In today's volatile stock market, many young investors are seeking alternative investment vehicles. Many have realized that we will never "win" against professionals, or have the kind of information the rich are privy to - including our own Congressmen, who are allowed to trade on inside knowledge because they're not considered "insiders." So with all these people with access to more information to us on the stock market, how are we ever going to come out ahead?
Enter micro-lending. Sites such as prosper.com allow individuals to lend to other individuals. However, they have also come under fire recently as bad investment choices in general. The main argument is that if these individuals are deemed unworthy by professionals, such as bankers, to get loans, why would nonprofessionals then provide the loans?
To find out, I have begun a small experiment on prosper.com. I have made several investments, using two strategies. First, I invest in only those borrowers with a "grade A" from Prosper.com, meaning they have the healthiest credit ratings and least likely to default. I then searched for any borrowers with a borrowing history on Prosper.com, and if their payments were always on time, then I would also invest in their current loan, regardless of their grade.
The experiment began in December 2011. The first payments are just coming in. So far all are current.
Want to help expand the experiment to cover more loans? The more loans we can cover, the better the information we have. Donate here!
Proceeds from contributions will be donated to local charities or nonprofits.
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