How much principal do I get back with a target-maturity ETF?
Adding a couple more assumptions, I'd compute about $18.23 would be that pay out in 2018.  This is computed by taking the Current Portfolio's Holdings par values and dividing by the outstanding shares(92987/5100 for those wanting specific figures used). Now, for those assumptions: Something to keep in mind is that bonds can valued higher than their face value if the coupon is higher than other issues given the same risk.  If you have 2 bonds maturing in 3 years of the same face value and same risk categories though one is paying 5% and the other is paying 10% then it may be that the 5% sells at a discount to bring the yield up some while the other sells at a premium to bring the yield down.  Thus, you could have bonds worth more before they mature that will eventually lose this capital appreciation.
"I invested in Prosper.com loans.  I'm getting out.  I only have about $37 left, and as the principal is doled back to me, I withdraw the money.  The default rate I experienced was over 30%.  Only six of the 53 loans I invested in were with borrowers whose credit rating was less than ""A.""  Borrowers with a rating of ""A"" and ""AA"" had a higher proportion of defaults that those below ""A"". Some of my blogging colleagues were wise enough not to start this game. Some who invest in other P2P lending are almost certainly doing it with ""found money.""  They post articles with affiliate links.  As people sign up, they get the commissions deposited in their accounts, which they invest.  As they update their blogs with the returns on their portfolio, it serves to encourage more signups, and the machine continues on.  Even if they lose money on the invested loans, they're still ahead.  To paraphrase John Chow's tagline:  They make money with Lending Club by telling people how much money they're making with Lending Club.  It's almost like investing with the house's money. My high default rate might be because I started earlier in the game.  Borrower screening and criteria have gotten tighter with time. I don't recommend investing in P2P loans.  My experience has been that a large percentage of borrowers requesting loans on these sites have run out of options, which the credit reporting doesn't reflect accurately enough." In addition to the answer from CQM, let me answer your 'am I missing anything?' question. Then I'll talk about how your approach of simplifying this is making it both harder and easier for you. Last I'll show what my model for this would look like, but if you aren't capable of stacking this up yourself, then you REALLY shouldn't be borrowing 10,000 to try to make money on the margin. Am I missing anything? YES. You're forgetting (1) taxes, specifically income tax, and (2) sales commissions//transaction fees.  On the first: You have not considered anything in your financial model for taxes. You should include at least 25% of your expected returns going to taxes, because anything that you buy... and then sell within 12 months... is taxed as income. Not capital gains. On the second: you will incur sales commissions and/or transaction fees depending on the brokerage you are using for your plan. These tend to vary widely, but I would expect to spend at least $25 per sale. So if I were building out this model I would think that your break-even would have to at least cover: monthly interest + monthly principal payment income tax when sold commissions and broker's fees every time you sell holdings On over-simplifying: You have the right idea with thinking about both interest and principal in trying to sketch this out. But as I mentioned above, you're making this both harder and easier for yourself. You are making it harder because you are doing the math wrong. The actual payment for this loan (assuming it is a normal loan) can be found most easily with the PMT function in Excel: =PMT(rate,NPER,PV,FV)... =PMT(.003, 24, -10000, 0). That returns a monthly payment  (of principal + interest) of 432.47.  So you actually are over-calculating the payment by $14/month with your ballpark approach. However, you didn't actually have all the factors in the model to begin with, so that doesn't matter much.  You are making it artificially easier because you have not thought about the impact of repaying principal. What I mean is this--in your question you indicate:  I'm guessing the necessary profit is just the total interest on this loan = 0.30%($10000)(24) = $720 USD ? So I'll break even on this loan - if and only if - I make $720 from stocks over 24 months (so the rate of return is 720/(10000 + 720) = 6.716%). This sounds great-- all you need is a 6.716% total return across two years. But, assuming this is a normal loan and not an 'interest-only' loan, you have to get rid of your capital a little bit at a time to pay back the loan. In essence, you will pay back 1/3 of your principal the first year... and then you have to keep making the same Fixed interest + principal payments out of a smaller base of capital.  So for the first few months you can cover the interest easily, but by the end you have to be making phenomenal returns to cover it.  Here is how I would build a model for it (I actually did... and your breakeven is about 1.019% per month. At that outstanding 12.228% annual return you would be earning a whopping $4.) At least as far as the variables are concerned, you need to be considering: Your current capital balance (because month 1 you may have $10,000 but month 2 you have just 9,619 after paying back some principal).  Your rate of return (if you do this in Excel you can play with it some, but you should save the time and just invest somewhere else.) Your actual return that month (rate of return * existing capital balance).  Loan payment = 432 for the parameters you gave earlier.  Income tax = (Actual Return) * (.25). With this kind of loan, you're not actually making enough to preserve the 10,000 capital and you're selling everything you've gained each month.  Commission = ($25 per month) ... assuming that covers your trade fees and broker commissions. I guarantee you that this is not the deal breaker in the model, so don't get excited if you think I'm over-estimating this and you realize that Scottrade or somewhere will let you have trades at $7.95 each.   Monthly ending balance == next month's starting capital balance.  Stack it all up in Excel for 24 months and see for yourself if you like. The key thing you left out is that you're repaying each month out of capital that you'd like to use to invest with. This makes you need much higher returns.  Even if your initial description wasn't clear and this is an interest-only loan, you're still looking at a rate of about 7.6% annually that you need to hit in order to just break even on the costs of holding the loan and transferring your gains into cash. I recommend pulling up a retirement calculator and having an honest conversation about how long term savings works, and the power of compound interest. Just by playing around with the sliders on an online calculator, you can demonstrate how the early years are the most important. Depending on how much they make now and are considering saving, delaying 5-10 years can easily leave 6-7 figures on the table. If it's specifically a child or close family member, I recommend pulling up your retirement account. Talk with them about how you managed it, and how much you were putting in. Perhaps show them how much is the principal and how much is interest. If you did well, tell them how. If you didn't do as well as you liked, tell them what you would have done differently. Finally, discuss a bit of psychology. Even if they don't have a professional job and are making minimum wage, getting into the habit of saving makes it easier when they eventually make more. A couple of dollars a month isn't much, but getting into the habit makes it easier to save a couple hundred dollars a month later on. The simple answer is technically bonds don't have earnings, hence no P/E. What I think the OP is really asking how do I compare stock and bond ETFs. Some mature stocks exhibit very similar characteristics to bonds, so at the margin if you are considering investing between 2 such investments that provide stable income in the form of dividends, you might want to use the dividend/price ratio (D/P) of the stock and compare it to the dividend yield of the bond. If you go down to the basics, both the bond and the stock can be considered  the present value of all future expected cashflows. The cash that accrues to the owner of the stock is future dividends and for the bond is the coupon payments. If a company were to pay out 100% of its earnings, then the dividend yield D/P would be conveniently E/P. For a company with P/E of 20 that paid out it's entire earnings, one would expect D/P = 1/20 = 5% This serves as a decent yard stick in the short term ~ 1 year to compare mature stock etfs with stable prospects vs bond funds since the former will have very little expected price growth (think utilities), hence they both compete on the cashflows they throw off to the investor. This comparison stops being useful for stock ETFs with higher growth prospects since expected future cashflows are much more volatile. This comparison is also not valid in the long term since bond ETFs are highly sensitive to the yield curve (interest rate risk) and they can move substantially from where they are now. So I did some queries on Google Scholar, and the term of art academics seem to use is target date fund. I notice divided opinions among academics on the matter. W. Pfau gave a nice set of citations of papers with which he disagrees, so I'll start with them. In 1969, Paul Sameulson published the paper Lifetime Portfolio Selection By Dynamic Stochaistic Programming, which found that there's no mathematical foundation for an age based risk tolerance. There seems to be a fundamental quibble relating to present value of future wages; if they are stable and uncorrelated with the market, one analysis suggests the optimal lifecycle investment should start at roughly 300 percent of your portfolio in stocks (via crazy borrowing). Other people point out that if your wages are correlated with stock returns, allocations to stock as low as 20 percent might be optimal. So theory isn't helping much. Perhaps with the advent of computers we can find some kind of empirical data. Robert Shiller authored a study on lifecycle funds when they were proposed for personal Social Security accounts. Lifecycle strategies fare poorly in his historical simulation: Moreover, with these life cycle portfolios, relatively little is contributed when the allocation to stocks is high, since earnings are relatively low in the younger years. Workers contribute only a little to stocks, and do not enjoy a strong effect of   compounding, since the proceeds of the early investments are taken out of the stock   market as time goes on. Basu and Drew follow up on that assertion with a set of lifecycle strategies and their contrarian counterparts: whereas a the lifecycle plan starts high stock exposure and trails off near retirement, the contrarian ones will invest in bonds and cash early in life and move to stocks after a few years. They show that contrarian strategies have higher average returns, even at the low 25th percentile of returns. It's only at the bottom 5 or 10 percent where this is reversed. One problem with these empirical studies is isolating the effect of the glide path from rebalancing. It could be that a simple fixed allocation works plenty fine, and that selling winners and doubling down on losers is the fundamental driver of returns. Schleef and Eisinger compare lifecycle strategy with a number of fixed asset allocation schemes in Monte Carlo simulations and conclude that a 70% equity, 30% long term corp bonds does as well as all of the lifecycle funds. Finally, the earlier W Pfau paper offers a Monte Carlo simulation similar to Schleef and Eisinger, and runs final portfolio values through a utility function designed to calculate diminishing returns to more money. This seems like a good point, as the risk of your portfolio isn't all or nothing, but your first dollar is more valuable than your millionth. Pfau finds that for some risk-aversion coefficients, lifecycles offer greater utility than portfolios with fixed allocations. And Pfau does note that applying their strategies to the historical record makes a strong recommendation for 100 percent stocks in all but 5 years from 1940-2011. So maybe the best retirement allocation is good old low cost S&P index funds! "This is an example from another field, real estate. Suppose you buy a $100,000 house with a 20 percent down payment, or $20,000, and borrow the other $80,000. In this example, your ""equity"" or ""market cap"" is $20,000. But the total value, or ""enterprise value"" of the house, is actually $100,000, counting the $80,000 mortgage.  ""Enterprise value"" is what a buyer would have to pay to own the company or the house ""free and clear,"" counting the debt." "I am currently running 12%. This is including IRA, 401k, HSA, and tax accounts. My LC is not a tax sheltered.The share used to be around 25% but i have been very aggressively putting away alot more into 401k/HSA. My current NAT returns on LC are 14.3%, but not a single loan has seasoned, i am nearing my first full year, and i have had 3 defaults in 150~ loans. My % across grades: A-0  B-6  C-30  D-31  E-20  F-12  G-1 Also to note, i use a very filter and only pick the ""best"" notes based on my own personally back testing. My 5 year average for stocks and such is around 11%, and YTD is 14%. Which is matching my LC rate. I am not sure which one will hurt more during the next bear markets, LC, or long term investments. Only time will tell. I suppose I plan on keeping my LC between 10-15% of my total investments. I will see how it goes as time goes on and my account gets more seasoned." Yahoo! Finance would list it as 3.30 for the 20 year corporate AAA bonds. This is using the criteria from the Wikipedia link you stated in the initial question.