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 $120,198 which was exactly what I forecasted. My investment suffered due to a large unexpected loss of Lending Club ($5k expected gain vs. $4k actual loss), and lower return of DLI Fund (12% forecast vs. 10.89% actual). 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 decline. The under-performance of recent vintages of lower grade Lending Club loans (particularly grade E-G) is hurting my investment returns. Allocating a large portion of my portfolio to Lending Club 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.

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 debts. An estimated total withdrawal is $750k over the next 12 months. $350k 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 $10k per year. I will contribute only up to $8k.