Profitability calculations are not intended as a guarantee of results and do not represent the projected performance of any investment. Individual portfolio results may be influenced by factors such as portfolio diversity and macroeconomic conditions.
How do you calculate investment profitability over a specific period when you have multiple investments on different days?
The XIRR function, also known as the Extended Internal Rate of Return function (available in Excel), is used to calculate profitability based on multiple investments made over a period of time.
This indicator, which is crucial in P2P platforms, is calculated individually for each user based on: invested amount (deposits and their corresponding dates), withdrawals from the platform, interest earned and the current value of the account.
This investment profitability calculation is visible in the investor’s personal dashboard under the name XIRR.
A few suggestions for a better XIRR:
Diversify the loans you invest in (different risk grades, various purposes, different amounts, etc.).
Limit the amount invested in a single loan (At Fagura, investments in a single loan are capped at 200 EUR for consumer loans and 500 EUR for business loans to ensure diversification and risk reduction).
Analyze loan requests individually or set stricter rules when using "Auto Invest".
Increase the total invested amount, so that the percentage of potentially compromised loans is offset by those that will be repaid on time.
A detailed example of the calculation and applied formula for XIRR can be found HERE.