More and more financial professionals are advising clients to not only diversify their investments, but also to diversify their streams of income. What is an income stream? An income stream is simply a means from which you generate income, multiple income streams are more than one way to make money.
Generally, the more the better and the more diversified the safer. Your full time job is an income stream and probably the biggest one you have. Many folks have a full time and a part time job. That means you have 2 income streams. You may have money invested in bonds from which you earn a return; this is also an income stream. What about considering person to person lending using Prosper as another income stream?
First, let’s look at other types of income streams. Dividends on stocks are an example, as well as rental income from property, advertising on your website, Ebay selling, day trading stocks, royalties, interest from a savings account and side jobs like teaching a class are all also examples. Some are passive, some are more active.
The one thing all of these different streams have in common is that they earn income in different ways. This is exactly why it’s valuable to look at your finances in this way.
Lending in an online marketplace like Prosper is growing fast and can provide you another way to earn a return on your investment dollars that are diversified from the stock market and other interest returning investments. Prosper is like Ebay for lending. You can bid as little as $50 on a loan listing if you think it meets your personal criteria for risk and return. Prosper has thousands of loans to choose from.
While there are many other good vehicles out there to earn a return on your investment dollar, peer to peer lending using Prosper is something to consider as a way to diversify and shift the market for lending away from banks and to the public. Banks have become very wealthy earning interest: time to democratize this and let folks like us earn a share!
- At January 21, 2008 at 6:08 PM j9359 said...
I pretty much agree with what you have posted. But lending on Prosper should only come after fully funding other investments first. Like saving 3 months living expenses in a savings or money market account. And funding retirement plans like 401k or IRA. There just isn't enough of a track record to say how Prosper loans are going to perform over the long run yet. So it really should be just a small part of your investments.
- At January 22, 2008 at 2:11 PM Anonymous said...
Nice post, yes its a good way to earn extra but dont put too much in
- At January 22, 2008 at 2:36 PM Anonymous said...
Will check it out
- At January 22, 2008 at 3:35 PM R2K said...
- At February 1, 2008 at 4:56 AM JS said...
I absolutely agree that Prosper or better yet, P2P lending is a great way to diversify. I started a Prosper account at the beginning of January and now have 7 loans for $50 each. I also plan on contributing $25/week and will fund around 2 loans per month. My family can live without the $25/week, so I figured why not give it a try. Since I don't have good stats yet from my own experience, I am interested in learning how others have done lending in Prosper or other P2P lenders.