Harmoney

[leesal]

Cool Bear, I'm not convinced. Shouldn't the formula return the exact interest rate, calculated on the cash flows stipulated and not make assumptions about reinvestment of cash not recorded in the stipulated flows? For a one month period it should not produce an outcome 3.58% above the actual one month's interest. Should there be compounding in a one month investment? I'll have another play if tomorrow has free time.

The annualised result without reinvestment assumption is fundamentally flawed that it ignores the time value of money.

That would also suggest you would be indifferent to the following cashflows below... Which clearly can not be correct.

1/ negative 10million outflow on 1-January-2017 , then 1 million monthly over the next 12 months.

2/ negative 10million outflow on 1-January-2017, then 12million received on 1-January-2018

[myles]

BJ1, adding NOMINAL(XIRR(...), 12) around your XIRR calculation should give the result you are expecting. (Changes result to monthly rate i.e. from effective to nominal rate)

Note: The XIRR rate (effective) is an annual rate (similar to a term deposit that pays the interest annually).

[BJ1]

I think I'll continue without XIRR. If I plug in two investments of $1,000 at 12% for 12 months and choose monthly cash interest paid for one and cash interest paid at the end for the other I get XIRR rates of 12.6825% on the first and 12.00% on the second. However, both return the same cash to me over 12 months, of $1,120. As I choose to take the interest out for spending in both cases, I have not compounded it and therefore my investment is not worth the $1,126.825 after 12 months that XIRR implies it will be. XIRR also assumes that the monthly interest payments are reinvested at the same rate of 12% from receipt of each. Essentially, I don't see the point in applying XIRR to my portfolio as what matters is that Harmoney calculates and pays interest properly and I then decide what to do - either spend or reinvest. If the former I forego the benefit of compounding and end up with bread on the table but less in the "bank" and if the latter then I starve today. The more I reinvest the more I have for future consumption. I can understand all that without XIRR.

[myles]

All sounds fair for what you want BJ1. The only caution is not to compare monthly interest rates with annual interest rates. For example the RAR value is an annual rate so shouldn't be compared directly to monthly loan rates.

[Darchie]

My charge-off's are still steadily rising .. at this rate it will be $5,000 written off before long ... happy with my decision to unwind all I have left in HM ....

[joker]

My charge-off's are still steadily rising .. at this rate it will be $5,000 written off before long ... happy with my decision to unwind all I have left in HM ....

That doesn't sound too good. Just as an indicator...
1. Were they all $25 investments or larger?
2. Any particular grades over represented?
3. What period of time does the $5000 cover and how big is your total loan book?

TIA Joker

[Investor]

That doesn't sound too good. Just as an indicator...
1. Were they all $25 investments or larger?
2. Any particular grades over represented?
3. What period of time does the $5000 cover and how big is your total loan book?

TIA Joker

Yes it sounds like there was either not enough diversification or Darchie has invested in E-F's

[joker]

Yes it sounds like there was either not enough diversification or Darchie has invested in E-F's

In simple terms, $100k in the old C, D, E & Fs at an average interest rate of (say) 25% would still give an RAR of 20% (before Harmoney's fees) after $5k of charge offs.

[Darchie]

That doesn't sound too good. Just as an indicator...
1. Were they all $25 investments or larger?
2. Any particular grades over represented?
3. What period of time does the $5000 cover and how big is your total loan book?

TIA Joker

Not so easy to answer as my strategy has changed with each round of fee changes.
I see my very first loan taken was on 23.9.15 , B5, 2notes taken - it's still current, not in arrears & ticking along nicely.
In June 2016 my spread was basically:
A 20%
B 28%
C 19%
D 17%
E 10%
F 6%
But recently (since fees changed to 15% ) I've taken no D-F and <6 C grades.
I currently have 98 loans written off so that's an average of pretty much 2notes each.
Loan investment shows as 127k
Interestingly looking at my current grade spread it's now 72% A&B ...
So to me i do not think it is what you could have called high risk behaviour! I just wonder how many more out there have similar high write-offs but do not admit it openly...

[Cool Bear]

So to me i do not think it is what you could have called high risk behaviour! I just wonder how many more out there have similar high write-offs but do not admit it openly...

My writeoffs are much higher than yours both in $ and in numbers. But no point comparing. Our risks spread, total investments, timing of investments etc are all different. The absolute amount is not as important although it still hurts each time.

What I monitor is the RAR and also the net write-offs as a percentage of gross interest received. My RAR is currently about 14.25% and the percentage of net write-offs to gross interest is 20.5%