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Thread: Harmoney

  1. #2731
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    Quote Originally Posted by alistar_mid View Post

    IN regards to the lego, well its still cool and I like it, but even still buying it as an investment, even if you get like a -30% sale at the wharehouse, by the time you trademe it a few years down the line when that set is discontinued.. and you have to do the auction, then take it to nz post bubble wrap it etc... is it all worth it lol

    Esp when the rest of your portfolio is in the 7 figures and can have pretty decent fluctuations and you are dealing in a $60 lego set you brought for $40 and waited for 2 years and sold for $80 lmao
    Yeah, but if you'd bought the original Lego Millenium Falcon...http://www.ebay.com/itm/Lego-Star-Wa...EAAOSwRr5ZtgGf

  2. #2732
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    Quote Originally Posted by Cool Bear View Post
    Yes, despite all the shortcomings of the RAR, anyone with over 15% RAR after 24 months is doing very well indeed!! Will beat a lot of other investments too including many in the share and housing markets.
    You early adopters got in at the right time!

    I missed the party, and joined just as 1.5 kicked in

    15% will be very challenging to achieve.

  3. #2733
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    Quote Originally Posted by leesal View Post
    You early adopters got in at the right time!

    I missed the party, and joined just as 1.5 kicked in

    15% will be very challenging to achieve.
    Yes, based on the latest scorecard an optimal RAR after projected defaults is going to be around 14% (roughly).

  4. #2734
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    Quote Originally Posted by Investor View Post
    Yes, based on the latest scorecard an optimal RAR after projected defaults is going to be around 14% (roughly).
    What is your definition of optimal?

  5. #2735
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    Quote Originally Posted by RMJH View Post
    What is your definition of optimal?
    Meaning if you could invest all of your capital at the most desirable grade or grade range.

  6. #2736
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    Quote Originally Posted by Investor View Post
    Meaning if you could invest all of your capital at the most desirable grade or grade range.
    So you mean the highest expected achievable return on a portfolio rather than a more complex optimisation considering risk.

  7. #2737
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    Quote Originally Posted by RMJH View Post
    So you mean the highest expected achievable return on a portfolio rather than a more complex optimisation considering risk.
    Yes. My statement was fairly vague. I don't have the time at present to explain my estimate and it was nothing more than an estimate so take it as you will.

  8. #2738
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    For interest only based on the new (1.5) interest rates and default rates supplied by Harmoney (no guarantee that it is correct):

    The below percentages are Annualised Rate of Return based on 1000 loans of $100 each (all invested at the same start time) for a period of 3 years (so fees are 15%).

    1 2 3 4 5
    A 5.15% 5.87% 6.61% 7.36% 8.11%
    B 9.24% 9.99% 10.73% 11.09% 11.43%
    C 12.14% 12.84% 13.14% 13.79% 14.01%
    D 14.57% 15.08% 15.14% 15.17% 15.16%
    E 15.45% 15.63% 15.53% 15.37% 15.20%
    F 15.02% 14.82% 14.66% 14.51% 14.10%

    Things to note:

    * The above is calculated on a 3 year fixed term for all loans. Clearly many loans are paid off early and since more interest is paid early in a loan this would increase the return.
    * Defaults are applied at the same rate every month across the full term - the new Hazard curve shows defaults having a more equal spread and since they are applied equally from the first month, I think it a reasonable approach to get a reasonable representation of default losses.
    * Selection of 'better' loans based on even very basic criteria should increase the return.
    * There are many small variations that can affect returns, so the above cannot be used as a generalisation of loan returns.

    The calculation was done by first determining the annualised rate of return without reinvestment. This rate was then applied to the returns (i.e. principal + interest - fees) for the relevant term remaining (so reinvestment of all returns), with additional defaults applied, resulting in a value that should reflect the full investment return for the full term.

    It would be great if someone else wanted to run similar numbers and see if they get similar results...as I think the full return on returns may still not be fully accounted for by the method I've used...
    Last edited by myles; 24-09-2017 at 02:23 PM. Reason: Update table for return on return over full period.

  9. #2739
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    The matching default table for the previous table:

    1 2 3 4 5
    A 2.3 4.7 5.2 5.7 6.7
    B 7.7 8.6 10.1 12.1 14.5
    C 18.0 22.4 27.3 34.7 43.4
    D 55.6 70.2 87.5 106.0 126.6
    E 151.0 177.9 208.6 240.5 272.7
    F 304.6 336.4 365.6 393.9 421.4

    This shows the total number of defaults expected over the full 3 year period if only the individual grade was selected to achieve the return shown in the previous table - might be enlightening for some! 1000 initial loans, but many more loans are invested in over the 3 year period as principal and interest is returned, more than 2000 loans by the end of year 3.

    Note that these defaults are not for the full $100 of each loan, but only the value of principal left when the default occurs.

    So as an example: if only E1 loans were invested in (initially 1000 loans of equal value), over 3 years of reinvesting the returns, you should expect 151 defaults, but should achieve a 15.45% return pa. (151 defaults would have a total value of around $7550 assuming $100 invested in each loan)

    BOTH OF THE ABOVE TABLES IGNORE TAX!!!
    Last edited by myles; 25-09-2017 at 12:12 AM. Reason: Added: for clarity

  10. #2740
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    Good work Myles. Kinda confirms my highly unscientific instincts to stick to B.C.D's but also indicates might not be worth going beyond D2 though in practice supply is limited so you get what you can to some extent. Would be really interested to have the standard deviations for the default rate estimates from Harmoney. Could flex the default rates +/- 50% (though suspect more downside than upside at this point in the cycle)and see what returns that yields...

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