Key Points

  • My net investable assets increased to $651,747.
  • 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: $651,747

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 $651,747 $121,606

The increase was $121,606 which was exactly what I forecasted. My investment returns suffered due to a result to the unexpected loss of Lending Club notes ($5,000 expected gain vs. $3,983 actual loss), and slightly lower returns on DLI Fund performance (12% forecast vs. 10.89% actual). Over the next few years, I expect my salary to remain flat while the passive income continues to grow.

Internal Rate of Return (IRR): 7.98%

Account Allocation IRR (TTM) IRR (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 decline. The under-performance of the lower-grade loans (particularly grade E-G) is hurting my investment returns. Investing a large portion of my fixed income allocation in Lending Club notes was a big mistake. The discrepancy between an actual return and an expected return continue to worsen, leading me to consider other investments. I have 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 sign up for the Groundfloor IRA beta release. My annual backdoor Roth IRA contribution will be invested with Groundfloor. I also started winding down Lending Club IRAs.

Portfolio Assessment

YieldStreet works with litigation finance originators to create diversified portfolios of pre-settlement advances on personal injury cases for the target return of 12-15% over 24-36 month term. I have been parking my cash in DLI Fund as an alternative to stashing money in a high yield savings account until I am ready to make a long-term commitment with other asset classes. Now that the return of the fund is going to fall in the high-single digit range, I am thinking to shift my portfolio from overweight short-term small business loans to overweight litigation finance. The difference between the two returns is no longer negligible when one has been in steady decline.

Credit Card Arbitrage

DLI Fund redemption will cover my credit card debts. 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 a 401(k) plan through my company. 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.