It has been awhile since I’ve provided an update on how my 4 investments have been performing. There has been a lot going on since I last shared my results in October. Beyond normal life like holidays and chores around the house, the bank I work for was sold, we had a baby in March, and we’ve been ramping up our real estate venture.
What is the $1,000 Investment Challenge?
In September, I decided I needed to step up my savings game a little bit and wanted to try out 4 investment options to see how they compare over time. So, October 1st, I deposited $1,000 into each account and started contributing $100 a month.
So far, I have contributed $1,800 ($1,000 initially + 8 months of $100) into each account with varying degrees of success.
The $1,000 Investment Challenge
- An Introduction – Where to invest $1000 – my investment challenge
- Investing with Prosper peer-to-peer lending
- Investing with Lending Club peer-to-peer lending
- Investing with Betterment
- Investing with Sharebuilder
How has the market performed?
Since October 1, 2014, the stock market has performed positively. There were some significant gyrations in December 2014 and January 2015, but the stock market has been on an upward trend ever since. The NASDAQ has been up almost 13%, with the S&P and Dow indices around half that return.
In May 2015, the market has been mostly flat for the S&P and Dow, with the NASDAQ continuing it’s outperformance among the three. That smaller stocks are performing well in an improving economy is not a coincidence since the credit markets start to thaw for smaller companies, and they are generally quicker to adapt to changes in the marketplace.
How have my investments perform through May 2015?
The investment returns were mixed in May. Lending Club, Betterment, and Sharebuilder were negative, while Prosper was up. I think that losses in my existing portfolio at Lending Club are hurting the results a bit, since it is unlikely that there will be a default within the first six months of a loan’s issuance. Because the Prosper portfolio is not “seasoned” (meaning that all of the notes are newly issued), there is less of a probability of default (borrower missing a payment).
Because I had an existing account with Lending Club, I am making a manual adjustment for my existing balances to normalize to the $1,000 investment that the other options received. There is still an advantage for Lending Club over Prosper because the notes invested in are already funded from Day 1.
Click here to open an account with Lending Club.
Through May, all of the contributions are now invested into notes and they are active. There has actually been one charge off (the borrower is not paying, so the investment is effectively now worth $0). The loan was made in October 2014, and the note was written off in April 2015, with only one payment made by the borrower.
On the plus side, one loan has been completely paid off. I want to earn interest, but it is even better to ensure that you get your principle (amount invested) back.
Click here to open an account with Prosper.
My Betterment investment is performing well. I am maintaining the 90/10 split between stocks and bonds, as you can see below. Continuing with the dollar-cost-averaging (monthly contributions of the same amount) has helped Betterment perform at a higher level than the Dow since I started this $1,000 Investment Challenge.
Click here to open an account with Betterment.
In my Sharebuilder account, I am investing in the USAA First Start Growth (UFSGX) fund because it is a no-fee option and has a mix of stocks and bonds, otherwise known as a balanced fund. The Sharebuilder account’s performance is boosted because there was a sign-up bonus of $50. The $50 bonus serves to boost returns somewhat, so in the graph below, I show the returns with and without the $50 bonus.
Click here to open an account with Sharebuilder. They often provide bonuses when you sign up, so I would hold off until you find a bonus that fits your objectives. Also consider opening an online savings account with CapitalOne360… there are no minimums or monthly fees.
How do the performances compare to each other?
One of the main purposes of this investing experiment is to compare their performances against each other. The stock-based options of Betterment and Sharebuilder are not only in the lead compared to the lending options, they have both beat the Dow from October 1 through May 31.
I keep track of all of my investments using the free online management tool, Personal Capital. It allows you to track a wide variety of accounts, such as your 401(k), IRA, bank accounts, brokerage accounts, and real estate. Click here to sign up for Personal Capital.
It has been eight months since I started this journey. The best thing is, that even though many things are happening all around me — company sold, baby born, buying more real estate — the automatic investments keep occurring into my four $1,000 Investment Challenge accounts. The stock-based positions are performing better than the Dow, while the peer-to-peer lending options are a good alternative to bonds in your portfolio.