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Post by Ace on May 26, 2018 9:10:45 GMT
The dashboard on one of my FC accounts is reporting a gross yield of 10.9% and an annualised return (after fees and bad debts) of 11.1%. Any mathematicians out there who could offer an explanation? Perhaps borrowers are feeling sorry for us beleaguered investors and are intending to give us a bonus!
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bigfoot12
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Post by bigfoot12 on May 26, 2018 9:50:44 GMT
The annualised return is historic. It includes purchases and sales at a premium and discount that you might have made, any cashback you received and any loans that you were (so far) luckier than average.
Gross yield is just the average yield of your current portfolio.
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Post by df on May 26, 2018 11:13:21 GMT
The dashboard on one of my FC accounts is reporting a gross yield of 10.9% and an annualised return (after fees and bad debts) of 11.1%. Any mathematicians out there who could offer an explanation? Perhaps borrowers are feeling sorry for us beleaguered investors and are intending to give us a bonus! I think it is because your account is at an early stage of "development"(i.e. not many of your loans have defaulted yet). Your annualised return figure is likely to go down as the account matures. It took more than a year for my annual return percentage to decrease and stabilise at around 7-7.5%.
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benaj
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Post by benaj on May 26, 2018 11:59:19 GMT
I had annualised return higher than gross yield once, that's the cashback. Then, my annualised return went down to 5% after I made mistakes picking up bad loans myself. I am hoping to do better than 5% this year.
According to one web site, the average borrowing rate has increased from 8.01% in 2010 to 10% in 2018. Another independent web site reports 19.7% net return for the last 3 years with FC.
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Post by Ace on May 26, 2018 13:07:43 GMT
I should have said; I haven't had any cashback nor knowingly had any dealings above or below par. So still struggling to see how gross can be lower than annualised.
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bigfoot12
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Post by bigfoot12 on May 26, 2018 15:00:37 GMT
I should have said; I haven't had any cashback nor knowingly had any dealings above or below par. So still struggling to see how gross can be lower than annualised. Maybe you started a new account and in the first few days you had more D and E loans than average. Then after a day or two you got more A and B loans to your current average. Your IRR would have been better in those first few days. Remember both of those numbers ignore any free cash in your account. Another way it might happen if your yield used to be a bit higher and then one of your higher yielding loans repays (all or part) early. Then your gross yield would drop, but (on the day it happened) the annualised return would be unchanged, and slowly dropping from then on. Similarly to the previous point would be the proportion of property loans, of which there are still a few. These are low yielding and pay no capital monthly. As the capital repayment loans repay the weighting of these will fall reducing the average yield. If your account is very new the proportion of SM and PM loans might have a similar impact (PM loans will have about a month before they make a first repayment, whereas SM loans will have an average of half a month).
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blender
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Post by blender on May 26, 2018 15:13:27 GMT
I should have said; I haven't had any cashback nor knowingly had any dealings above or below par. So still struggling to see how gross can be lower than annualised. Normally the 1% fee will take the annualised below gross, even if you have no losses (yet). When did you start this account, please? Is it new, fairer, FC (from Sept 17). Have you stuck to 'balanced' throughout? If you change from balanced to conservative then the gross will go down first - though your numbers suggest balanced.
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Post by Ace on May 26, 2018 15:32:48 GMT
I should have said; I haven't had any cashback nor knowingly had any dealings above or below par. So still struggling to see how gross can be lower than annualised. Normally the 1% fee will take the annualised below gross, even if you have no losses (yet). When did you start this account, please? Is it new, fairer, FC (from Sept 17). Have you stuck to 'balanced' throughout? If you change from balanced to conservative then the gross will go down first - though your numbers suggest balanced.
The account was only started at the start of the new tax year. Balanced throughout. Still lots unallocated (forty something percent), though this can't be included given the numbers.
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blender
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Post by blender on May 26, 2018 17:08:16 GMT
So, no losses yet. You would expect the annualised to be 1% lower than the gross, because of the fee. The annualised takes no account of un-lent cash, and so you will have no reduction in annualised because you have available funds. But I think it does take account of accrued interest. In the first month you buy and generate accrued interest, which is in the calculation, but the fee that relates to that interest has not yet been taken and does not figure in the calculation, because it is not accrued. That is why the annualised is not 1% lower than the gross. It may be higher if there is a change in the distribution of bands as your money is being lent out - for example if it started by picking up some old higher-rate loans on the SM. I promise that if you wait a while the annualised will be lower than the gross, by 1% for the fees, plus a bit more for payments not received on time, or at all.
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