My Counter Prosper.com Interest/Dividend Strategy

First of all, I love the idea of applying Reverse-Dutch Auctions to the loan process. I applaud Prosper and may, in the near future, allocate up to $2000 towards some Prosper.com investments. I want to give it some time though to learn from the successes and failures of others using Prosper. I do have some strategies that I will post in the near future that may help you with diversifying your Prosper loans. I will also form and post the name of my counter-intuitive Prosper group name.

Right now, I'm specifically interested in buying preferred stock in companies. I ran a search this morning and found 70 companies with dividend rates above 8%. I have not yet found a companion website that does yield-to-maturity calculations though. I'm going to hold off buying any of these preferred stocks until I can blog on here an easy-to-use site for determining yields-to-maturity. If not, I’ll probably show the required calculation and give a tutorial. Of the list of 70 preferred stocks, there were a few that caught my eye. I feel that buying a few preferred stocks could diversify your investments and hedge your risks against default on any Prosper loans.

I do have one problem with Prosper right now. It appears from the reporting of other blogs that there is an excessive period where PROSPER is collecting interest on your money without sharing this interest (let me know if I’m wrong). This idea is inherently flawed in that it increases the likelihood of lenders increasing their risk tolerance and lending to higher risk candidates just to get their net preferred yield on loans.

Here’s Wikipedia’s definition of yield-to-maturity. They define YTM for only bonds; however, I believe that an equivalent calculation could be done for preferred stocks. If not exact, a close enough SWAG. R/ FJ