Even Staff

2016-02-11

Ditch the Stocks, Earn Better Returns as a Marketplace Lender

The stock market has historically been hard to beat when it comes to long-term returns. However, there are several reasons why the growing world of alternative lending could be better for long-term investors than the stock market at current levels.

 

What Is Alternative Lending?

 

Traditionally, the best way for lenders to gain returns on their cash in fixed income has been to “lend” it to banks or other financial institutions by investing in CDs or other fixed income investments. However, the new trend toward online lending allows lenders to lend directly to borrowers by browsing online databases and hand-picking preferred borrowers. Rates, terms and risk levels are all determined without the involvement of a traditional bank, and loans are made directly through an online lending platform.

 

What To Expect From The Stock Market

 

For decades, investing in the S&P 500 has been one of the best sources of long-term returns. In fact, since 1928, the S&P 500 has returned an average annual yield of 11.5 percent. While it’s true that this type of return is hard to beat historically, the current market environment is far from typical. Following a huge, six-year post-Financial Crisis bull market, the S&P 500 is up about 200 percent since March 2009 and is currently more than 25 percent higher than its pre-crisis all-time highs. There are very few valuation metrics that indicate that the S&P 500 remains undervalued at this point. The index’s price to earnings ratio (PE) is currently 20.0, well above its historical mean of 15.5. Even though the S&P 500’s current 12-month forward PE of 17.4 is slightly lower, it’s still hard to argue that the market is currently undervalued.

 

A Lost Decade?

 

John Bogle, founder and former CEO of The Vanguard Group, said earlier this year that he sees very little upside for traditional investors over the next decade. He projects 2-3 percent bond yields and about 4 percent overall returns from the stock market over the next 10 years. “When you factor in the costs associated with index funds, inflation and taxes, you are actually looking at real returns of nominal to zero,” Bogle explained. If Bogle’s projections are correct, “nominal to zero” is a far cry from 11.5 percent annual returns, and stock and bond investors could currently be staring down the barrel of a lost decade.

 

The Alternative

 

According to the latest numbers from Lending Club, an alternative lender, the average two-year aged portfolio is currently yielding average returns of between 6.2 percent and 8.7 percent. Depending on risk tolerance, even higher rates of return are available for lenders. While there is certainly always risk of borrower default, these types of returns are less volatile than stock market returns. For example, the S&P 500 recently dropped 11 percent in less than a week, eliminating more than a year of gains in a matter of days. Investors that have chosen quality borrowers can sleep much easier at night than stock market traders, who live in constant fear that one bad economic headline could wipe out years of progress overnight.

 

Creative Solution

 

At many times throughout history, the stock market has been the best place to go for large returns on investment. Unfortunately, it appears as if the next decade may not be one of those times. If you are looking for a creative solution to a potentially stagnant stock market, want access to higher returns than you can get from a bank and understand the risks involved, you should consider dipping your toes into the world of alternative finance.  

Disclaimer: The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the suitability of any Even Financial product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional. Any information or statistical data sourced by Even Financial through hyperlinks, from third-party websites, are provided for informational purposes only. While Even Financial finds these sources to be accurate, it does not endorse or guarantee any third-party content

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Even features the industry’s largest multi-carrier, all-digital life insurance marketplace New York, New York – August 16, 2021 – Even Financial (“Even”), the leading search, comparison, and recommendation engine for financial services, has announced the launch of Haven Term and Haven Simple on its life insurance marketplace platform. Leveraging machine learning and advanced data science, Even solves a significant pain point in financial services customer acquisition by seamlessly bridging financial institutions and channel partners via its industry-leading API and embeddable solutions.   With the addition of Haven Term and Haven Simple, Even has further expanded its extensive network of premium life insurance offerings, strengthening its position as the industry’s largest multi-carrier, all-digital life insurance marketplace. Haven Life, which offers Haven Term and Haven Simple, and is backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual), is known for its customer-centric approach and for its commitment to making life insurance more affordable and accessible. Haven Life’s term life insurance offerings will be available on Even properties and via its wholly owned subsidiary LeapLife.   “In these uncertain times, the majority of U.S. adults want the financial security of high-quality life insurance, but are often dissuaded by the complex application process and need to complete an in-person medical exam,” said Phill Rosen, Founder and CEO of Even Financial. “Haven Life’s groundbreaking, all-digital application experience brings tremendous accessibility and peace-of-mind to consumers. 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"On the heels of introducing even more affordable pricing for the Haven Term product, our partnership with Even Financial allows us to marry that affordability with greater accessibility to offer comprehensive financial protection to shared clients with ease and efficiency.”    Even entered the life insurance industry in 2020 through its acquisition of LeapLife, a leading insurtech and licenced life insurance agency. Since that acquisition, Even has worked with its large network of channel partners to make the process of getting personalized life insurance fast, easy, and accessible for consumers. In addition to Haven Term and Haven Simple, products offered by leading insurance companies including Lincoln Financial Group, Pacific Life, and Mutual of Omaha are available through LeapLife, Even’s life insurance platform. Companies such as TransUnion and Lantern by SoFi rely on Even’s embedded finance marketplaces to power 100% digital personalized life insurance policy quotes for their customers, with live agent support.   Even has continued its rapid growth trajectory in 2021 by reaching over $3 billion in consumer credit issued through its API and expanding its platform to over 800 partners. Earlier this year, Even was named one of “America’s Best Startup Employers'' by Forbes for 2021 and placed in the Top 50 of the 2020 Deloitte Technology Fast 500, which recognizes the fastest growing tech companies in the world.   About Even Financial   Founded in 2014, Even Financial is a B2B fintech company that is transforming the way financial institutions find and connect with consumers. As the leading search, comparison, and recommendation engine for financial services, Even seamlessly bridges financial institutions (such as SoFi) and channel partners (such as TransUnion) via its simple yet robust API and embeddable solutions. Even turns any consumer touchpoint into a comprehensive financial services marketplace with full compliance and security at scale. The company is backed by leading financial services firms and VCs, including American Express Ventures, Canaan Partners, Citi Ventures, Fidelity’s F-Prime Capital, Greatpoint Ventures, Goldman Sachs, LendingClub, and MassMutual Ventures. Learn more at www.evenfinancial.com.   About Haven Life Insurance Agency   Haven Life Insurance Agency, LLC (Haven Life) is re-thinking how people financially protect the ones they love. Haven Life is committed to delivering exceptional products, delightful purchasing experiences, and meaningful moments of service to the modern life insurance customer. Haven Term is a Term Life Insurance Policy (ICC21 Haven Term in certain states, including NC) issued by C.M. Life Insurance Company (C.M. Life), Enfield, CT 06082. In New York (DTC-NY), and California (DTC-CA), and other states, it is issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001.    Policy and rider form numbers and features may vary by state and may not be available in all states. Haven Term is available through Haven Life Insurance Agency, LLC (Haven Life), whose agency license number in California is OK71922 and in Arkansas, 100139527. Both Haven Life and C.M. Life are wholly owned subsidiaries of MassMutual.   Please note that issuing the policy or paying its benefits depends on the applicant’s insurability, based on their answers to the health questions in the application, and their truthfulness.   MassMutual and its subsidiaries C.M. Life Insurance Company and MML Bay State Life Insurance Company are rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of June 1, 2021 and is subject to change. MassMutual has received different ratings from other rating agencies.   Media Contact media@evenfinancial.com    
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