“My greatest fear is about investing … losing my retirement savings and impoverishing my wife and I.”
“My biggest concern is investing money that I’m scared I may not profit on (as I live paycheck to paycheck).”
“My biggest fear is that my lack of knowledge and experience may cause expensive mistakes.”
Risking money is never an easy thing to do, especially when you are just starting out. Nobody likes to take a loss, and for most of us, our life savings depends on our investments.
People who have gone through numerous market crashes are understandably hesitant to get back in:
“I got really scared after 2008 … I keep looking at the stock market trying to decide what I should do.”
“I have always been scared of the market since I had a 401(k) loss in 1998 and 2004.”
The above quotes are the words of our readers.
We’re always looking for the best investments possible to bring you profits in the stock market. And I personally believe that we will continue to see rising stock prices.
However, there are always different routes that you can take in addition to the recommendations that we put out.
Opting Out of the Market
For many of our readers, there is a lot of anxiety over the stock market due to the current political unrest, the EU possibly coming undone and the simple fact that the stock market has gone straight up for the past nine years.
People are saying, for justifiable reasons, that it’s due for a crash.
But if you’re opting out of the market for now, there are much better things that you can do with your money than leaving it in a bank account or certificate of deposit with about 1.5% to 2% interest.
One investment that has been gaining traction recently is peer-to-peer (or P2P) lending.
In short, peer-to-peer lending is when lenders and borrowers are connected over the internet by a lending company that acts as a financial intermediary. So when someone applies for a loan through a P2P lending company, that company pools money from individual lenders all over the country to fund the loan.
I know the concept of lending money to someone you don’t know sounds like a scary possibility. But if you belong to a bank or credit union, you’re doing the same thing and making little to no money in the process.
So why isn’t everyone talking about it?
For one thing, it’s relatively new. This form of investment started a little over 10 years ago, but it has recently exploded into one of the fastest-growing markets today.
In 2015, the market was worth about $26 billion. That number is expected to reach over $897 billion in 2024.
Growth like that — almost 50% a year — suggests that this is the future of borrowing and lending money.
About as Low-Risk as You Can Get
One of the most established and well-trusted companies in the P2P lending industry is LendingClub.
LendingClub is also far and away the largest P2P lender in the United States. Since the beginning of 2013, its amount of loans outstanding has gone from $1.53 billion to $28.8 billion — an increase of almost 2,000%.
Just like the stock market, you can make your investment in P2P lending as risky as you want to. If you want to be more conservative, you can choose to loan out money to Grade A borrowers, where the interest rates are typically around 7% to 8%.
But if you want to loan to riskier borrowers, which LendingClub classifies as Grade F and Grade G, you could make 20% to 25% per year, assuming they are able to pay the loan back. Of course, with the high return, there is a much higher chance that these borrowers will default. At that point, it’s almost like gambling.
Interestingly enough, after accounting for defaults and fees, over the past 18 months those F and G groups have yielded the worst returns for lenders, at 4.26%. The best returns came from Grade C borrowers, a low-to-mid-risk group. When lending to that group, investors saw gains of about 6.5%.
To give a little bit more information about the least risky group, Grade A, they have borrowed $1.47 billion since the beginning of 2016. Of that amount, only 1.15% has been deemed late or defaulted. That’s about as low-risk as you can get.
To make it even better, investors have made almost 5% a year after fees by lending to this group. That’s over twice as much as a standard 10-year U.S. Treasury bond, and about 37% higher than investing in the most reliable corporate bonds available.
Based on those numbers, I believe that P2P lending is a great way to invest if you are looking for an option other than stocks.
Just remember, like any new industry, there are companies out there that should not be trusted. Without proper regulations and screening, it’s not hard to see how P2P lending could get very dangerous.
Of course, it is always best to go with an established company in the industry, especially when it comes to managing your money. That’s why using P2P lending with a company like LendingClub is one of the best ways to invest in this rapidly growing industry.
Internal Analyst, Banyan Hill Publishing
Editor’s Note: According to Profits Unlimited Editor Paul Mampilly, stocks are on the cusp of a historic surge, and the drive behind this stock market rally is “a little-known yet powerful economic force that has driven every bull market for the last 120 years. I’ve used this same force to predict the stock market collapses of 2000 and 2008 … and to make personal gains of 634%, 696% and even 2,539% along the way.” To find out which stocks to buy, simply click here to watch Paul’s video presentation.