How do we calculate annualized net return?


This is a question often asked from our support personnel. While it is also covered in our investment guide, let’s look into how the Secondary Market transactions can affect this number.

If you have read the respective investment guide section, you’ll know that we only account for transactions that have happened or should have happened by the moment the return is calculated.

Whenever a sale or purchase on the Secondary Market is completed, the resulting change in your portfolio will also be accounted for the next time return is calculated.

For example:

  • If you make a purchase, then buying at a discount will increase your return since you received a capital gain. Buying at a mark-up and paying the commission on purchases however, will decrease your return initially until you start receiving payments from the purchased loans.
  • If you sell a loan at mark-up, then your return will increase, but when selling at discount or paying the commission, it will decrease accordingly.

If you have very few other transactions, then your annualized return will be mostly determined by whether you purchased your investments at a discount or mark-up or in other words, if those transactions initially resulted in capital gain or loss.

The more transactions you have made however, the less each new transaction will affect the return figure.