The ‘sell after six repayments’ strategy

I don't entirely disagree with a view that there is some moral dilemma to selling out on stuff you have a really really bad feeling about. However I don't buy it in its generality as stated here. For everyone who thinks that selling all loans before e.g. their 6th anniversary is a good way to de-risk and get the returns they want, there is someone else who thinks that only buying loans for borrowers who have proved a track record of paying for 6 months is a good strategy. For everyone who thinks that a loan that goes late once should be got shot off as soon as possible, there is someone else who thinks its a sign that they've invested the loan as they intended and currently have a short term cashflow problem (and yes I have seen that stated by a seasoned lender on the pre-cursor to this forum). For every 40-45% band taxpayer who needs to really minimise their capital losses in order to make p2p work and is prepared to input the time/labour required to micro manage their portfolio to achieve that, there is a potential non-taxpayer who can't be bothered to input much time and can still benefit from a lower headline rate of return and greater capital loss and therefore chooses to run a strategy of maximum diversification / minimum effort through e.g. auto bidding.

I am more than aware that the level of insight, acumen, and crystal ball gazing capabilities I have are sufficiently light that what to me may seem like a sane decision may for someone else be the opportunity to implement their counter strategy.

Edit: And indeed: for those like me who sold out their holding's in Tesco's, there's the likes of the poor misinformed no idea what they are doing Warren Buffet's of the world who instead chose to buy what others were selling. [If only I had been in a position to fulfill all of his buy orders....]

As I mentioned in an earlier post, I hold one dodgy loan (Top Tier Shysters).  Should that ever be re-rated, I would certainly have strong moral qualms about attempting to sell it on the aftermarket - I might well hold it and bear the risk myself (treating it as a small price to pay for experience gained), knowing I would otherwise be passing off a clear and specific, if not quantifiable, high risk to some other individual. 

I cannot bring myself to feel the same moral dilemma regarding the six-month churn of my portfolio, to which I applied at least a little informed choice to their initial selection, yet apply none at all in their eventual sale.  If the strategy works (yet to be convinced by facts, as opposed to theory), I am offering to the secondary market a package of loans with perhaps a statistically slightly higher lifetime risk than a randomly-bought package at the same rates.  But you should note : I am not (except perhaps for the first burst of autobidding) offering a random package of loans bought at the average rate.  I have put at least some effort into selecting the loans on which I bid, and I have put very considerable time into obtaining better than average rates.  In other words, through my efforts, I am passing on to my buyers a better than average selection of loans, and certainly not the bundle of that sterling purports it to be. 

I believe I have earned my own rather-better-than-average returns (should they turn out to be real) : is not the labourer worthy of his hire?

What he said.

A flaw in the FC setup is that buyers of loan parts cannot readily see whether the borrower has a new loan application in progress. Holders of the older loans are alerted by the segment type symbol applied by FC to the new, uncompleted loan. Hence there is unequal access to information in these cases. In current conditions there is a near certainty that the new loan will finish at a higher rate than the existing hence an incentive to lay off the older loan. You all know what I'm talking about.

DELETED: Misinterpretation of original post.

"You all know what I'm talking about." Being relatively new, I'm not sure that I do - can you spell it out for me - sounds interesting.
One thing that I have noticed, in my blunderbuss pursuit of early enders, is that 'segmented' loans are more likely to finish early - possibly because the borrower knows the ropes better (knows to watch the movement of the average rate, knows to get the paper work ready for acceptance ...).

To put it another way, if you are considering a loan part under say 10% and older than a couple of months, you might wish to look for that company's name in all the current loan applications, as the reason for the sale might be that the applicant has another loan application in progress which in current market conditions will end some percent higher.

The sellers can see the presence of an pre-existing loan immediately. The part buyer cant see this fact from looking at the older loan part. That only registers after the new loan is finalised. Therefore buyers and sellers are not immediately in possession of the same information, and something of sterling's point applies. Sorry if I was less than clear before, it was late.

Well I thought there was some risk for early failures not least the Crappy Scrappy incident. Six payments without incident presumably weeds out intentional non payment (not referring to Crappy Scrappy there).
J