of return will continue to drop.

One area of improvement on my end is picking better notes to invest in.  This will lower default and increase rate of return.  After filtering notes, I invest in every note without reading each note requirement and even asking questions of the borrower to determine risk. 

I currently have $3,000 in funding notes at $50 each in all A borrowers.  I have an available $7,758.89 in cash that I will invest over the next several weeks.  The cash available is from loan payoffs that I haven’t re-invested.

See screenshot below of my account.

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My Lending Club Account Performance Update 4

September 1, 2010 | Investing | My Ramblings | 2 Comments

Once again, it’s time for another update of my Lending Club Account Performance.  The last update was on May 13, 2010, about 3.5 months ago.

Since starting to issue loans in August 2009, I’ve earned a total of $2,557.36 in interest; however, with signup bonuses I’ve earned $3,183.02.

Unfortunately, I have 1 note currently late 16-30 days and 7 notes late 31 to 120 days.  One has currently defaulted (meaning in collections) and 2 have been charged off.  To combat future late payments and defaults, I’ve reinvested monies with A investors.  This should lower future risk, however, my rate of return will be lower.

So since the last update I’ve lost $93 (charged off) and with the current defaults and late payments there is a strong potential to lose another $410.

Taking the potential loss into account I’ve earned $3,183.02 – $410 = $2,773.02.  So my one year rate of return is $2,773.02 / $30,000.00 = $9.2%.  Without signup bonuses my rate of return is $2,557.36 – $410 = $2,147.36 / $30,000.00 = 7.1%.

Of course my rate of return maybe higher is the late payments are paid and/or if the default loan money is recovered.

Regardless, I am happy with my returns.  Beats the banks any day and this is pretty much what the banks do anyway.  Banks give loans knowing that some people will default and will be late paying.  However, the goal is to cover the losses with the profits.

Several months ago I started a forum at Social-Lending-Forums.com to discuss social lending primarily for Lending Club and Prosper, the 2 largest social lending networks.  The forum offers a  Free Comparison Report comparing Lending Club and Prosper.  Please don’t hesitate to visit and sign-up if you are interested in social lending.

Finally, Lending Club is giving investors $25 when they sign-up at no risk.  You can use the $25 to try out their service with no future obligation.  There is nothing for you to deposit and you can lend the $25 immediately.  Try it out, you have nothing to lose!

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