Diversify Your Portfolio and Reduce Risk - Prosper
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Diversify Your Portfolio and Reduce Your Risk

Diversification is often thought of as the key to smart investing. By spreading your investment out across various assets, you reduce your risk. Prosper is a great way to add diversification to your greater portfolio, and the investments you make through Prosper will further diversify your holdings.

Hypothetical Portfolio Examples

Consumer Loans: A New Asset Class

Consumer loans enable you to diversify your investment portfolio by adding to assets you might already own, such as stocks, bonds, and savings accounts. Owning a variety of assets reduces the effect on a portfolio of any one asset dropping in value.

Read more about Peer-to-Peer Lending


Diversifying Within Your Prosper Investment

We have made it easy to lower your risk within your portfolio of Prosper Notes. By spreading your investment over several loans, you can invest as little as $25 per loan, greatly reducing the impact if any one borrower goes into default.

Because Prosper was the pioneer in Peer-to-Peer Lending, we’ve been around long enough to run significant analysis on the historical returns of our investors. We’ve found that those who invest small amounts over more loans have generally received higher returns than those who placed higher amounts on a few listings. This is why our service is geared toward enabling you to diversify your investment quickly and with very little effort.

When you invest through Prosper, we give you the tools and data to make intelligent bidding decisions. You can find online borrower listings that meet your criteria for risk and return. You can then invest in small increments on these listings and purchase corresponding Prosper Notes. Use Quick Invest to invest in many loans at once based on criteria you set, or browse listings and choose individual loans one at a time.


Quick Invest: A Great Way to Help Diversify Your Portfolio

Quick Invest allows you to efficiently invest your money using criteria that you set—such as Prosper Rating and loan terms—without having to look through each loan individually. You simply specify the amount of money you would like to invest, and Quick Invest helps you choose loans that match those criteria. For more explicit control over exactly which loans you invest in, you have the option of deleting individual loans or modifying your criteria. You can also save your search criteria each time you create an investment order through Quick Invest, so that it’s easier for you to invest repeatedly with the same criteria. In this way, we help you diversify your investment.

Learn more about Quick Invest.


Hypothetical Investor Return Analysis

Below is an example of hypothetical investor return data, comparing the probable returns for two lending strategies. Both hypothetical investors invest $7,500 at a 23% lender rate, with a final loss rate of 10% after all loans are paid in full. One hypothetical lender bid on only 5 loans, while the other diversified across 150 different loans. Remember that investing on Prosper is risk-bearing and speculative, and positive returns are not guaranteed, even with a sound diversified lending strategy.

  5 Loans150 Loans
Expected Return 12% 12%
Likely Range of Returns -21 to 23% 8 to 17%
Probability of Negative Return 8.24% ~0%
Probability of >7% Return 58.9% 97.43%

Prospectus

The Notes that correspond to specific borrower listings are offered by prospectus. Investors should read the complete description of the Notes and risks associated with making an investment in the Notes as well as other information about Prosper and our platform in the prospectus.