Month by Month Evaluation

I spent some time the other day evaluating my Prosper portfolio. Part of the reason for doing this was to see where I've been and to help determine where I'll go in the marketplace.

I took a different approach this time, and looked at originations by month:

I also broke the months into quarters and added a dollar amount column:

Observation 1: Only a few bad decisions will hurt a lot.

The first thing that jumped out at me was Q3 2006. I picked some horrible loans during that period. I distinctly remember that at the time I was becoming more confident in my loan picking ability. I was also too dumb to realize that my performance up to that point was only going well because the loans had not aged much! Feeling I could do no wrong, I sure did go wrong and am paying for it today.

Observation 2: Patience, young Jedi.

At this point, it's difficult for me to determine if the lending strategy changes I made in 2007 really work or not because these loans are still very young. The feedback loop regarding loans performance is agonizingly slow. (like trying to have a telephone conversation with Voyager1)

Observation 3: It is still very early...

I see that in 2007 only 2 of my loan choices are late or defaulted (one is late, one defaulted). It seems great, but it is still very early. This time last year I had 3 late loans. That was it. Now look what happened since then (19 late or defaulted).

(I would also like to point out that those 2 bad 2007 loans share something in common. If you take the time to find them in my Eric's stats, you will find a type of borrower I avoid now.)

Observation 4: ...but my confidence is growing.

As the months roll by, I'm becoming more and more confident in my ability to select decent listings and make reasonable returns on Prosper. While my confidence is not the only factor that will determine my future investment into the marketplace, it sure means a lot...