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My Comments about Prosper on Lazy Man and Money April 10, 2007

Posted by pf in Expenses and Savings, Uncategorized.
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Last month, I posted some comments about Prosper on Lazy Man’s blog.  You can see them here.   Lazy recently posted a response to some of my comments entitled “Prosper Winners and Losers” where he re-posted my comments and then included his responses for each of the various points. 

Now, let me start by saying that I think Lazy Man is very well aware of the risks involved with Prosper and I think he is being very thoughtful about his strategy there and how this fits into his overall portfolio. However, I also believe that if he does succeed (and I hope he does), he will do so despite the odds being against him (my view).

Below are some recent posts on Prosper’s own Lender’s Forum:

http://forums.prosper.com/index.php?showtopic=11513&hl

http://forums.prosper.com/index.php?showtopic=11714

http://forums.prosper.com/index.php?showtopic=11290

http://joelodom.blogspot.com/2007/04/why-im-pulling-out-of-prosper.html

http://forums.prosper.com/index.php?showtopic=22923

Much like Lazy Man, I think you will find many of the posters to be very thoughtful and intelligent about their investments and conducting as much research as possible to figure out how to make it work for them. 

However, as I said in my original post, based upon what I’ve been able to glean from the Prosper forums and other material, I am still of the firm belief that Prosper is not really a place where one can expect to make consistent returns, but where people can take a risk, have fun, and potentially hit the winner…just like gambling.   Here are some quotes from one of the posts I listed above where lenders were asked why they invest in Prosper:

“I’m here out of curiosity and for the challenge”

“this for me = hobby. I hope the making money trend continues for me as it has. Odds
are that it won’t. I enjoy myself here.”

“I think that is the right approach: put only the “gambling money” portion of your portfolio into Prosper, something you can afford to lose.

I am here because it’s a Brave New World, and I want to be a part of it.

While I hope to make money, I do not expect to. It’s a hobby. The return in no way justifies the time I put into Prosper.”

“Not a place to make money, but really quite a bit of fun, and the tidbits shared by others (financial info, personality insights, etc) makes it comfortable, informative and entertaining.”

Of course, I have been a bit biased in my selections, but do think the overall theme holds true.  However, I absolutely and strongly encourage you to read the forums for yourself and let me know if you come away with a different assessment as my intent is not to mislead or skew the “truth”. 

I am definitely more risk averse than some…perhaps I just don’t “get it”.    Maybe Lazy Man has figured this thing out (which would be great).  He’s certainly more knowledgeable about it than I am.  He’s also not wearing rose colored glasses either as he writes “Of course, some will win and some will lose.”   I generally share his opinion in that regard, although I would change the second “some” to “MOST”. 

Ultimately, one could argue that investing in stocks, bonds, etc. are also “gambling”.  Indeed.  However, I still like my odds playing blackjack (stock market) versus roulette (Prosper).   Best of luck!

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Comments»

1. TFB - April 12, 2007

How come you and I think alike? I wrote about Prosper and thought lenders are better off in a junk bond fund or just buying stocks in credit card companies. I’m not posting link so it won’t look like spam, but you can search for it if you are interested.

2. pf - April 13, 2007

I read your post and generally agree with your comments. I found the reference to the T Rowe Price High Yield fund particularly amusing since I invest in it. I still really like the Prosper concept…I just want to be the “middle-man” (Prosper) where the real money is being made.

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