Monday, August 31, 2009
Sunday, August 30, 2009
Recommended Personal Finance Articles From: The Digerati Life, MoneyNing, Mighty Bargain Hunter, Darwin's Finance, Military Finance Network, etc.
The Digerati Life. "California Unemployment Rate History: A Visual Guide."
MoneyNing. "Finally, An Online Savings Account Raises Rates."
Mighty Bargain Hunter. "Bargain Hunting Miles and Points With Credit Cards." The author brings up a good strategy called "stacking."
Darwin's Finance. "Corporate Pension Plan Shortfall - The Next Crisis?"
Military Finance Network. "Free Stock Trades at Zecco - 20 Trades for New Customers"Trading Goddess. "Marijuana, LSD and Cocaine are now Legal in Mexico: Will it Help the Mexican Economy?"
I embarked on this hobby principally because I knew I could do a better job than what I did at Prosper.com. At Prosper, I loaned over $5000 out and as of this weekend have a net loss of $45. Initially, I was very successful at Prosper. At first, I had a 78 loan portfolio with zero delinquents. I eventually got very cocky and took on way to much risk. I transitioned the average interest rate on my portfolio from 17.5% to 21.5%. Bad move.
Today, I'm far more conservative at Lending Club. I am only lending to those:
* In the military
* In Federal or state civil service
* In health care
* Frequently only those that have been in their job for a minimum of 3 years.
* With less than 20% debt-to-income
* Zero delinquencies last two years
* Loan request no more than three times documented gross income
My loan portfolio stats are:
Total Loans (48): $1052.12
Charged Off (0): $0
In Funding (2): $50
Issued & Current (44): $1002.12
Late 16 - 30 days (0): $0
Late 31 - 120 days (0): $0
Fully Paid (2): $0
Default (0): $0
Weighted Average Rate: 11.84%
Expected Monthly Payments: $36.21
Accrued Interest: $6.37
Payments to Date: $183.73
Late Fees Received: $0
Lending Club states that my weighted average rate is 11.84% and my net annualized return is 11.94%. But, the nasty little secret is that Lending Club's formula for determining account returns does not factor in sold loans. Why not? I have no clue. When you factor in that I sold two of my loans at a loss, my net annualized return is closer to 9%. My goal was for a net return of 8.4% or better. So, I'm happy with the results to date.
I sold two of my loans that were in the 16-30 day late category. I sold one of the loans for a $7 loss and the other loan for a $3 loss. The first loan continued to deteriorate. The second loan ended up returning to a current status before I could cancel my sale.
Sunday, August 23, 2009
The 401K loan was actually taken out from my military Thrift Savings Plan (TSP). Interest paid is redeposited back into my TSP account. I always like using TSP loans whenever I'm buying a house or need emergency funds. The interest is getting paid back to you and my military job is quite secure. Anybody using a 401K loan in a secure job since 2000 has fared fine since the stock market has done poorly and you would have paid the interest to yourself.
Ten months ago I targeted a payoff date of Sep 2009 for this TSP loan. My wife and I were happy when we were able to cut a check for $7900 this month and pay the loan off ahead of time. This puts my TSP balance at $52.7k. I'm fine with having only $52.7k in my TSP since this is a back-up to my military pension which should be a minimum $40k a year if I get no more promotions and stay in another 81 months. I actually intend to stay in much longer (15 more years) if I get promoted to O-5 (Commander), equal to Lieutenant Colonel in Army & Air Force.
We still have one more TSP loan with a balance of $23.5k. This last loan was taken with an interest rate of 2.75% payable over 5 years. We needed this for $23k in exterior repairs at one of our investment properties. We currently plan on letting this loan run close to the full 5 years. In the mean time, we will funnel most of our spare cash to paying off all three of our investment properties.
Ten months ago we also set a goal of paying off our least expensive investment property in March of 2010. We bought the property for $86.8k in January 2005. It currently appraises for $140.5k and we owe $19.7k left on it.
Saturday, August 22, 2009
Recommended Personal Finance Articles From: MoneyNing, Dividends 4 Life, Military Money Might and Paper Economy
MoneyNing. "Rental Property vs. REIT." We already have three investment properties (3200 sq ft, 1900 sq ft and 1450 sq ft homes). I'm seriously thinking about investing some in REITs.
Dividends 4 Life. "The Social Security Blues." At the end of this article he also recommends four dividend stocks. I own two of them (JNJ & WMT) via low cost dividend reinvestment plans.
Military Money Might. "Military Spouses Can Receive a Grant of Up To $6,000 a Year For College."
Paper Economy. "Two Great Bounces." This is a chart overlay of the initial bull rally in the Great Depression Dow Jones Industrial Average and the Great Recession S&P 500. Writer implies that our recent rally is similar to that seen in the Great Depression and that our current rally may be drawing to an end in favor of a bear market slide.
Monday, August 17, 2009
Here's a graphical representation of our month over month gains in net worth. Click to enlarge graph.
Tuesday, August 11, 2009
You can make or lose money quickly in options. I remember that within the first 30 days I was up over 20%. Unfortunately, I never cashed out early and held the options for a lot of ups and downs.
Had I bought the call options in March of this year I would be up far more. That's ok. At least now I'm developing some initial confidence in options trading.
Sunday, August 02, 2009
Three Year Best Buy Laptop Warranty Already Paid for Itself (Despite Geek Squad's Initial Diagnosis)
Three weeks ago I was having problems with doing a successful system recovery using the original factory recovery disks. I attempted a system recovery two times because I had too much malware on my computer and the free AVG adaware program wasn't keeping my system clean.
When I dropped off my laptop, I was surprised to hear that the Best Buy warranty does not cover software problems. A software problem would have to be fixed at owners expense, regardless of the existing warranty.
I acknowledged this and turned my laptop over. All the while, I was expecting Geek Squad to discover that my laptop had "software issues." A few days later Geek Squad told me that they were unable to find any hardware issues with my computer and that I had the option to ship it anyways to their depot repair facility for a second opinion. Glad I did. Had I not done so, I would have been forced to deal with a perceived "software problem" on my own.
Best Buy's depot repair facility fixed my computer at no cost to me. The repair ticket cited the replacement of a "palm rest" at a total cost of $347.22 (covered by warranty). I'm not convinced that my "palm rest" was broken, but I'm happy nonetheless to recieve the laptop back in working condition.
I have had good luck w/ warranties dating back to 2004. Besides this repair, I have spilled soda on my other computers twice and had them fixed despite warranty limitations on liquid spill repairs.