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Thread: Harmoney

  1. #2711
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    I was writing about 'portfolio performance" not "portfolio return", the idea is to invest in quality grade loans to minimize your gross interest losses.

  2. #2712
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    Quote Originally Posted by permutation View Post
    I was writing about 'portfolio performance" not "portfolio return", the idea is to invest in quality grade loans to minimize your gross interest losses.
    Still don't agree. Example:

    $10,000 invested

    Protfolio 1:
    ------------
    7% interest with 0.2% defaults => $700 interest - $20 defaults (35:1 ratio) => return $680

    Portfolio 2:
    ------------
    28% interest with 0.8% defaults => $2800 interest - $80 defaults (35:1 ratio) => return $ 2720

    Both of the above have the same Gross Interest vs Default ratio, both have the same investment amount, one returns $680 the other returns $2720.

    I don't think they are equivalent when considering 'portfolio performance'.

    For Portfolio 2 to return a similar amount to Portfolio 1 the default rate needs to be a little over 21% (4:1 ratio).

    For Portfolio 1 to return a similar amount to Portfolio 2 the amount invested needs to be $40000 (vs $10000 for portfolio 2).

  3. #2713
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    yeah you all realize ultimately it comes back to IRR on money in, money out?

  4. #2714
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    Quote Originally Posted by myles View Post

    ..........Example:

    $10,000 invested

    28% interest with 0.8% defaults => $2800 interest - $80 defaults (35:1 ratio) => return $ 2720....
    The problem is you can't get this kind of high interest with a very low default rate. Ultimately high risk grades will crush your overall return, over time.

  5. #2715
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    Default $$$ made

    Quote Originally Posted by alistar_mid View Post
    yeah you all realize ultimately it comes back to IRR on money in, money out?
    Yes, it is how much $$$ we made after a certain point of time or, if you like, at the end of it all. That is measured effectively by Harmoney's RAR which is the same as XIRR (or IRR). The only difference between HM's RAR and our XIRR/IRR is that HM's RAR do not take into account the cash sitting there while most of us in using IRR/XIRR will take into account all cash flows (including cash sitting there waiting for loans)

  6. #2716
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    Quote Originally Posted by permutation View Post
    The problem is you can't get this kind of high interest with a very low default rate. Ultimately high risk grades will crush your overall return, over time.
    Disagree - see rest of the example... If you pick poorly in the higher risk grades, perhaps, but the right mix of higher risk/interest loans vs low risk/interest loans will ALWAYS outperform (unless something dramatic happens and there is a large run on defaults).

  7. #2717
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    Quote Originally Posted by Cool Bear View Post
    That is measured effectively by Harmoney's RAR which is the same as XIRR (or IRR). The only difference between HM's RAR and our XIRR/IRR is that HM's RAR do not take into account the cash sitting there while most of us in using IRR/XIRR will take into account all cash flows (including cash sitting there waiting for loans)
    The calculations of RAR and XIRR are quite different?

  8. #2718
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    My RAR graph has recently take a noticeable spike downwards. This is during last update of graph by Harmoney. A approximate 1% crash instantaneously and am now sitting at 13.99%. I haven't had any charge offs for sometime so am unsure why it could drop so quick.

    What about others?
    Has there been new fees etc that just begun showing in latest RAR graph?

  9. #2719
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    Quote Originally Posted by whitt View Post
    What about others?
    Mine went from 17.0% down to 16.67% with no obvious reason. I don't hold all that much faith in the supplied RAR..

  10. #2720
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    Default Realised Annual Return by Unique Loans

    Quote Originally Posted by myles View Post
    Mine went from 17.0% down to 16.67% with no obvious reason. I don't hold all that much faith in the supplied RAR..
    My RAR hasn't suffered the declines reported on the last two postings. Over the past month it has tracked as I expected. That said,
    looking at the portfolio graph on the website I can see there is one investor with 13,353 loans at an RAR of 13.50%. Where are Heartland's and TSB's loans on this graph? Wouldn't they have more than that number? And I've said it before and will again, any formula which creates a reported loss in excess of 100% has shortcomings. There is also 1 unique loan with an RAR of 39.51% - against a max gross rate of 39.99 less fees - how does that calculate with fees at either 1.25% on total repaid or 20% on interest only. And, later, I see there is an RAR of 130% on 3 loans.
    I suggest the RAR should be ignored - it is historical and no guide to personal portfolio performance going forward.
    Last edited by BJ1; 20-09-2017 at 12:36 PM.

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