Putting $70,000 into Prosper.com

by James & Miel on September 28, 2006 · 4 comments

Sometimes pressing problems require radical solutions. If you’ve been reading our blog, you’ll have gathered that my wife and I are running a monthly deficit of $1,800. This is a LOT of money and if the situation continues, it will put us in dire financial straits. As part of the solution, we’re doing the following:

1) Putting the bulk of our investment capitol in Prosper.com. If you don’t know what this is, prosper is a person to person money lending service with an ebay style format. In order to generate the 18% required to replace our income, we’ll need to lend to persons who have bad credit.

Is this risky? Yes, we will incur two types of risk. First, we risk not having our money repaid. Second, we risk loosing all or most of our money if prosper goes out of business.

Non-repayment risk can be manged via loan diversification and collection agents. So frankly, I’m more concerned about prosper going out of business. Why? The company is still raising money from venture capitalists and won’t disclose the amount of transactions or amount of loans under management. This tells me they aren’t currently cash flow positive. I’ve got a call and email in to the company’s senior to staff to get more information about this.

2) Second, we’re planning on investing in high yielding income stocks. Some of the Canadian Energy Trusts are paying upwards of 10 to 18% percent. It may be possible to secure some preferred shares in some of these companies. The main idea behind preferreds is to get a higher yield while managing our risk.

That’s about it.

We’ll keep you updated as things pan out.

Best,

James



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