In this segment of The Motley Fool's all-financials show Where the Money Is, Fool financial analysts Matt Koppenheffer and David Hanson take a question from a WTMI podcast listener who writes:
"I was hoping you could share your thoughts on peer-to-peer lending. I am maxing out my 401(k) each year and have a separate brokerage account with 20 or so stocks that I really like. I'm now at a point where I have some money I'm looking to invest but am having a hard time finding a stock that I like. A co-worker mentioned that he has been using a peer-to-peer lending site for almost 3 years and has averaged a 12-14% return annually. While that lags the stock market over that time frame, it's still a pretty solid return and probably a bit more consistent than the stock market on a year to year basis. What are your thoughts on peer-to-peer lending as a small part of someone's overall portfolio?"
The guys discuss the concept of peer-to-peer lending and why this is still too new of a concept to see historically proven returns, and they also talk about the difference between an equity investment in a business and an investment in a credit product such as this. While loan investments have performed well over the past three years in this upswing of the credit cycle, the picture hasn't always been so rosy in earlier economic climates.