Key Points

  • My net investable assets increased to $650,339.
  • The IRR for the trailing 12 months (TTM) decreased to 7.98%.
  • I added commercial real estate (CRE) investments to my portfolio.

Asset Allocation

Net Investable Assets: $650,339

Account 2015Q4 2016Q4 Change
Cash $10,081 $31,248 $21,167
Brokerage $29,921 $38,839 $8,918
Lending Club $177,860 $43,878 $133,982
Direct Lending Income Fund $487,118 $792,181 $305,063
Groundfloor $0 $5,190 $5,190
iFunding $0 $100,000 $100,000
Debt ($174,840) ($360,996) $186,156
Total $530,141 $650,339 $120,198

The increase was $30,706 more than forecast. This was primarily driven by the additional income from salary. Higher salary was due to the appreciation in the RSUs and lump sum relocation package from my full-time job. Lower investment return was due to a large unexpected loss of Lending Club ($3,982 actual loss vs. $5,000 expected gain) and lower return of DLI Fund (10.89% actual vs. 12% forecast). Over the next few years, my salary is expected to remain flat while a passive income continues to grow.

Internal Rate of Return (IRR): 7.98%

Account Allocation XIRR (TTM) XIRR (TOT)
Lending Club 4.66% (4.16%) 5.71%
Direct Lending Income Fund 84.16% 10.75% 10.73%
Groundfloor 0.55% 6.86%
iFunding 10.62% 3.60%
Total 100% 7.98% 8.75%

My IRR continued to suffer from under-performance of recent vintages of lower grade Lending Club loans (particularly grade E-G). Allocating a large portion of my portfolio to Lending Club was a big mistake. The discrepancy between actual and expected return continue to worsen, leading me to consider other investments. I’ve stopped automated reinvesting for the foreseeable future and continue winding down all Lending Club accounts. I plan to transfer Roth IRAs from Lending Club to Vanguard.

Investment Strategy 2017

Currently my portfolio splits 90% hedge fund and 10% commercial real estate. An expected return is 10% and 20% respectively. I will continue to leverage through credit card balance transfers to increase the return of an investment.

Backdoor Roth IRA

I considered Vanguard or Fidelity for my annual backdoor Roth IRA, but I decided to stay with Lending Club. I signed up for the Groundfloor IRA beta release. My annual backdoor Roth IRA contribution will be invested in a Groundfloor IRA. I also start winding down a Lending Club IRA.

Litigation Finance Overweight

I will shift my portfolio from overweight short-term small business loans through DLI Fund to overweight commercial lawsuits through LexShares. I plan to build a large litigation portfolio.

Credit Card Arbitrage

DLI Fund redemption will cover my credit card debt. An estimated total withdrawal is $750,000 over the next 12 months. $350,000 will go toward credit card repayments. The third round of credit card arbitrage investment will take place in mid-2018.

401(k) Contribution Only Up To The Match

I stop maxing out 401(k). My employer matches 125% up to 6 percent of my salary for a maximum $10,000 per year. I will contribute only up to $8,000.