Net – Worth Update:
|Student Loan A||0||Investments||11,807.13|
|Student Loan B||0||Cash||4,973.24|
|Student Loan C||0|
A fortunate 4K?
A really, really long time ago, my parents put away money for my brother and I to go to college. Fast forward to present day – my parents have long since forgotten about this money. As a result, I inherited an education savings account (ESA) that contains $4K. Unfortunately, I’ve graduated from college and “student loans” don’t count as a “qualified education expense”. As a result, I got 4K that I couldn’t use.
Luckily for me, my parents agreed to rebate me $4K in exchange for rolling over my ESA to my brothers ESA. This extra 4K is really going to speed up my next investment plans.
2016 is almost done
Since 2016 is just about finished, there’s an opportunity to invest tax free coming up. Starting Jan. 1, 2017, all of us can contribute to our Roth IRA’s. For this round, I’m planning on putting 5.5K into a Roth. I have not yet decided what I want to invest in, but I am currently looking into P2P lending.
What’s peer 2 peer lending?
In a nutshell, p2p lending allows me to become a bank and lend money to other people at high interest rates. Later on, those people will (hopefully) pay back my original loan along with lots of interest. There’s a lot of risk involved since the loans that I make will not be backed by anything. As a result, the people I make loans to can simply decide to not pay me back (at the cost of ruining their credit scores) and I would not be able to do anything about it. However, to make huge gains, you’ve got to take some risks, and I think I can turn p2p lending into a wise, calculated risk.
My Strategy (should I invest with p2p lending)
My strategy is to go ham and invest in untrustworthy, high-risk, high interest rate borrowers. Doing so will allow me to earn a great return in the short run at the cost of several defaults in the long run. In order to counter this, I plan on re-investing all of the proceeds from the high interest rate borrowers into trustworthy, low interest rate borrowers. As a result, I’ll take on significant risk in the beginning, but as time goes on, my risk profile will decrease as my portfolio moves towards trustworthy borrowers.
I don’t actually know if my strategy will work, and whether or not I will make or lose money. It’s honestly something I just want to try and experiment with. Anyways, I’ve actually got some results to report with my investing experience. Next time, I plan on breaking down my portfolio and explain the lessons I’ve learned losing money.