Author Topic: Net Annualized Return includes Folio Sold Notes?  (Read 2687 times)

TcH

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Net Annualized Return includes Folio Sold Notes?
« on: December 11, 2012, 04:55:53 PM »
Does anyone know if the net annualized return on LC summary includes losses/gains relative to sold notes on folio.

For example:  if a $25 note (a new note with no payments) is sold for $20 thus a $5 loss does this show up on you net annualized return thus reducing it percentage by some amount?

Thanks,

Zach

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Re: Net Annualized Return includes Folio Sold Notes?
« Reply #1 on: December 11, 2012, 05:23:30 PM »
The return displayed in your Lending Club account does NOT take into account Folio transactions. Regardless of that fact, the Lending Club return is not a very accurate method to compute your return. The best way is through IRR calculations in excel, or through interestradar.com

Peter has a blog post floating around on how to use the functionality in excel.

Good luck!
« Last Edit: December 11, 2012, 05:26:18 PM by zpbsfg »

yojoakak

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Re: Net Annualized Return includes Folio Sold Notes?
« Reply #2 on: December 11, 2012, 08:24:02 PM »
NAR is calculated by this complicated formula which I don't really understand:



http://www.lendingclub.com/kb/index.php?View=entry&EntryID=252


They say: "If a Note is in 'default' status, we subtract the entire principal amount of the Note from the numerator."

So if you sell a note on Foliofn before it goes into default, even if you sell it for 1 cent, it will make your NAR look better.


Also, they keep talking about "the/each/that period" but they never say how long a period they're actually using for the value displayed on Account Summary.
« Last Edit: December 18, 2012, 09:17:54 PM by yojoakak »

Peter

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Re: Net Annualized Return includes Folio Sold Notes?
« Reply #3 on: December 11, 2012, 11:35:10 PM »
As was pointed out sales on Folio are ignored in your NAR which is why I think it is important for everyone to do their own calculation - I have seen investors with real returns more than 5% different from Lending Club's NAR. Here is the post I wrote about this:
http://www.lendacademy.com/how-to-calculate-your-real-p2p-lending-return-with-xirr/
Publisher of the Lend Academy blog

See my returns here: http://www.lendacademy.com/returns

TcH

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Re: Net Annualized Return includes Folio Sold Notes?
« Reply #4 on: December 18, 2012, 08:52:42 PM »
Thanks for the replies.  I have used the XIRR and the predictive method from NS but was curious if someone had the answer and it appears someone did.  Thanks,