A bad month?

Hi all, apologies if I'm diverting slightly from where the thread has gone, but the title seems particularly apt for my concern, so just to share my experience so far:

I opened a Zopa+ account in August 2016, just a £2k tester so no big fish, and set my repayments to holding. All went well until March this year, since when my account position has been:

March 2017: Net earnings -£3.33  (£19.44 default)
April 2017: Net earnings = -£28.07 (£38.62 default)
May 2017 (so far!): Net earnings = -£18.65 (£18.72 default)


I'm invested in P2P widely, appreciate the risks, don't expect no defaults etc etc, but in the last 3 months I've lost £50 or 5% of my initial investment. I'm sitting at about 3.5% XIRR as I didn't experience defaults for the first 4 months.

With my experience in FC, I'm tempted to cut my losses, but am also willing to consider staying given the possibility that the defaults may level off after a few bad egg loans have left. I'm not feeling particularly optimistic though! Thoughts?


Edit: corrected figures slightly at 16:20

One week on, another default rolls in. For some reason, I don't quite feel the same level of enthusiasm as others for their new ISA 

Just one other thought to at least partially disguise me just having a plain old moan. I accept that if had invested more I would probably be seeing a more diversified performance, but might i also being seeing a more 'true' view, as I have elected to not re-invest any early repayments in new loans? If I had, then I would have an ongoing chunk of fresh new yet-to-be-defaulted loans to improve my stats. Still wouldn't look particularly rosy though I suspect

If anyone's interested, I actually had 114 loan parts initially, which is more diversification than FC for example suggest. My 4 defaults so far consist of 2 D's and 2 E's and I have a further 2 D/E's lining up in 'Collections' status to provide my June anti-boost. I also have one D's in 'Arrangement'. All the rest are fine.

My stats

698 loans,  7 defaults,  12 collections, 22 missed payments so 3.2% in trouble

Started in plus in August so only 4.5 months of real data

A double Zopa Minus month.
I accept that I will receive bad debts in Z+ so that doesn't worry me -  I would expect to lose roughly 40% of my gross interest.

For May - Started Z+ 14 moths ago - I lost 110% of my May income to bad debt - 72% YTD so my xirr for 2017 is now 3.1%.
Mrs B - Started Z+ 8 months ago - lost 115% of her income in May, due to one for her initial £80 loans going bad - 52% YTD xirr for 2017 now 5.3%.

So I am definitely in the 'bad' default period, Mrs B's figures will have more variance due to her initial larger loans ( 1 default makes a lot of difference! ).

its interesting that the loans have disappeared from the spreadsheet, in my experience of being an investor since 2006 is that the current csv file holds all active loans. The all time file does however contain all the loans from day one of the investments. I have a few defaults that have been eventually considered to be closed but not completed. They are usually marked as "settled". Both files should show the current arrears in a single column though.

I have over 30 defaults, most from pre-safeguarded days that are still active some are paying and others have not paid for quite a long time, 2 plus years in some cases but are still open and in the current file. The defaults in the safeguarded loans will only remain in defaults until the SG has paid them off they will then be moved to the all time file and I think marked as closed. I'm not sure but the default date may still be registered to show it was a default but it is closed and fully paid up (There are some minor issues with small sums either way in the arrears columns but I think its rounding issues).

There is a sort of spreadsheet for each individual loan at the raw payments level but its a bit convoluted to get at as you have to download all the statements files, join them all together - it can be done - then use excel to review the given loans payments. At that level you will be able to see when payments are made and missed etc. Its similar to the old Zopa loanbook report/options before it was changed. It requires quite a bit of knowledge of both DOS and excel though to get it to work, not including downloading each individual statement file, that's a task in itself. I did it because zopa said they could not provide me this level of data and it was before the default fields appeared. It does have some uses still. 

At the loan level you can use the current (active) csv to see all types of states including the date when defaults started (the field was added in the last month or two) so there is less of a need to see the statements level, however, when you can see this statements level you will be able to see defaults that declare a payment in the comments field but in fact you may not get one as the typically smaller payments in default have to be shared across all lenders of the loan. Zopa has assured me that I would get the payments when there was enough and its rotated around lenders when less than can be shared equally.

Sorry if this seems complicated but sadly since zopa removed the tools to review some of these things it is actually quite complicated to reproduce the granularity that may be needed to see some of this stuff.
 
To answer your question of normality of losses is quite difficult to say - are the losses all in one product. At the moment losses in safeguarded are not losses until re-lends from later in the year when SG is removed - I think thats right. So lets assume all the losses are in plus as its not sg, £20000 lent all at once, with a 1% spread assumes that the loan rate was potentially in minimum £200 chunks so that means that you have 3 defaults tops that are a problem yes/no?. Since Plus has only been active for just a year then it follows that unless you consider it for its full length it may be the case they will never pay back. Right now assuming that 5% will be the level you will get back year on year from non defaults then in fact after the first year and assuming relend in to same product you should be able realise £1000 before tax, and assuming the default loss is reclaimed against tax then you have in fact realised 2.92% without that. The default will return money as well £6.26 this month you say thats not that bad to be honest. Most of my defaults are returning at least some money but in many cases little more than the minimum.

I think I got most of that right, the key thing here is to not bail out when the losses start as they may recover and will almost certainly be covered by the other gains. As I said I have been in zopa since 2006, many of the defaults started in 2008 but i'm still in considerable profit as a result of just relending and relying on the compounding effect. Having said all this I would be very wary of lending in non safeguarded at anything > £1999 as the lend rate will be >£10 chunks and may mean that the losses seem a lot higher and take longer to recover from. Also, hopefully everyone knows that, the true lend rate if the returns are not relent is a few points higher the half the headline rate. Its sort of similar to regular saver accounts as the loan is being reduced all through the cycle.

I'm sure that's confused the hell out of you but it pays to know some things when lending on all p2p, its not like a bank, sadly. Hopefully though it has helped.

PS My statements file is over 130,000 records to give you some idea of the task, my book is less than a 3rd of yours as well. Its 85% safe guarded and 15% plus and pre-safeguarded.


Edit: What you should be doing, assuming you know how to in excel is filtering out all defaults in sg as they are irrelevant at present. You can do this by filtering on the safeguard column removing all true states so you only see defaults that are relevant to true losses. This is in either file and only arrears are relevant to the true losses I think!.

Glad its got you going fishyhooky  and you are understanding a bit better. Apart from settled accounts the repaid field will be 1 (100% repaid), I have 4 settled, which according to their comments field seems to mean bankrupts. fortunately they were all £10 ones and the worst one lost me 7.90 - 78p interest so just over £7. 

Just using the all_time file and checking only defaults and settled items and the outstanding field I can see quickly that 

    Lost capital = (settled outstanding) - (settled interest received)

Capital still in danger = (defaults outstanding) - (defaults interest received) 

Zopa recently suggested to me, by email, that any value up to £2000 should be invested in £10 chunks. I'm double checking with Zopa that if I invest £1999 it will lent out in £10 chunks. I originally thought that it was £1000, I guess zopa lends in £10,20,30 etc blocks rather than say £15,16,17 etc. I'm looking to limit my ISA investment.

PS: I have heard back from zopa and its been confirmed that an investment of up to and including £1999 will deliver loans in £10 chunks. I guess that means that an investment of £3999 will give £20 chunks and so on but that bit is not confirmed.