Kickfurther: My Review

Those of you who follow this blog know that I invest via Kickfurther, which is a platform that crowdfunds inventory for businesses.  My first investment was in April, 2015, so I thought it was time for a review of Kickfurther.

The Concept:

The concept of Kickfurther is simple.  In order to sell merchandise, businesses have to buy it--whether by purchasing a finished product from manufacturers or by purchasing raw materials to fashion into a finished product.  Many businesses, particularly newer, smaller businesses have difficulty obtaining credit from banks or other traditional forms of financing and so are unable to grow as quickly as the market might otherwise allow.  Rather than examining the creditworthiness of the business as a whole, Kickfurther concerns itself with inventory and whether the business has shown it can sell it.  Rather than lending businesses money with which to purchase inventory, Kickfurther purchases the inventory for them, and then gives it back to the business to sell on consignment.  As the inventory is sold, investors received an agreed-upon return.  Theoretically, since the inventory is the property of the Kickfurther backers, if the business itself fails, or if the inventory fails to sell, Kickfurther, on behalf of the backers, can repossess the inventory and recoup at least some of the investors' money.

The History:

The earliest offer I could find was from Marlie Madison, a Dallas boutique which raised $2977 in November, 2014, and which paid it back, with a 10% return (that's total return, not per annum) less than two months later.  All total, from what I can tell, Kickfurther, as of this writing (1/19) has  122 offers which have been funded and are in the process of payback.  59 which have been paid back entirely and 1 that has been cancelled for non-payment.  Of the 122 open offers, 56 have not reached the point that a payback is due; 64 have.  Of those 64, 43 are paying back on time, at least so far.  After I wrote those numbers, the Reddit that is run by Kickfurther had a post linking to this page which gives up-to-date numbers for Kickfurther. 

 These appear to me to be  problems:

• Thump: Only 38% paid; no payment since July
• Chesstache:  Only 21% paid; no payment since October
• Marlie Madison (third offer); Only 50% paid, no payment since September
• Snow Lizard:  Last payment in December; should be done, only paid 3%
• American Dog:  Should be done; only 41% paid, but still paying
• Comic Book Displays.  No payment in over a month; should be at 75%, now at 4%
• My Little Vixen:  No payment; should be at 83%.
• Kayson Golf:  No payment; should be at 83%
• Yumms:  At 50% rather than 75%, but paying regularly
• Mulberry Silk:  Behind, but paying
• Baboon Bamboo:  At 11% rather than 40%
• Boingo Baby:  Missed 1st payment
• Sweet Rebel:  Behind but paying; at 27% rather than 50%
• Gemphones:  Behind but paying; at 15% rather than 40%. 
• Wellington:  Late with 1st payment
• Nori Lights:  Has not made first two payments
• Sweet Tea:  2.5 months late with 1st payment
• Bellies to Babies:  Behind but paying; 25% rather than 50%. 
• Garayald:  Behind but paying.  13% rather than 40%

Now, some of these may finish strong.  I know that Kickfuther has started repossession proceedings against Thump, Chesstache, Marlie Madison, Snow Lizard, Comic Book Displays, My Little Vixen, and Kayson, besides the earlier proceeding against Max Axe Guitar.  In at least some of these cases, Kickfurther has offered to pay back the principal to the investors; stating that investors shouldn't have to pay for them learning how to take possession of the inventory.  Obviously that state of affairs can't continue; investors will have to bear their own losses eventually.

Theory vs. Reality

The way Kickfurther is supposed to work is that vendors repay as they sell.  If they sell the financed inventory in the first month, they are supposed to pay back all the money the first month.  If sales are less than expected, payments are reduced, which is good for vendors because if the ship gets stuck in customs or the factory is behind schedule, they don't have to make a payment, or pay more interest.  The advantage for investors is supposed to be that can repossess the property to get at least some of the investor's money back, no matter how badly the business does.  Investors aren't creditors of the business but rather, owners of property being sold on consignment.  That's the theory.

What is reality?  Reality is that at least  four offers are at least two months behind and have paid nothing; which would lead you to believe than they have sold NONE of the inventory.  Perhaps they haven't; however most of them have claimed they have sold some.  My guess is that some goods were sold, and the money used to pay pressing bills.  This is a problem not only because it reduces the investors' yield but also because it reduces investors to unsecured creditors of businesses that are in trouble, which needless to say, is not a good position.  Right now there is only one offer that is paying ahead of schedule; the rest are either behind (not many other than those mentioned) or paying right on schedule.  I find it hard to believe that all those business owners were that good at predicting sales.  I find it far more likely that they are holding money, paying what is necessary to keep investors happy.  From the vendor's viewpoint, it makes little sense to pay back early as it does not reduce their interest.  

The Good:

When these deals work, the return is excellent.  An average rate right now is about 10% in 6 months; usually paid in 3-4 installments.  Annualized this is over 20% per year.  Investors also get the pleasure of helping young businesses grow.  Investors can invest as little as $20 for less than a year.  

The Bad:  

At this point I have earned $78.50 in returns, plus $15.00 in bonuses.  The annualized returns on all my offers that have finished have been well over 20%.  However, if I had to bear my own losses, if Kickfurther had not agreed to take them over as part of their learning process, I think I would be $81.00 in the hole due to deals that I think will yield little if any recovery for Kickfurther.  Of the others in my account, I have one that is two months late with the first payment and two that are substantially behind schedule.  I think I'm pretty average.  

  Of 182 funded offers, 3 appear to be total losses and others partial losses.  At an average return of 10% per offer, it would take 30 good deals to wipe out the three bad, and get you back to even, or a 10/1 ratio, just to break even.  19 of the 126 offers that have reached the payback stage so far appear to have trouble.  The odds aren't looking good, but the question to which no one knows the answer is how much will they end up paying back.  Unfortunately for those who pay, in any financing scheme, those who pay not only have to pay enough to cover themselves, but also to cover those who don't pay.  Are the good offers paying enough to make up for the bad?  The jury is still out.  

Despite the fact that the overall numbers don't look great, individual offers have done quite well, and right now there are more investors than offers. Today an offer over $170,000 filled in less than a minute.  It was the second offer for the company and they were financing inventory which had been pre-sold.  In other words, unless something totally unexpected happens, there is already a buyer.  The offer was for an 8.5% return over 4.5 months, one of the best recently offered rates--and I wasn't fast enough to get in on it.  In my opinion, a big problem is that there is no effort by Kickfurther to rate these offers and with so many people chasing them, the offered rates are going down.  However, each merchant sets their own offered rate and there seems to be no rhyme or reason to them.  The offers all seem to fill quickly and I think people are going to get burned.  When Prosper started, it used a model of investors bidding on the loans--the ones who bid the lowest interest got the loan.  Unfortunately, the people bidding were not bankers and did not have a good handle on expected losses.  They ended up, on average, losing money.  Since Prosper has been setting the rates, investors who are well diversified have not lost money.  Unless there is some standardization of rates on Kickfurther based on the ability of the company to repay the funds, merchants will continue to lower rates, and, as long as the rates at least appear to be better than investors can get elsewhere, investors will continue to chase those rates, until they start getting burned on defaults.  Once that happens, unless the rates on the winners make up for the defaults the platform will, in my opinion, fail.  

The Bottom Line:

Kickfurther is a place for money you can afford to lose.  There are no reliable estimates of earnings or defaults.  Kickfurther has talked about putting in an inventory tracking system, but that hasn't been done yet and so I question how accurately paybacks reflect sales.  While reclaiming and selling unsold inventory has been touted as a feature of Kickfurther, we have no idea how successful such takeovers will be.  Kickfurther is also for people who can be on the computer at 4:00 p.m. Central time, and I don't mean 4:01.  Offers go live then and are generally grabbed immediately; if they aren't, they are either paying less than average or there is something about the product or company that is suspect.

On the other hand, Kickfurther is a new and developing platform.  They are making changes and improvements all the time.  Some of them last and others (like early access to offers, and $5.00 per person referral bonuses) don't.  They are working on inventory tracking systems and they are processing their first cancellation/repossessions now.   They are aware of investors' concerns and say they are trying to address them. Management participates regularly in a Reddit and responds to investors' questions and comments. 

I'm going to continue to reinvest the money I have in Kickfurther (when I can get on the site at 4:00 p.m.) but until I see evidence that the overall return is going to be higher than what I've seen so far, I am not investing any more money.  I think the Kickfurther concept is good but right now there are too many investors chasing too few offers and with Kickfurther depending on the honor system to track sales, I think the possibility of getting burned outweighs the probability of making money.  I'll stick with what I have for a while, but it is money I can afford to lose.

Do you invest with Kickfurther?  If so are your concerns the same as mine?  What has your experience been so far?

Evaluating Your Investments: Income- Focused Investments

Someone once asked my why I invested in a particular thing. My answer? "To make money, of course". That answer was the truth but the point of the question was that there is no perfect investment; they all have strengths and weaknesses and when evaluating a new investment or deciding how to allocate your money among investments you have, you have to consider the strengths and weaknesses of each type of investment.  This article will focus on investments that people buy for income--for money paid to them now, whether that money is to be used now or reinvested for future use.

Types of Accounts

First we need to quickly look at the basic types of investment accounts.  Most types of investments can be held in any of these types of accounts.  Which you pick depends on your current and future needs.

Normal Accounts

These are opened by default; the others must be chosen.  Income from normal accounts is taxed yearly.  While the custodian of the account may have rules governing withdrawals, the government does  not. The advantage of these accounts is that you can get your money when you want it.  The disadvantage is that you can get your money when you want it--and that you have to pay taxes yearly.

Used with permission of 401kcalculator.org

Roth IRA

Once money is placed in a Roth IRA you will never pay taxes again on it again or on the money it earns.  However, contributions are not tax-deductible when made.   What's more, you can withdraw your contributions (but not your earnings) at any time without penalty.  Some people use Roth IRAs to save for medium-term goals; they withdraw principal when needed but the earnings stay to grow, and grow tax-free.  Another feature of the Roth IRA is that you never have to withdraw money from it; the account, and its tax-free status, can be passed on to your heirs.

IRA or 401K

You do not pay taxes on money you put into these accounts.  However, unless you are over 59.5  years, you pay penalties if you withdraw money.  Also, you have to pay income taxes on any money withdrawn from your IRA or 401K.  Finally, the law requires people over 70 to take minimum distributions from their IRA or 401K, based on age/life expectancy.  

Types of Investments

This article focuses on investments people hold for the income they generate.  

Bank Accounts

Description:  Very simple. Take your money to the bank and deposit it. They agree to pay you very little interest but your account is insured by the government and except for certificates of deposit, you can access your money at any time without penalty.  

Liquidity:  Bank accounts can be accessed at any time.  

Stability:  The value of bank accounts is predictable and they are insured by the government so you know they will not lose value.

Growth Potential: After taxes, bank account earnings do not keep up with inflation, much less exceed it. 

Taxes:  Interest on bank accounts is taxed as regular income.

Conclusion:  Bank accounts are for money you may need to access on short notice, or which you have a specific plan to sell in the next year or two.

From Wikimedia Commons

Bonds

Description:  Bonds are debt instruments issued by corporations or governmental entities.  When you buy a bond, you are lending money to that entity.  In return the entity agrees to pay you interest, usually yearly. and to return the principal at the end of the term of the bond.  Generally speaking the more financially stable the issuer is, the lower the interest rate.  Generally speaking, the longer the term of the bond, the higher the interest rate.  

Liquidity:  Bonds can generally be sold relatively quickly (unless the entity that issued them is having financial trouble), but you may not receive full value for them. 

Stability:  It depends on the bond.  Generally speaking, as long as the issuer is able to make the payments, the bond will be worth at least what you paid for it, if you hold it to maturity.  If interest rates drop during the life of the bond, you could sell the bond for more than you paid for it; if interest rates increase during the life of the bond, the price of the bond, if you try to sell it, will decrease.  

Growth Potential: A bond's interest rate is set at the time it is issued.  If the issuer is financially viable, the interest will be paid.  The only growth is the income, plus any increase in value, if you choose to sell, if interest rates on newly issued bonds are less than the interest rate on your bond.

Taxes:  Some bonds issued by government authorities offer tax-free income.  Corporate bond interest is taxed as regular income.

Conclusion:  Bonds are a good source of income, and if high-grade bonds are chosen, chances are very good that they will not lose value if held to maturity.

From Wikimedia

Bond Funds

Description:  Bond funds are mutual funds that invest in bonds.  A mutual fund means that a financial manager pools your money with the money of millions of other people and invests it in a way consistent with the stated goals and means of the fund, with the hope of making money. 

Liquidity:  Bond funds  can generally be sold the same day you request. 

Stability:  While the share price of bond funds does not vary as much as the share price of stock funds, there is some price variability.  When interest rates rise, the per-share price of your bond fund will fall; when interest rates fall, the per-share price of your bond fund will increase.  As with bonds themselves, funds that buy short-term bonds tend to pay less than those that buy long-term bonds, but the share price of short-term bond funds does not tend to go up and down as much as the share price of funds that hold longer-term bonds.  

Taxes:  Some bonds funds hold  bonds issued by government authorities and they offer at least some tax-free income.  Interest from funds that hold corporate bonds is taxed as regular income.

Conclusion:  Bonds Funds are a good source of income, for those who can tolerate a little volatility.  

Money Market Funds

Description:  Money market funds invest in very short-term financial instruments, some as short as overnight.

Liquidity:  They can be sold the same day you request.

Stability:  Money market funds seek to maintain a stable share price, and most sell for $1.00 per share.  

Growth Potential:  These will likely lose money after inflation.

Taxes:  You can buy either tax-free funds or taxable funds.  Taxable funds, in general, pay more interest, but those in high tax brackets may do better with tax-free funds.

Conclusion:  Since these are insured, you have to decide whether the additional interest over a bank account is worth it.  A lot of people use money market accounts with their broker as a place to hold money in between investments.

Peer Lending

Description:  Peer to Peer Lending means making unsecured personal loans to individuals who want to borrow money.  Rather than lending a lot of money to one person, the two major platforms, Lending Club and Prosper, allow you to pool your money with other lenders so that you fund parts of loans to many people.  As a lender, you are paid monthly by the borrower until the loan is paid.  

Liquidity:  Lending Club notes can be sold at any time, except when payments are pending.  Propser notes can be sold only if current.  Whether you get face value (or above or below it) depends on how much you want to sell it.  Generally speaking high-interest notes with a good payment record can be sold for more than face value; low interest notes or notes with poor payment histories generally sell for less than face value.  It is a supply and demand system--you can ask whatever price you want; the question is at what price you will find a buyer and the more/sooner you want to sell, the lower your asking price.  While emptying your account may take a couple of weeks, remember that each note pays principal and interest monthly, and that they can be paid off by the borrower at any time.  Last month, the payments I received totalled about 5% of my account.  While I reinvested them, I could have chosen to withdraw them if I needed the money.

Stability:  Lending Club says that if you hold at least 100 notes and no note is more than 1% of your account, then according to their historical statistics, you have less than a 1% chance of losing money.  See charts here.  Nevertheless, defaults are to be expected and your return will not be stable over time.  However, according to Lending Club statistics, for an account of over 100 notes, you will have a hard time, over the long term, earning less than 5% or more than 9%.  

Growth Potential: While it is possible to sell well-performing notes above par value, you then lose  your source of income.  The only real growth with this investment is via compound interest, and that's not insignificant when interest rates are close to 8%.  

Taxes:  Unless held in an IRA, interest on Peer-to Peer notes is taxed yearly as regular interest income.  

Conclusion:  Peer to Peer notes are a good source of current income.  While they are not guaranteed (and a certain number of defaults are to be expected) banks have been making money on unsecured personal loans for years.  Lending Club recommends that you have no more than 10% of your investable assets in Peer to Peer notes.  

Used with permission

Dividend-Paying Stocks (or stock funds)

Description:  A share of stock is a share in the ownership of the corporation.  As a co-owner, the value of your share of the company increases as the value of the company increases.  Also, the company may pay out some of its income as dividends.  Given the low interest rates today, many investors find companies that pay dividends over 2%  to be attractive sources of income.  Some such companies are Target, Mead Johnson Nutrition, AT&T, and Darden Restaurants.  

Liquidity:  Shares of stock can be sold at any time; however, if the market is down compared to when you purchased the stock, you will lose money selling.  Of course if the market is up, you'll make money.

Stability:  Stock prices are not stable.  However, if your purpose in purchasing these shares is income, as long as the shares are dropping due to the overall state of the market rather than a problem with the particular stock, then most income stocks are stable investments--stable companies that pay good dividends usually continue to be stable companies that pay good dividends.  

Growth Potential:  Generally good.  Over time, no investment class has performed as well as the stock market. With dividend stocks, you not only get the income from the dividends but also appreciation of the stock price. 

Taxes:  Dividends are taxed as regular income.  Capital gains (money earned by selling stock for more than you paid for it) are usually taxed at a lower rate.  

Real Estate Investment Trusts (REITs)

Description:  REITs pool investor's money and invest in real estate.  The laws under which they are organized require them to pay out 90% of their income as dividends. 

Liquidity:  Shares of  can be sold at any time; but like many other investments, the price you get may not be the price you paid.

Stability:  REITs invest in real estate; therefore they are as stable as the real estate in which they invest.  They are also not closely correlated with the stock market so it can lend stability to your overall portfolio.  

Growth Potential:  If the price of real estate increases, the share prices may go up, giving you growth.

Taxes:  Dividends are taxed as regular income.  Capital gains (money earned by selling stock for more than you paid for it) are usually taxed at a lower rate.  

Conclusion

The general rule in investing is that the higher the risk, the higher the reward.  The lower the risk, the lower the reward.  Bank accounts and government bonds have low rewards, but you know the money will be there when you need it.  On the other end of the spectrum are dividend stocks and REITs.  As with all investing, playing it too safe may mean not getting the growth you need, but no safety net means you could be really hurt if things do not go your way.

How do you invest for income?

*Part of Financially Savvy Saturdays on brokeGIRLrich, A Disease Called Debt and The Frugal Cottage*

Book Review: The 3% Signal

The 3% Signal: The Investing Technique That Will Change Your Life

About the Book:

Take the stress out of investing with this revolutionary new strategy from the author of The Neatest Little Guide to Stock Market Investing, now in its fifth edition

In today's troubling economic times, the quality of our retirement depends upon our own portfolio management. But for most of us, investing can be stressful and confusing, especially when supposedly expert predictions fail. Enter The 3% Signal. Simple and effective, Kelly's plan can be applied to any type of account, including 401(k)s -- and requires only fifteen minutes of strategizing per quarter. No stress. No noise. No confusion.

By targeting three percent growth and adjusting holdings to meet that goal, even novice investors can level the financial playing field and ensure a secure retirement free from the stress of noisy advice that doesn't work. The plan's simple technique cuts through the folly of human emotion by reacting intelligently to price changes and automatically buying low and selling high. Relayed in the same easy-to-understand language that has made The Neatest Little Guide to Stock Market Investing such a staple in the investing community, The 3% Signal is sure to become your most trusted guide to investing success. 

My Comments:

If you ask any reasonable person who invests in the stock market about goals, the general one given is to "buy low, sell high".  Yet, many people end up doing the exact opposite.  Why? Is there any way to change that?  Jason Kelly opines that trying to predict the market is a fool's game.  There are lots of pundits giving out lots of information (or at least making lots of noise), but the reality is no one knows when the stock market will fall next, or how far, we only know that it will fall one day, and that eventually, it will grow beyond where it is now.  In other words, the general trajectory of the market is up, but there are plenty of downs along the way.  All too often people follow the crowd--everyone gets afraid of falling stock prices, so "everyone" sells, and stock prices continue to fall, so the sellers lock in their losses.  Then the real winners step in; those who buy at low prices.  How can we be in that number?  This book by Jason Kelly describes and defends his system for buying low and selling high.  Using historical data and just general numbers, he shows why the system works and the advantages of using it.  

In short, as you can see on his website (so I'm not telling secrets) Kelly advocates an 80/20 stock/bond allocation for most investors, and advocates using two mutual funds to implement his system.  Every quarter that the stock portion of the portfolio grows by more than 3%, Kelly advocates selling shares in the stock fund and putting them into the bond fund such that you only keep the 3% gain in stocks, the rest is converted to bonds.  If, at the end of a quarter, your stock fund has not gained 3%, you use the money in the bond fund to buy more stock so that there is a 3% increase in the value of the fund.  The only hitch in the system is that if the value of the stock fund falls far enough, in order to get full value from the system, you may have to put outside money into it.  However, even without the outside money, the system in and of itself, with its discipline of only looking at the gains/losses quarterly and with its determined path of acting on what has clearly happened, will grant you superior returns over the long term.  While you won't beat "Peter Perfect", you'll beat most investors.  

So, why does it take a whole book to talk about a system I described in a paragraph?  Kelly leads readers through probability exercises to show why the system works.  He talks about why predicting the market is so hard, and, in the end, it is so useless to try.  He recommends mutual funds that are appropriate to use in the plan and advises how to put the plan into action.  He even carries you through the life of the plan.  

The system sounds good to me and I wanted to try it with my 401(k).  My husband did not like the idea of that much money in a small cap stock fund.  The compromise is that I am going to stick with the funds I have but use the 3% rule with each.  

I'd like to thank the publisher for making a review copy available via NetGalley.  I do not know how my NetGalley advance copy compares to the final Amazon edition.  However, my NetGalley for my Kindle does not properly display c.harts, graphs etc.  The  NetGalley that I read on Adobe Digital Editions looks fine.    Grade: B

New Product: Kickfurther.com

Have you ever contributed to a Kickstarter campaign?  For those not familiar with Kickstarter, it is a crowd-funding source for new business ideas or products.  Entrepreneurs pitch their products at Kickstarter and through social media, hoping to garner enough funding to begin production or carry out a plan.  For example, a  family friend who played in a band was diagnosed with a brain tumor and, in the days before his surgery. recorded some of his music.  Unfortunately, he did not survive the surgery.  His band wanted to record an album that included his music and to produce cds with that music so his family and the band promoted a Kickstarter campaign to fund the production costs.  Those of us who invested received a copy of the cd and other band swag, depending on the amount of our investment.  Since the cd and swag were our only expected return on investment, I'd say this was as much a gift as an investment, but if you peruse the Kickstarter site, you'll see that investors can end up with gifts worth as much as their investment, if not more.  Nevertheless, I'd consider money used at Kickstarter to be fun money, not really an investment.

If I'm talking about Kickstarter, why is the post titled "Kickfurther.com"?  Because Kickfurther is another site, and it takes these new businesses a little further than Kickstarter does.

Isn't that a cute swimsuit?  I wish I could wear it.  The manufacturer, AMARA, is relatively new and needs capital to produce a line while also spending money on advertising and marketing.  They want to borrow $6839.00 for six months, and will return $1.10 per dollar invested.  Sounds like a great payoff, but I realize that with that kind of reward goes risk.  I invested, but only $50.00.  If I lose, I won't lose much.  While my percentage of return is high, the actual dollar value, due to my low investment, isn't very substantial.  Unless enough people invest to fund the entire loan, the transaction is cancelled.  Kickfurther gets a security interest in the inventory so they can liquidate it if the manufacturer fails to sell it.  Once half the inventory is sold, the lenders get their money.  Of course if they can't sell the inventory and don't get enough for it to pay back the loan, I lose money.  Another downside is that there is a 1.5% withdrawal fee when I get ready to take my money home--but they do let me continue to reinvest without paying the fee.  

So, is Kickfurther a toy, or is a serious investing opportunity?  Right now, for me, it is a toy.  If there were a hundred choices, investing a little in each would be an attractive investmeny to me, but right now, they have only three companies looking for money, thirty-one with outstanding loans and six have been completely repaid their loans. While there are protections in place for investors, the reality is that it won't take many bad loans to wipe out my profit, or even my investment. The platform is trying to grow and I plan to keep it on my radar as a place to invest fun money, but until it is larger or has more of a track record, I do not consider it part of my serious investments.  

What are some other business to whom I've lent money through Kickfurther?  North Coast Organics makes natural deodorants.   The money I lent them was charged to my credit card in April and they are supposed to pay back $1.08 per dollar lent by the end of August.  

 

Below is a Humanoid Wake Boot.  Assuming they sell 43 of the 100 pairs I helped buy, I'll get $1.08 in August for every $1.00 I lent them in April.

My husband hates to wear a tie, but some folks love them  Skinny Ties makes these, and they have slightly (or not so slightly) suggestive names.  If they sell 60% of what I helped them buy, then I get $1.20 for every $1.00 invested.  They got my money in May and plan to pay it back by November.

If Clarisea sells 38% of their supply of this cleanser, I get $1.08 per dollar invested.  They got my money in June and plan to pay it back in September.

Aren't these pretty?  You can buy them at Marlie Madison which is a Texas boutique which is on its third Kickfurther campaign.  They borrowed to open a new store and plan to re-pay $1.11 for every dollar borrowed, and to do so over several payments.  The charge hit my credit card in April and I just received my first payment of a little more than $0.16/$1.00.  

Besides lending money to the businesses, Kickfurther gives you to opportunity to make money by selling products financed through the platform, whether you invested in them or not.  Here is my store.  Feel free to buy from it so I can get a 5% commission.  Those tweezers look nice. 

Does this look like an investing opportunity to  you?  If you click my affiliate links (including the word Kickfurther throughout this post) and invest, you get a $5.00 credit and I get entered into a contest to earn bigger prizes.  

New Financial Product: Peer to Peer Lending

One day when surfing the web, I happened on to a new type of investment, "peer-to-peer" or "marketplace" lending.  Basically it is a loan product where lenders (investors) lend money to borrowers through an intermediary company that did the underwriting and collecting.  Average returns near eight percent were promised.  Surely, that couldn't be right.  Surely there had to be something funny going on. Surely it was like those multi-level marketing schemes were a few did get rich, but most people didn't.  It couldn't be as good as it seemed, could it?

https://www.lendingclub.com/info/statistics-performance.action

This chart summarizes Peer-to-Peer lender, Lending Club's claims about investor returns.  In short, as long as you have more than 100 notes ($2500 invested, if you buy new notes) your chances of actually losing money (as long as current trends in repayment continue) is very low.

This chart shows that the more money you have invested with Lending Club, the harder it is to stray very far from the norm of about 8%.  You can see both of these charts, along with other information, at Lending Club's website.  

This definitely caught my eye and I headed over to Google to do some more research.  I learned that the concept was pioneered by Lending Club's main competitor, Prosper. The product both offer is unsecured personal loans to people considered to be reasonably good credit risks--in other words they are doing what banks have been doing for years via credit cards.  As my brother, the used car salesman said "I can make money lending money to any type of person; I just need to price it correctly".  Unfortunately, Prosper's first model was that lenders bid on loans and since the lenders were amateurs, they did not price the product correctly and most lost money.  

One interesting thing about both Prosper and Lending Club is that they allow interested parties to download their historical databases so they can analyze the data and learn what they can from it.  Nickle Steamroller is a website that hooks into that data and then allows you to filter it to determine the historical performance of loans of various characteristics.  Overall, the rates of return shown there do not appear to be close to 8%, but playing with back testing filters, it does not seem impossible to get good returns, especially compared to what the bank is paying.  One thing I did note was that returns have gotten progressively better and that when you look at the three year loans issued in 2010 and 2011, the return on investment (interest, minus fees, minus charge-offs) was close to 6%.  

We decided to put some of our money into Lending Club to see how it worked. You can read about my experiences on my other blog, though I will be writing more here later.  In short, so far I've been happy with my investment and, while I do not claim any real expertise in financial matters, I encourage you to research peer-to-peer lending to see if it is the right place for some of your money.

Book Review: Make Money, Think Rich

Make Money, Think Rich

About the Book:

You are here today because your ancient ancestors cooperated to survive a brutal environment with life threatening predators. That herd mentality backfires when investing. Can you overcome your instincts to sell low and buy high with the rest of the crowd? Read a few paragraphs of Dale Buckner's book and you too can profit from the mistakes of others.

About the Author: Dale Buckner has spent his 25-year career as a financial planner helping people avoid the mistakes that wreck most financial plans. He has the academic credentials: a BS, MBA, the designation as a CERTIFIED FINANCIAL PLANNER™ Practitioner and an Accredited Investment Fiduciary®.

Dale has hosted a financial radio program for two decades. He's heard it all while in the trenches, solving people's problems and helping guide them through some of the most violent market swings in the history of the stock market. His experience and sage advice can help you avoid tragic mistakes like selling at the bottom of a market cycle or buying into a bubble. 

Dale helps clients achieve their financial and personal goals using Life Stage Planning, an advanced form of financial planning he developed with the help of the CERTIFIED FINANCIAL PLANNING® course work.

Dale is a Registered Principal and offers securities through United Planners Financial Services, member FINRA and SIPC. He holds security licenses Series 7, 24, 63, and 65 and has been insurance licensed since 1988. Dale offers financial planning and investment counseling through his Registered Investment Advisory firm, Dale Buckner, Inc. Dale Buckner, Inc. and United Planners Financial Services are not affiliated.

My Comments:

I enjoyed this book.  I liked the way Buckner started it by telling us that we are created by God, and don't have design defects.  Buckner goes on to look at primitive societies to give us an idea of why we behave the way we do.  After that, it is a pretty basic guide to saving money and investing, but Buckner reminds us time and again that just because everyone is doing it (selling, buying, whatever) is no reason for us to do it.  Rather, we need to make a plan and stick to it.  

While I can't say there was anything earthshaking in this book, it was a good little pep talk on making a plan and sticking to it.  While market cycles were discussed, there were no long technical explanations of how to predict them or beat them, just encouragement to stick with the plan.  

I'd like to thank the publisher for making a review copy available via NetGalley.  Grade:  B.